Physical feasibility

The total area of ​​the site is insignificant, the dimensions of the site are 34x50 m, the site is located in an established development zone, the type of development is predominantly firewall. It is necessary to take into account the level of insolation of adjacent buildings, therefore the construction area of ​​the site above the level of the 2nd floor should not exceed 400 sq.m. The second limitation is the need to construct part of the building’s façade in the style of the adjacent residential building, which was partially lost during the war. The height of the building will be less than the permitted 28-33 meters and will be limited by the height of the neighboring residential building, so the height of the building will not exceed 5 floors above ground level. When constructing a building, it is necessary to provide access to the courtyard through the analyzed site, which also imposes restrictions on the placement of the building on the site. According to available data, utility networks are located along the perimeter of the territory, so the location of the networks will not be an obstacle to the placement of the building.

Financial Feasibility

The project is planned to be financed from our own funds due to the current high lending rates. Interest on loans for large developers is 18-20% and is provided for a period of three to five years, mainly for residential projects (for example, a project by RBI). Lending to entrepreneurs purchasing leased premises, according to banks published in open sources, will be in the range:

Bank "St. Petersburg" - refinancing rate + 9%, i.e. 20% currently

VTB 24 is ready to provide loans secured by purchased real estate at rates of 17-21%

According to Moskommertsbank, the average rate for a quality borrower will be about 20%.

Thus, when calculating the financial indicators of the project, it is advisable to take current loan rates of 20% as the rate of return for the project.

Economic expediency

Economic feasibility analysis determines which legally permissible and physically feasible uses will produce acceptable

income to the owner of the site, to the extent that the use of the land is “reasonably possible” with

taking into account the nature of the relationship between supply and demand in a given market.

The main criterion of economic feasibility : NPV(CF)>0.

The potential location of the land being assessed should also be taken into account.

The location of land is considered the main factor determining its value. On

The location potential of a piece of land is influenced primarily by the characteristics of the surrounding land use type.

According to the environmental analysis of the location of the Assessment Property, the area

the location of the plot of land is most promising from a development point of view

modern public and business zone of the area due to planned redevelopment projects of industrial areas and location near a metro station. Due to the fact that the project provides for the commercial use of the constructed facility, social functions that do not generate significant rental income were excluded from the list of possible functions.

Due to the small area of ​​the site and its location in a block with dense residential buildings of low quality, as well as due to the low income from renting out space for a sports function, the function of a sports complex should be excluded from the list of functions.

Hotel projects are the most complex compared to other types of investment in profitable real estate. Their construction requires costs several times higher than the construction of a business center, and the payback significantly depends on effective hotel and tourism management. Taking into account the restrictions on the building area and the height of the building possible for construction, the total area of ​​the facility will not exceed 1900-2000 sq.m., which will allow only a mini-hotel with approximately 50 rooms to be placed on the site. Since the site is located near a metro station, not far from the city center, within walking distance from the Neva embankment, as well as near the Finland Station, it is advisable to consider the possibility of placing a mini-hotel on the site, the target clients of which could be tourists and entrepreneurs from Finland staying in our city ​​by rail.

In the immediate surroundings of the analyzed area there are no modern shopping centers and small shopping complexes, which is due to the nature of the surrounding development. Trade enterprises are located in built-in premises on the first floors of residential and office buildings. Due to the specific location of the site, the requirements for the architecture of the future building, as well as the requirements for the provision of parking spaces and the location of loading zones of retail facilities, the construction of a small shopping center is not feasible on the analyzed land plot. Retail premises in metro areas are in high demand among tenants even during a crisis, as evidenced by the occupancy of all built-in retail premises surrounded by the site. Therefore, the trading function can be included in the object as an additional function.

The inclusion of the function of a private medical multidisciplinary center in the facility is possible due to the presence of centers of attraction - specialized medical institutions - in the surrounding area. Since private medical centers rent mostly small areas, and large chain clinics prefer to buy real estate, the placement of a medical center can be considered as an additional function of the future building.

Thus, it is legally permissible, physically feasible, financially feasible and economically feasible to construct an office or hotel building with the following associated functions: parking or parking, retail, medical center.

