Gabrieli, Tommaso;
(2023)
Back to the future with the dual lease-hold rate.
Presented at: 29th European Real Estate Society (ERES) Annual Conference, London, UK.
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Presentation ERES 2023.ppt - Other Download (3MB) |
Abstract
We are contemporary real estate valuers who use tools of present value maths and discounted cash flow analysis. Endowed with those tools, we travel back to the 30's and analyse the origins of the dual leasehold rate, an appraisal technique that has been widely used -but contested- till our present times. Following the journey of Mackmin (2008), we find that the original idea of Mackmin (1928) is based on a correct valuation principle, but the dual-rate formula advocated by Parry (1930) and others is wrong in terms of discounting. We correct the old formula and we take it back to the present. The corrected formula can then be further extended and adapted to different cases of contemporary leasehold valuations. We show through some numerical simulations to which extent the old dual-rate formula differs from the corrected version. We reach a possibly different conclusion from the one of Mackmin (2008): a dual (or even triple) rate formula can still be useful to value leaseholds but it needs to be obtained by correct principles of discounted cash flow.
Type: | Conference item (Presentation) |
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Title: | Back to the future with the dual lease-hold rate |
Event: | 29th European Real Estate Society (ERES) Annual Conference |
Location: | London, UK |
Dates: | 12 - 15 July 2023 |
Open access status: | An open access version is available from UCL Discovery |
Publisher version: | https://2023.eres.org/ |
Language: | English |
UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > The Bartlett School of Planning |
URI: | https://discovery.ucl.ac.uk/id/eprint/10179292 |
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