AbstractPropertyvaluationofincome-producingpropertiesisnormallyreferredtoasadirectrelationshipbetweenvalueandincome.Thisisnormallydefinedasincomeapproach.Thevaluationprocessmaybecomeunclearbecauseoftheupturnanddownturninthemarket.ThisproblemhasbeenaddressedinthelastInterna-tionalValuationStandardsintroducingthedefinitionofcyclicalassettocalculatetheexitvalue(IVS,2020;IVS105para50.21lette).Inthisparagraph,thecalculationofterminalvalueisspecified“forcyclicalassets,theterminalvalueshouldconsiderthecyclicalnatureoftheassetandshouldnotbeperformedinawaythatassumespeakortoughlevelsofcashflowsinperpetuity”.Thisparagraphexcludestheapplicationofallthemostimportantcurrentmethodologiesbasedonincomeapproach.Theproblemraisedforthedeterminationofterminalvaluemaybeextended,generallyspeakingtoincome-producingproperties.Thechapterproposesanapplicationofavaluationmethodologypreviouslyintroduced(d’Amato,IntJStrategicPropertyManag19(3):207–219,2015;Cyclicalcapitalization.InLorenzD,DentP,KaukoT(eds)Valueinachangingbuiltenvironment.Wiley,2017a;JEurRealEstateRes10(2):211–238,2017b)definedcyclicalcapitalizationasamethodtoestimatemortgagelendingvalueforincome-producingproperties.Theproposedmodelcreatesabridgebetweenthevaluationprocessandthepropertymarketcycleformortgagelendingvaluation.Cyclicalcapitalizationisintroducedtogetherwithadifferentapproachtomortgagelendingvalue.Althoughitiswidelyacceptedthecyclicalbehaviour(Roulacetal.JRealEstatePortfolioManag2(1):1–17,1996;JRealEstateRes,1999;Pyhrretal.Analyzingrealestateassetperfor-manceduringperiodsofmarketdisequilibriumundercyclicaleconomicconditions:aframeworkforanalysis.InKapplinSD,SchwartzJrAL(eds)Researchinrealestate,vol3,pp75–106.JAIPress,1990)ofthepropertymarketingeneralandthecommercialpropertymarketinparticular,professionalpracticeinpropertyvaluationstillreliesoncapitalizationofeitheraconstantoraconstantgrowingrent.Thiswouldbeaseriousproblemparticularlyintherecessiveperiodofthemarket(DeLisleandGrissom,JPropertyInvestFinance29(4/5):384–427,2011)theoreticaldiscussionandempiricalevidenceintheliterature,consequenceoftheCovid-19periodalsodemonstratesthataconstantmarketrentandhencemortgagelendingvalueassumptionarealsomisleadinginpractice.
Property Market Cycle, Commercial Properties and Mortgage Lending Value / D'Amato, Maurizio - In: Property Valuation and Market Cycle / [a cura di] M d'Amato Y Coskun. - ELETTRONICO. - Germania : Springer, 2022. - ISBN 978-3-031-09449-1. - pp. 73-97 [10.1007/978-3-031-09450-7_7]
Property Market Cycle, Commercial Properties and Mortgage Lending Value
Maurizio d'Amato
2022-01-01
Abstract
AbstractPropertyvaluationofincome-producingpropertiesisnormallyreferredtoasadirectrelationshipbetweenvalueandincome.Thisisnormallydefinedasincomeapproach.Thevaluationprocessmaybecomeunclearbecauseoftheupturnanddownturninthemarket.ThisproblemhasbeenaddressedinthelastInterna-tionalValuationStandardsintroducingthedefinitionofcyclicalassettocalculatetheexitvalue(IVS,2020;IVS105para50.21lette).Inthisparagraph,thecalculationofterminalvalueisspecified“forcyclicalassets,theterminalvalueshouldconsiderthecyclicalnatureoftheassetandshouldnotbeperformedinawaythatassumespeakortoughlevelsofcashflowsinperpetuity”.Thisparagraphexcludestheapplicationofallthemostimportantcurrentmethodologiesbasedonincomeapproach.Theproblemraisedforthedeterminationofterminalvaluemaybeextended,generallyspeakingtoincome-producingproperties.Thechapterproposesanapplicationofavaluationmethodologypreviouslyintroduced(d’Amato,IntJStrategicPropertyManag19(3):207–219,2015;Cyclicalcapitalization.InLorenzD,DentP,KaukoT(eds)Valueinachangingbuiltenvironment.Wiley,2017a;JEurRealEstateRes10(2):211–238,2017b)definedcyclicalcapitalizationasamethodtoestimatemortgagelendingvalueforincome-producingproperties.Theproposedmodelcreatesabridgebetweenthevaluationprocessandthepropertymarketcycleformortgagelendingvaluation.Cyclicalcapitalizationisintroducedtogetherwithadifferentapproachtomortgagelendingvalue.Althoughitiswidelyacceptedthecyclicalbehaviour(Roulacetal.JRealEstatePortfolioManag2(1):1–17,1996;JRealEstateRes,1999;Pyhrretal.Analyzingrealestateassetperfor-manceduringperiodsofmarketdisequilibriumundercyclicaleconomicconditions:aframeworkforanalysis.InKapplinSD,SchwartzJrAL(eds)Researchinrealestate,vol3,pp75–106.JAIPress,1990)ofthepropertymarketingeneralandthecommercialpropertymarketinparticular,professionalpracticeinpropertyvaluationstillreliesoncapitalizationofeitheraconstantoraconstantgrowingrent.Thiswouldbeaseriousproblemparticularlyintherecessiveperiodofthemarket(DeLisleandGrissom,JPropertyInvestFinance29(4/5):384–427,2011)theoreticaldiscussionandempiricalevidenceintheliterature,consequenceoftheCovid-19periodalsodemonstratesthataconstantmarketrentandhencemortgagelendingvalueassumptionarealsomisleadinginpractice.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