Maximum efficiency

The most effective option for using the site is called

which provides the greatest value. In this case it is determined

the most effective of the options formed above:

business center with surface parking,

business center with built-in and attached parking

business center with surface parking and built-in retail premises

mini-hotel with surface parking

3.3. Determining the best and most effective option for using a conditionally vacant site

Calculation algorithm:

1. Options for using a land plot, taking into account existing restrictions, norms and rules of land use and development

2. Cost of improvement - construction costs ( standards: UPVS, UPBS

VR; or market data).

3. Cost of the object

4. Cost of land VL=Vо–VB => max, Where VL– cost of land, Vo–

market value of the property (improvement + land), VB – cost of improvement.

The criterion for the best and most efficient use of a piece of land,

as free, is the maximum value of the land. The value of land can be found, for example, using the extraction technique.

In this work, the method of capitalization by the rate of return and the residual method were used to find the value of the land plot.

Income approach determines the value of real estate by reducing expected future income to their current value at the time of valuation. The income approach combines reasonable calculations of future income and expenses with investors' requirements for final returns. Final return requirements reflect differences in risks, including type of property, location, regional market conditions and opportunities, etc.

Rate of return capitalization method based on the period of ownership of the property, the type of income streams and the frequency of their receipt. Each receipt of income, including income from resale, is discounted (that is, converted at the discount rate to present value). Moreover, the discount rate, which is mainly a function of risk, can be different for each type of income. The discount rate is chosen taking into account the state of the capital markets, the expectations and desires of investors.

The main stages of the assessment procedure when using this method:

Justification of the typical holding period (forecast period) for the valued

real estate;

forecasting periodic cash flows until the end of the holding period,

for each period it is necessary to determine:

IPg – potential gross income(this is the total gross income from real estate

upon leasing of all premises and upon timely payment of rent

payments by all tenants);

Ieg – effective gross income(takes into account possible losses from temporarily empty premises and losses when collecting rental payments);

E – operating expenses (costs of operating the facility);

Io – net operating income(the difference between effective gross income and operating expenses);

calculation of the appropriate rate of return (discount rate) for periodic cash flows ( Y);

calculation of the corresponding capitalization ratio ( Rn);

calculation of the cost of reversing the assessed object at the end of the forecast period

(for the last year of the holding period);

calculation of the current value of net operating income and reversion costs

by discounting them using an appropriate discount rate;

calculation of market value by summing current monetary values

flows and reversion costs.

Mathematical expression for determining the market value of the property being assessed

property is represented by the following formula:

Where Vo– market value of the property within the framework of the income approach;

Ioi– net operating income of period i (i =1,...,n);

Y– rate of return on capital (discount rate);

n– last year of the forecast period;

Von– cost of object reversion in the last year of the forecast period.

By most effective use generating... Leningrad ( Saint-Petersburg). The first... Balakovskaya, Kalininskaya and... the principle use the best existing... material assets - land plots, buildings and... area its placement. As a result analysis ...

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Analysis of the most efficient use of land plots

