Should you require a valuation of your school for secured lending or accounting purposes, or indeed in preparation for a potential sale, it is always useful to know at the outset what the process will involve. Once you have selected and appointed a valuer, they will need to establish an in-depth overview of the trading characteristics of the school, including the trading history and future potential. But how is this established?
Prior to inspection, the school principal will need to provide some initial information to the valuer. This would include:
- Property information (floor plans, title deeds, planning, asbestos reports, copies of leases)
- Financial information (accounts, fee information, bursaries, staff costs, pay rates)
- Business information (history of the school, regulatory inspection reports, year group capacities, occupancy, fee lists and school prospectus).
The valuer will need to have an initial meeting with the school principal or proprietor to discuss the history and growth of the school, statutory matters such as planning consents, fire risk assessments and environmental health, repairs, renewals, capital expenditure and the building’s services, before being accompanied on a tour of the school to take notes, measurements and photos as appropriate. The valuer will always be sensitive to privacy and safeguarding issues – for example, ensuring that no children are in the background of any photographs.
Having undertaken a detailed analysis of wide ranging factors, the valuer will formalise their opinion of value. The value of the school is intrinsically linked to the asset’s trading potential (meaning the returns that an owner, operator or investor can generate from its use as a school). This will also be underpinned by current market sentiment, derived from evidence of similar transactions which show how much buyers are willing to pay for assets of a comparable nature.
If the valuation is required for lending purposes, for example if you are looking into refinancing the school, raising further funds or extending sports or other facilities, the bank will need to commission the valuation directly via an approved panel valuer. The valuation report will be addressed to the bank and it will be able to place full reliance on this for secured lending purposes.
Should the valuation be required for sale purposes, the agent will then need to agree terms with the school. A sole selling rights agreement will normally be drawn up, with a fee charged based on a percentage of the eventual sale price, plus reasonable marketing expenses. The agent will then prepare marketing particulars which will often include floor plans, professional photographs and an Energy Performance Certificate (EPC). As school sales are usually facilitated on a confidential basis, advertising is normally only undertaken if the school has ceased trading and is to be sold with vacant possession. The decision as to whether to inform the parents should be a matter for the school, however in most cases, the parents would not be informed until a sale has been secured to ensure that the trading and financial position of the school is not adversely affected.
Once the confidential marketing process begins, interested parties will be vetted by the agent and asked to enter into non-disclosure agreements. Potential purchasers will wish to inspect the school accompanied by a relevant official which can often be done discreetly under the guise of potential parents visiting. Offers will then be formulated and the agent, working on behalf of the school, will seek to create competitive tension between bidders in order to drive the best possible offers on value and terms.
Once the vendor has selected a preferred purchaser, the agent will liaise with all professional advisers, on both the seller’s and buyer’s side, to ensure the transaction is completed as smoothly and quickly as possible.
The valuer you choose to appoint should be well versed in the sale and valuation of schools and educational establishments. If owners are considering the sale of their business, preparation for sale is key and the first port of call should be to obtain accurate valuation advice.
Courteney Donaldson is Head of Childcare & Education at Christie & Co.