Valuation & Acquisition Processes
Valuation Process
Step 1: Management Accounts
Management accounts are produced for each park on a monthly basis, at the individual park level by Darwin. These park accounts are subject to annual audit by Grant Thornton, the Fund’s auditors.
Step 2: Forecast Projections
Forecast projections for each park are prepared by Darwin on a monthly basis. These forecasts are discussed with the Valuation Adviser, a leading independent accounting firm, and reviewed by the auditors, Grant Thornton.
Step 3: DCF Model & Non-Operating Assets
The Discounted Cash Flow Model takes as inputs the latest management accounts for the parks and the latest forecast projections. The model is reviewed on a quarterly basis by the Valuation Adviser.
Non-operating assets are assets owned but not yet incorporated into the DCF projections. A register of these assets at each park is compiled on acquisition and any revaluation must be accompanied by evidence of a trigger event (e.g. planning). The register is maintained by JLL, the Fund’s Property Valuer.
Step 4: Net Asset Value
The value of the non-operating assets, the value of the DCF Model and the value of any parks acquired recently (at acquisition cost), together with any uninvested cash plus the unpaid lease obligations are combined. Fund expenses are deducted from this to derive the Net Asset Value of the Fund. Orangefield Legis Fund Services Limited, the Fund Administrator, carries out this process.
Step 5: Validation
The Auditor, Valuation Adviser and Property Valuer convene as appropriate to discuss with Darwin the overall valuation methodologies and detailed inputs into the model. These discussions form an important part of the process they use to form a view that the technical factors of the DCF – the Weighted Average Cost of Capital and the Terminal Growth Rates – are commensurate with investment and industry norms.
At the same time, we meet with the Valuation Adviser to consider the future forecast projections input into the DCF models and this discussion is used by us to form our view that the future forecast projections are prudent.
Acquisition Process
Darwin operates a thorough screening and due diligence process before adding any park to the portfolio, which is overseen by the Investment Committee.