Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
Deakin Research Online Deakin University’s institutional research repository
DDeakin Research Online Research Online This is the published version: Reed, Richard G. 2008, Encouraging the uptake of sustainable buildings and the critical role of the property valuer, in SB 2008 : Proceedings of the World Sustainable Building Conference, SB08, Melbourne, Vic., pp. 272-283. Available from Deakin Research Online: http://hdl.handle.net/10536/DRO/DU:30019174 Every reasonable effort has been made to ensure that permission has been obtained for items included in DRO. If you believe that your rights have been infringed by this repository, please contact [email protected] Copyright : 2008, ASN Events
Presentation at the 2008 World Sustainable Conference Melbourne,
Professional
Encouraging the Uptake of Sustainable Buildings and the Critical Role of the Property Valuer
8B08
Or Richard Reed MRICS AAPI Professor of Property and Real Estate Deakin University Melbourne Email: [email protected]
(~RICS
From the Proceedings of the World Conference SB08 -ISBN 978-0-646-50372-1
www.rics.org
www.sb08.org
< Back • Home • Contents • Program • Gallery > Forward
Presentation at the 2008 World Sustainable Buliding Conference Melbourne, Australia sb08 ..................................... . . . ....... .. ................... ... ........... . ... . .. ... ... ..... .......... ... .. .. . . ................. . . . .. .. . . . ..........................
Professional
A 9reen profession?
(~RIeS Research
(~RJCS www.rics.org
Professional
4.0 0
'Leaders' I 'Followers'
3.5 0 I
I 3.0 0 f--
I r-
t:!l;l- ':" 1-- "I-- . ':1-- I'·"' c-I ~. ,......
0 I-- ~ c- I-'- ~ .1-- , I". I
2.5
1.50
~ .. .1 II' I
0 f-- ~.8 1-ft-;- . f-- f-- f-- I-- l- I-
i::, FI' . I ~ ;~ ~ . '.5 ~6 ~;5 t· ;3 ~7 Ii, I ~ I·~
, I>
I-- I-- I-- I-- I-- I--pc c-I' c- ~ !\ ~ I-- I-- I-- I-10' 1- . I-
2.0
~~ I ,
0 \ ; 1.0
(~RICS www.rics .org
From the Proceedings of the World Conference SB08 -ISBN 978-0-646-50372-1 www,sb08,org
< Back • Home • Contents • Program ' . , Gallery > Forward
Presentation at the 2008 World Sustainable Conference Melbourne,
Professional
Three main objectives:
-Equip valuers, financiers, investors/owners and other stakeholders with a better understanding of the varying levels of sustainability and how it affects the level of risk (and subsequently the value associated with a commercial building); -It will allow owners, investors, and tenants to appreciate the role of a valuer, their exposure to liability, and their challenging task of assessing the current and future risk, and subsequently value, of a sustainable commercial building; and -Through this higher level of understanding it should mean that the benefits of sustainability will be fully reflected in the valuation process, therefore contributing to support for those developers and investors who are leading in the provision of sustainable solutions.
'·1·~ - .1<':""'--( '~~ R."""",ssional www.rics.org
Communication between valuers and stakeholders
(~R'CS
INVESTORS • Would fUnd
sustainable buildings
• Experience no demand
TENANTS • Demand sustainable
buildings • Have little choice
~LI ___ V_A_LU_E_RS __ ~Ic=> CONTRACTORS
• Can build environmentally efficient buildings
• Do not have demand
DEVELOPERS • Would ask for sustainable
buildings • Believe investors won't
fund them
(Source: modified from Myers et al.. 2(07)
www.rics.org
www.sb08.org
< Back • Home • Contents • Program • Gallery > Forward
Presentation at the 2008 World Sustainable Melboume, Australia
Professional
Conference
The main issues for valuers ...
