LAND VALUATION FOR FINANCIAL ANALYSIS PURPOSES: A CASE STUDY IN ARGENTINA

The farm real estate market is different from commodity markets because land has unique characteristics such as durability and immobility. Moreover, the heterogeneity of land and relatively low activity of land transactions limits the availability of pricing information for specific properties. Because land is the primary asset and the least liquid of any farm company, its valuation plays an important role in financial analysis. The purpose of this paper is to compare different approaches to estimate the value of land. These methods include: sales comparison, price trend, capitalization and modified capitalization. Using these four methods, different estimates will be obtained to assess the financial situation of Las Estancias S.A., an Argentine farm corporation. The impact of different land valuation approaches upon the financial decision making process will also be analyzed. This research studies the different land valuation methods and their effects on the financial decision making process. The information gathered from this study will allow the analyst to determine if the company is really too highly leveraged. In addition, the values arrived at for the individual farms will be used to determine which, if any, assets should be liquidated