Capital and Rental Valuation of Hotels
Robert Chess, April 2021
Hotels have been one of the asset classes most damaged by the coronavirus pandemic. Assets such as hotels and shopping centres, which have witnessed a steep decline in revenues, be they permanent or temporary, illustrate the need for DCF valuations, for only DCFs have the necessary flexibilities needed to value abrupt changes to income. Like in many other aspects, the coronavirus pandemic had amplified trends that were already ongoing. In the case of valuations, academics had for decades been encouraging practitioners to fully embrace DCF. Those who find such changes to entrenched practice challenging, should note that Direct Capitalisation is itself a special case of DCF.
In the hospitality sector it had been customary for decades to employ DCF, therefore apart from an interest in the valuation of hotels, which should only be undertaken with specialist skills, we are able to learn from hotel valuations about the application of DCFs in general. Therefore we are delighted that Robert Chess, a notable practitioner and talented writer has agreed to write especially for the Israel IVS Forum this introductory paper on the subject.
Cash flows or cap rates?
Andrew E. Baum, March 2021
The issue of valuation methods and techniques has once again become pertinent this year, due to the disruptions caused by Covid-19. The difficulty in valuing by use of direct capitalisation in periods of swift market transitions, be they temporary or permanent, recalls past criticisms by academics, which have been aired for twenty years. Andrew Baum authored with Neil Crosby a foundational text on the subject, the fourth edition of which has recently been published. We are delighted that he has agreed that we translate, with due changes, an excerpt from the first chapter of Property Investment Appraisal.
Real Estate Valuation and the Sustainability Challenge
Marco Percoco, February 2021
The issue of sustainability in real estate and construction is currently at the top of the international agenda, due to the worrying trends in climate change attributed to human interference. In Israel awareness of the subject is only just beginning, the Interior Committee of the Knesset having approved a few months ago a first pilot for implementing Energy Performance Ratings for newly built properties in Israel. These are similar to the certificates placed on all imported white goods. In Europe they have been in place for a few years and in the UK the Government has committed to ambitious targets for raising the minimum performance ratings in the coming years, as part of their all encompassing plan to attain carbon neutrality by 2050.
In view of this we are pleased that Professor Marco Percoco, the head of the GREEN centre for sustainability at Bocconi University in Italy, has agreed to our request to set out his views as to the role needed of valuers.
Valuation of Property for Lending Purposes
Reiner Lux and Wolfgang Kälberer, February 2021
We have asked Reiner Lux, the head of HypZert, which sets qualifications for valuers undertaking Mortgage Lending Valuations (MLV) in Germany, to write a short introductory piece on Long Term Value (LTV), of which German MLV is the best known example.
We are delighted at having received this paper by Reiner and his colleague Wolfgang Kälberer. LTV has been endorsed by Basel III and the European Union is meant to transpose it into European law. Consequently, LTV is subject to consultation on being added to the new five years' agenda of the IVSC. It appears pertinent for valuers worldwide to become acquainted with it, since global application in one form or another is surely imminent.
The Valuation of Shopping Centres
Christian Luft, January 2021
We have asked Christian Luft, an expert on shopping centre valuations, to write a short introduction on the subject, with an emphasis on recent trends and on his thoughts as to future developments. The intention is that this short paper act as a preliminary acquaintance with international best practice in the field, for the benefit of Israeli valuers and the global real estate valuation community at large.