• Lack of a centralised market • Off-market transactions • Availability of accurate up-to-date information • Privacy limitations about transaction data • Limited information about leases • Lag in the availability of information • Contract v. unconditional v. settlement
Professional
Transfer becomes unconditional
www.rics.org
and available to public '-----
/
Transfer is registered on govt. database
--+---1 --1-1 -1-1 ----+--1 -----. t
~~ ________ ~ ____ ~I~:T-re-n~-ero-~-u~--~ Parties agree on future settlement terms
(~RICS www.rics.org
,., , , """ " " ., , " '" "."" .. " ,." .. From the Proceedings of the World Conference 5B08 - 15BN 978-0-646-50372-1 www.sb08.org
< Back • Home • Contents • Program • Gallery > Forward
Presentation at the lOOS Wodd Sustainable ConferencE! Australia
Professionai
Total development period
--------------~-------------~ r ,
o
(~RICS
Pmf8ss~ona!
Value ($)
(~IUCS
5tte acquisttion, preparation
and precontract
6 12 18 24 Months
Law of Diminishing Returns
(a)
30
Construction Cost ($)
From the Proceedings of the World Conference SB08 - ISBN 978-0-646-50372-1
< Back • Home • Contents • Program
..
www.riGs.orq
wvvw.rics.org
www.sb08.org
• Gallery > Forward
Presentation at the 2008 Worid Sustainable Melbourne, Australia
Professional
Conference
Market Value Model
Construction Cost '---------'
/
(C) Aclual
--------~----~~~---- (b) Difference between
(a) and (e)
o (~R'CS
Professional
1--- ......... -- ................................................. -1 , , I 1"'-------_____________ , I
! ~ EQUITY i ~ I I I I J --------------------- I , . · , r---------------------, · . · . 1 1 · . · . · . · . I r---------------------, I I I 11
i i LOAN ii : ,----------------------, : · . , , · . · . · . · . · . · . · . · . , , , . , , , , , . · . · . · . , , 1------__________________ ... _1
(~R.CS
BORROWER
FINANCIER
RISK
INVESTORSPUBLIC, REIT
VALUER
www.rics.org
www.rics.org
From the Proceedings of the World Conference 5B08 - 15BN 978-0-646-50372-1 www.sb08.org
• Contents < Back • Home • Program • Gallery > Forward
Presentation at the 2008 World Sustainable Melbourne, Australia
Professional
Highest and best use:
Conference
"The most probable use of a property, which is physically possible, appropriately justified, legally permissible, financially feasible, and which results in the highest value of the property being valued"
(lVSC 2007)
(~~RICS Professional
www.rics.org
Definition of market value:
"the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had acted knowledgeably, prudently, and without compulsion"
(RICS Red Book - Valuation Standards)
www.rics.org
www.sb08.org
< Back • Home • Contents • Program • Gallery > Forward
Presentation at the 2008 World Sustainable Conference Me!bourne, Austraiia
Professional
Definition of special value:
IISpecial Value can arise where an asset has attributes that make it more attractive to a particular buyer, or to a limited category of buyers, than to the general body of buyers in a market. These attributes can include the physical, geographic, economic or legal characteristics of an asset. Market Value requires the disregard of any element of Special Value because at any given date it is only assumed that there is a willing buyer, not a particular willing buyer. "
(RICS Red Book - Valuation Standards)
(~IUCS Professional
www.rics.org
Drivers of sustainability considerations in valuation
• Tenant demand • Investor demand • Government specification of sustainability in leasing
contracts • Socio-economic change including adoption of CSR • Lower operating costs and increased accountability • Increased performance measurement • Improved rating systems • Retention of staff
(~RICS www.rics.org
From theProceeding~ of the Wo~ld Confer~nce 5B08 - ISBN 978-0~646-5()372-1' . www.sb08.org
< Back • Home • Contents • Program • Gallery > Forward
Presentation at the 1008 World Sustainable Melbourne, Australia
Professional
Conference
Barriers to acceptance of sustainability considerations in valuation
• Lack of knowledge about the effect on value • Limited discussion in valuation circles • Ability of valuation approaches to incorporate
sustainability • Impact of individual sustainabiJity inclusions • Quantifying the intangible aspects of valuation • Systematic nature of buildings
(~RICS www.rics.org
Professional
Concept of intangible value in valuation
• Wider effect of buildings on the environment • Point of difference • Corporate social responsibility • Government legislation • Addressing long-term obsolescence
(~RICS www.rics.org
www.sb08.org
< Back • Home • Contents • Program • Gallery > Forward
Presentation at the 2008 Wodd Sustainable Conference Melbourne, AustraHa
Professional
Policies, regulations and standards
• RICS Red Book - Valuation Standards • International Valuation Standards Committee (IVSC)
(~RICS www.rics.org
Professional
• Wider effect of buildings on the environment • Point of difference • Corporate social responsibility • Government legislation • Addressing long-term obsolescence
(;;Wrucs www.rics.org
'< < "'. "" ", , •••• ,., • "" '" <>"." ". "" .,' "" "" , ••
From the Proceedings of the World Conference 5B08 - 15BN 978-0-646-50372-1 www.sb08.org
< Back • Home • Contents • Program • Gallery > Forward
Presentation at the 2008 World Sustainable Buliding Conference Melbourne, Australia sb08 .. .. ..... .. ... .... .. .. .... .. ..... ... .. .... .. .. ..... .. ........ ........ .... ... ... ..... ... ... ......... .. ... .. .. ... ... ...... .... ......... .. .. ...... .. ... .. ........ ... .......... .