• 1. The need to analyze the most efficient use of land plots
• 2. Criteria for analyzing the most efficient use of land
• 3. Methods for assessing the most effective use of land
• Literature
• 1. The need to analyze the most effective useland plots
• Since in the practice of valuation activities the market value of the subject property is most often determined, the analysis of the most effective use reveals the most profitable and competitive type of use of a particular property.
• All types of property transactions based on market value require adequate assessment and careful analysis of the economic behavior of investors and other market participants.
• The influence of market behavior on the financial decisions of individuals, companies, and authorities dictates the concept of the most effective use of real estate. Market factors determine market value, so the demands of market forces on properties are important in determining the best use.
• The cost basis of any real estate property is the cost of the land plot. The buildings and structures located on it may be changed, but the basic characteristics of the site usually remain the same. At the same time, the income of a particular site depends on the efficiency of its use. An investor, when choosing a land plot on a specific market, understands that the difference in the cost of various plots is explained by their quality characteristics.
• Analysis of the most effective use of a property involves conducting a detailed study of the market situation, the characteristics of the property being valued, identifying market-demanded options that are compatible with the parameters of the property being valued, calculating the profitability of each option and estimating the value of the property for each use option. Thus, the final conclusion about the most effective use can only be made after calculating the cost.
• The best and most efficient use of a property is the use of a vacant or developed plot of land that is legally possible and properly designed, physically feasible, provided with appropriate financial resources and provides maximum value.
• The optimal use of a piece of land is determined by the competing factors of the particular market to which the property being valued belongs, and is not the result of the subjective speculation of the owner, developer or appraiser.
• Therefore, the analysis and selection of the most effective use is, in fact, an economic study of market factors that are significant for the object being valued.
• Market factors used to formulate a conclusion about the most efficient use of real estate at the valuation date are considered in the overall body of data collected and analyzed to determine the value of the property. Therefore, the highest value use can be qualified as the basis on which market value is based.
• If the property being valued involves subsequent personal use or rental, then their main motivation when calculating the value will be reduced to the resulting consumer qualities of the object (income, prestige and privacy, etc.). Investment motivation, in addition to the amount of income received and capital accumulation, takes into account such arguments as tax benefits and the feasibility of the project.
• Typically, the best use analysis is carried out using several alternative options and includes the following areas:
• - market analysis;
• - analysis of the feasibility of the option;
• - analysis of the most effective use.
• The listed areas of analysis require a comprehensive study of the following issues.
• Market analysis involves determining the demand for alternative use options to the existing one in order to study supply and demand, market capacity, dynamics of rental rates, etc. for each option.
• A feasibility analysis involves calculating the underlying cost components: revenue stream and capitalization rates to determine the variable value of each legally feasible and physically feasible option.
• The analysis of the most effective use involves the development of a detailed plan for the implementation of each option, considering specific market participants, the timing of the project, and sources of financing to select an option that ensures maximum productivity of the assessed object.

2. Criteria for analyzing the most efficient use of land

The option for the most effective use of the property being assessed must meet four criteria - these are:

- legal admissibility;

- physical feasibility;

- financial security;

- maximum productivity.

The sequence of consideration of these criteria during the analysis of various options for using real estate to select the most effective one usually corresponds to the above. Legal admissibility and physical feasibility are considered first, followed by financial viability and maximum productivity. This sequence of the analysis procedure is due to the fact that the most effective use case, even if the necessary funding is available, is not feasible if it is legally prohibited or its physical implementation is impossible.

Legal admissibility

The legal admissibility of each considered use case is checked first in all cases. However, the optimal use of the property should not be confused with the legal requirement to use the property for its intended purpose.

The appraiser reviews private restrictions, zoning regulations, building codes, historic preservation regulations, and environmental laws that may change specific potential uses.

The choice of the most efficient use of real estate may be influenced by the presence of long-term lease agreements. During the remainder of the lease term, use of the property is subject to the terms of the lease agreement. If the most effective use of a property is constrained by the existence of a lease, this should be reflected in the valuation report.

For example, if a property is constrained by a ground lease that expires in more than 12 years, then it may not be economically feasible to construct a new building that has an economic life of 40 years.

In addition, it is necessary to take into account possible restrictions that may be included in the agreement for the purchase of real estate. These restrictions may concern certain areas of use, specify the location of buildings on a land plot, the parameters of buildings, and the type of building materials used. If deed restrictions conflict with more general legal provisions, such as building codes, then the maximum restriction is usually taken into account.

Building codes can discourage land from being developed with the most efficient buildings if they increase construction costs to meet technical standards.

This ultimately hinders the development of the territories. In some areas, building codes are used to curb new construction and limit growth.

Current land use rules are aimed at protecting the environment. Appraisers must take into account air and water cleanliness standards, as well as public opinion about proposed development projects. As an example, we can cite the construction of buildings of a certain number of storeys, fire breaks, and insolation requirements.

A use option that is prohibited by law at the valuation date can be considered at further stages of analysis only if the appraiser intends to make changes to existing standards . However, the likelihood of changes in legislation, building codes, zoning regulations, etc. is never 100% certain.

Physical feasibility

The choice of the most effective option for using real estate should be based on its physical feasibility.

Physical feasibility criteria—size, shape, area, design, ground conditions and access roads to the site, and the risk of natural disasters (such as flood or earthquake)—influence the proposed use of the land.

