9-Sep-15 European Valuation Practices initial findings Leonie Koerhuis Msc, PhD student Tias Nimbas Bus. School Dr Paul Nelisse FRICS RT, Tias Nimbas Business School Prof. Dr. Aart Hordijk MRICS, Tias Nimbas Business School contact:

9-Sep-15goto menu view | Header and Footer to change this text 2 Previous Research European Valuation Practice, Alistair Adair et al, 1995 Real Estate Valuation in Global Markets, Appraisal Institute, 1996 Overviews by major Valuation Firms like DTZ, JLL, Colliers, etc., mostly as of 2000 onwards Conclusion: Relatively Outdated

9-Sep-15goto menu view | Header and Footer to change this text 3 Why ? Improve Transparency Crossborder Comparison Higher Profile of the Valuation Profession Stakeholders Demand Need for Dynamic System, to be updated regularly “Lonely Planet” of Valuation Looking for the “True” Capital Growth

9-Sep-15goto menu view | Header and Footer to change this text 4 For Whom ? Practitioners Academics (International) Investors Auditors Financial Institutions ALM Studies

9-Sep-15goto menu view | Header and Footer to change this text 5 What ? Compact Survey, focus on main items Similarities and Differences in this presentation : - Market Value - Property Rights - Measurement - Lease Conditions - Operating Costs - Transfer Costs - Valuation Methods - Reliability of market evidence

9-Sep-15goto menu view | Header and Footer to change this text 6 Contributing Countries so far France Germany Italy Netherlands Portugal Russia Spain UK

9-Sep-15goto menu view | Header and Footer to change this text 7 Market Value

9-Sep-15goto menu view | Header and Footer to change this text 8 Do you use any Other / Alternative Definitions? Value in Use Liquidation Value Fiscal Value Charte de l'Expertise en Evaluation Immobilière Fair Value Private Purchase Verkehrswert No

9-Sep-15goto menu view | Header and Footer to change this text 9 Property Rights Availability

9-Sep-15goto menu view | Header and Footer to change this text 10 Freehold

9-Sep-15goto menu view | Header and Footer to change this text 11 Leasehold

9-Sep-15goto menu view | Header and Footer to change this text 12 The Regular Approach to Measurement of Surface is: Gross External Area Gross External Area - Warehouse Kind of Gross External Area for Construction Permits Gross Internal Area Net Usable Area Net Usable Area for Leasing Net Internal Area ITZA (Retail) GLA (Gross Leasing Area) Net Leasable Area Depending upon the Asset Type Depending upon which of the 16 Bundesländer

9-Sep-15goto menu view | Header and Footer to change this text 13 Regular Contractual Lease Period

9-Sep-15goto menu view | Header and Footer to change this text 14 The following Costs are Incurred by the Tenant / Landlord:

9-Sep-15goto menu view | Header and Footer to change this text 15 Transfer Costs Transfer Costs are in the following Ranges: Stamp Duty / Transfer Tax: 0.8% (France) - 7.0% (Spain) VAT: 8.0% (Spain) % (23% in 2011, Portugal) Real Estate Agent: 0.35% (Portugal) - 4.0% (Italy) Notary Fees + Registration: 0.2% (Spain / Portugal) - 6.2% (France)

9-Sep-15goto menu view | Header and Footer to change this text 16 Income Approach to Market Value Calculation Components (i.e. Rental Income, Yield) are similar Usually 10 or 15 Years DCF Notable Difference: due to Full Repair Leasing in UK, therefore in the UK most emphasis on Net Yield

9-Sep-15goto menu view | Header and Footer to change this text 17 Which sources are available for comparable investment and rent transactions? What is the quality of each source?

9-Sep-15goto menu view | Header and Footer to change this text 18 Main Similarities and Differences Differences - Different Lease Lengths - Operating Costs - Stamp Duty / Transfer Costs Similarities - Valuation Methods - Underlying Variables - Judgement of Property Magazines Relevancy

9-Sep-15goto menu view | Header and Footer to change this text 19 Conclusions and next steps Further research necessary Expansion with more countries In-depth analysis of the data Quantification of the differences - measurement : use of EU NEN 2580 as a norm to adjust space - operating costs : UK as the starting point to adjust - transfer cost : once of correction on the investment Qualitative - good – poor information : risk premium on the cap/discount rate (?) - lease length : effective lease length and difference in risk premium (?) Main goal : looking for the “true” capital growth