< Back
Professional
Incorporating sustainability into valuation
• Do the sustainable features cause the building to be associated with less or more risk?
• How is the level of sustainability reflected in the assessed value of the building?
• How is sustainabmty incorporated throughout the valuation process?
(~RICS
Professional
0 TIME (years) 10 11 •
., ",.2! CIl 'iij ~ g> '" r "'c) 1U 8."6
alW ~~ ~~3 _ C)
(J)(J) y y Q; .£: ::::J~ (J)J2
z<t: a. :::J e~..a Q 13-< ... .Q :£:~ I-D:: Jf A.
'\ 0:::l <t:a.
->-1 (d) Income (Renl) I
/\0~'o~ 0
• 0:
..Jg >-
1 (e) Less Expenses I w .... vc0«'-' ....
:3 ;i-< «
• c'r~ :3 I-I ~ 0(J) <t:<t: I = (0 Nel Opera ling I
« (J
0 Income. e .... " >- • w
" I Mulliply (I) by present I ...... w
fil:s: w
value of each cashflow .. _ .. - .. _ .. _ .. - ':(j'~~::~~:'i- .. _ .. _ .. _ ...... z w
1-0 by discount factor (9) ::; Z..J e
§~< I • I C. j \: v (J
'0 ' r'( ~
en « Sum discounted . (» £5 () cashflows for each time 0:
'- period (h)
_._._._._._._._._._._._._._._._._ . ., >-
"I Present value of cash flow 1 (property)
(~RICS
www.rics.org
www.rics.org
. . . ' .. www.sb08.org
• Home • Contents II Program .: . Gallery >- Forward
Presentation at the 2008 World Sustainable Melbourne, Australia
Professional
r ;
(onference
Environmentally Efficient Buildmgs
r y,----.:::::'!---.... --.."r---~--r----Y---·-." ;' Improved woIki:Jg' ( RedtK"ed buildillg " (" Reduced facilities l . Greater capital eo~, \
I. emiIolll.llent -" " ~ratiug com ) ~. ru.~intell3llce"ost~_) L------r--~
,.-_i--c-_, ,.--~_c-" '1.~ .. -, (C 1. .. I " i C-reater denHlld. for ." , Lower operatlng i ! Lower operatmg aDu'Of i au~e; ower lllltla '
, space , expet.'dm.ue;! capital "":pellditure \ ret1ll1l on capital ,_ j \. __ ~--------" .I \.
r-£-~\ ,-, Higher rents. Ie'S!; mcrease; the net r ~ \~ancie~ ~ J
__ il' ____ ., (" Positi~:e impact on ~
value t Positive impact on
value
: J .. \If .\ K" , I P()~ltlVe I1npact on . ! eganve UllpaC! on .
L ______ . ; \"a!ne 'I ,"a!ne L~_. j '--____ J
(Source: Boyd. 2006)
(~RICS www.rics.org
Professional
• Changing perception of sustainability • The definition of market value • Changing relationship between cost and value • Increased communication and information availability • Undertaking explicit valuations • Increased data collection and transparency • Enhanced understanding of the valuation process
(~RJCS www.rics.org
www.sb08.org
< Back • Home • Contents • Program • Gallery > Forward