Contemporary UK market valuation methods for over-rented investment properties: a framework for risk adjustment

Crosby, Neil; French, Nick; Ward, Charles

doi:10.1080/095999197368663

Cited by 9 publications

(15 citation statements)

References 5 publications

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“…The complex cash flow structure in Figure 1 invalidates the continuous use of conventional techniques and favours the application of any variant of the contemporary valuation model. Recalling that the contemporary value models are not designed to compete for supremacy but to offer alternative toolkit for the valuer (Crosby, 1996;Crosby et al, 1997), there is a need to explore possibilities of evolving an alternative real value hybrid model for the market valuation of this third category of reversionary leasehold properties.…”

Section: The Variants Of Reversionary Leasehold Investment Propertiesmentioning

confidence: 99%

“…Although it is arguable to say that the contemporary value models were not designed to compete for supremacy but to avail valuers with an array of alternative valuation models for use in practice (Crosby, 1996;Crosby, et al, 1997), the research question put forward is: In what other form can the modified rational model be redesigned to mimic and use the same inputs as the real value hybrid model for the purpose of valuing reversionary leaseholds characterized by simultaneous revision of sub-rent and head rent but at different review periods? Specific objectives put forward to answer this research question include: a synthesis of model parameters for the modified rational model and the real value hybrid models of reversionary leasehold valuations; deriving a surrogate for reversionary income multiplier deferred for the period to the next rent review; redesigning an alternative real value hybrid model using the surrogate for reversionary income multiplier and the deferment factor; conducting a hypothetical valuation of reversionary leasehold investment property using the alternative real value hybrid model; and validating the alternative real value hybrid model using the four existing contemporary value models for leasehold interest.…”

Section: Introductionmentioning

confidence: 99%

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Alternative Real Value Hybrid Model for the Valuation of Reversionary Leasehold Investment Properties

Ataguba

2020

Real Estate Management and Valuation

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This study is a design of an alternative real value hybrid model for the valuation of reversionary leasehold investment properties characterized by divergence in the revision period of sub-rent and head rent respectively. The development of this model commenced with a synthesis of inputs for the modified rational- and real value hybrid models, and the derivation of an equivalent cash flow multiplier for terminal investments. With exception of the generic real value model, term incomes across all other contemporary models including the alternative real value hybrid model were discounted using the equated yield. The discounted reversionary cash flows in the valuation template associated with the alternative real value hybrid model appears identical to that in the generic real value model, while exhibiting itself as a surrogate reversionary income multiplier for the modified rational, and the real value/short-cut DCF models respectively. The alternative real value hybrid model was validated as capable of producing valuations that are identical to those churned out from all the existing contemporary models for the valuation of this category of reversionary leasehold investment property. The study is a novel attempt towards redesigning the modified rational model of leasehold investment property valuation and according it a real value perspective.

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Section: The Variants Of Reversionary Leasehold Investment Propertiesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Alternative Real Value Hybrid Model for the Valuation of Reversionary Leasehold Investment Properties

Ataguba

2020

Real Estate Management and Valuation

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“…ix See, for example, Booth and Adams (1996);Crosby (1992); Crosby et al (1997); Crosby & Goodchild (1992); Epstein (1993); French and Ward (1995;; Goodchild (1992); Martin (1991);and Rich (1992).…”

Section: Notesmentioning

confidence: 99%

Financialisation, the valuation of investment property and the urban built environment in the UK

Crosby

Henneberry

2015

Urban Studies

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The financialisation literature has been criticised for its limited empirical base and its failure adequately to link the everyday world with that of high finance. The paper addresses these shortcomings by examining the calculative practice of property valuation. The way that valuations are performed affects their results and, therefore, the operation of the property market. The paper traces the evolving influence of finance capital on the valuation of commercial property in the UK by constructing a historiography of investment valuation since 1960. Traditional approaches to valuation have been increasingly challenged by those derived from financial economics. However, the former remains the dominant method for undertaking market valuation. Its grounding in comparison -a centring and standardising process -offers an explanation for some of the changes in the urban built environment that are ascribed to financialisation. This suggests that a more detailed and historically sensitive interpretation of financialisation is required.

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“…As a pricing model, the short-cut DCF hybrid model is expressed as: One of the advantages of Equation 15 is that it provides the framework for the pricing of both under-rented and over-rented freehold property investments [2,27]. Adopted in this paper is an alternative approach to the short-cut DCF hybrid model which entailed the use of the algebra representing the symbol for the Years' purchase of ordinary annuity in perpetuity, 1/k as expressed in Equation 14 (See [8,27,28] ). The ensuing variant of the short-cut DCF hybrid model is expressed as: …”

Section: A Equivalent Yield Valuation Techniquementioning

confidence: 99%

Methodologies for Equivalent Yield Calculation and their Implications for Property Investment Pricing

Ataguba¹

2017

IJRASET

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Equivalent yield is a single discount rate that implicitly reflects the characteristics of a freehold property, as well as its redemption value and cash flow changes. Within the context of the synergy between equivalent yield analysis and the growth explicit discounted cash flow (DCF) techniques, this study assessed how the methodologies for equivalent yield calculation can influence the pricing of under-rented freehold property investments. Identified from existing literature were six techniques of equivalent yield calculation comprising the use of valuation and investment tables, formula method, linear interpolation, the @IRR-, and the goal seek functions in Microsoft Excel, and the use of mathematical software with in-built root-solving algorithm. These six methods were used to calculate the nominal net equivalent yield for a hypothetical case of under-rented freehold property. The decision rule for property pricing revolved around the net present value (NPV) criterion which is the difference between the market value of the property at the equivalent yield (PV1) and the price paid for the same property (PV0). The study demonstrated that mispricing of property might be attributed to the choice of methodology for the calculation of equivalent yield. It was found that equivalent yields derived from the spreadsheet-and polynomial root-solving approaches led to correct pricing of the property contrary to overpricing, which was attributed to equivalent yield derived from the linear interpolation method, and the phenomenon of underpricing associated with equivalent yields determined using valuation and investment tables, and the formula methods respectively. An added value of this study is that it has re-strategized the science of investment decision-making by identifying methodologies for processing investment data that would likely facilitate appropriate pricing decisions pertaining to the sale, purchase, or retention of under-rented freehold property investments.

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Contemporary UK market valuation methods for over-rented investment properties: a framework for risk adjustment

Cited by 9 publications

References 5 publications

Alternative Real Value Hybrid Model for the Valuation of Reversionary Leasehold Investment Properties

Alternative Real Value Hybrid Model for the Valuation of Reversionary Leasehold Investment Properties

Financialisation, the valuation of investment property and the urban built environment in the UK

Methodologies for Equivalent Yield Calculation and their Implications for Property Investment Pricing

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