The ultimate utility of a plot of land depends on its size and shape. Some options give the greatest effect only on the basis of using an area of ​​a certain size. In this case, it is necessary to determine the possibility of expanding the existing land plot, since some plots may not have the potential for expansion.

The shape of the plots affects the final productivity, as the costs of developing an irregularly shaped plot of land can be higher, which further reduces its usefulness, compared to plots with smooth sides.

Similarly, the presence of access roads to the site and utilities increases its final productivity, since savings are achieved on its development. Thus, the free capacity of treatment facilities limits the physical dimensions of the proposed efficient development option.

The topographic or soil characteristics of a plot of land are reflected in the functional utility of the site. Negative aspects identified by the appraiser complicate its development or increase development costs. Since all the sites on the market compete with each other, the site being evaluated may not be suitable for the most effective use, as it is inferior to other sites typical for the area.

In the process of analyzing the physical feasibility of an effective use case, it is necessary to consider the condition of buildings and structures to determine the possibility of its continued operation on a new basis. If buildings need to be redeveloped to ensure optimal use, the costs required for this should be calculated and compared with the final profitability. Typically, the cost of renovating a property depends on the physical condition and location of the property.

Financial security

The next stage of selecting types of use is an analysis of financial security. An option is considered financially viable if it provides operating income equal to or greater than operating costs, financing costs and the required return on capital scheme. Thus, all uses that can provide positive income are considered financially feasible.

If the type of use does not involve the receipt of regular income from operation, then the analysis selects those options that create real estate at a cost equal to or exceeding the cost of constructing or reconstructing the facility for this new type of use. The appraiser must compare the capital gains or income from the use of the property to the capital expenditure incurred. If income is lower than expenses or exceeds them only slightly, this type of use is considered financially unfeasible.

To evaluate uses that generate regular income from operation, for each of them the appraiser calculates the total net operating income, the individual rate of return on invested capital, and the amount of income attributable to the land. If the net income meets the required return on investment and provides the required return on the land, the use is financially feasible.

Obviously, the identification of financially feasible uses is based on an analysis of demand, supply and location.

Maximum productivity

Maximum productivity is the highest value of the land plot as such, regardless of whether it is vacant (actually or conditionally) or built up. Thus, the implementation of this criterion involves, from all legally permitted, physically implementable and providing a positive income, the choice of the type of use that provides the maximum value of the basis of real estate - the land plot.

The potential option for the most efficient use of land reflects a long-term, carefully developed and fairly specific land use program associated with the normal life of buildings and structures. The service life depends on the type of building, the quality of construction work and other factors.

The maximum productivity of a land plot is determined by relating the amount of its income to the capitalization rate required by the market for a given type of use. However, depending on the chosen use of the property, the method for determining the value of the land may be different. The choice of method depends on the degree of reorientation of the actual purpose of the property being valued, the level of risk of the option under consideration, the required rate of return and capital recovery period, and the timing of the implementation of the proposed option for using the property.

The type of use that provides the greatest profitability of the land is the most effective. The basis of all methods used for determining the value of a land plot in order to select the most effective option is the so-called residual technique. Income from land is considered as the balance between the total income generated by real estate and those amounts of income that are provided by attracting labor, capital, fixed assets (functioning buildings and structures).

The cost of a land plot, in turn, represents the difference between the total cost of the entire property and the residual value of buildings or the costs of their construction.

The best use of real estate can either be achieved on the basis of existing buildings, or involve the construction of fundamentally new improvements, which requires consideration of the land plot as vacant. Based on this, appraisers use two techniques when analyzing the best use of real estate:

- the most effective use of the site as an undeveloped one;

- the most effective use of the site as a built-up one.

There are the following main reasons for determining the most effective use of land as undeveloped:

1. Isolation in the value of real estate the value of only the land plot.

2. Using the comparable sales method to value developed land.

3. Calculation of loss in value due to external obsolescence.

4. Assessment of the real value of land as part of a real estate property, which is not optimal for a given site.

The analysis of the most effective use of a built-up area is done for two reasons:

1. Identification of the type of use of the property that provides the highest total return on invested capital.

2. Identification of real estate objects on the market of the same purpose with a comparable level of efficiency of use.

Let's consider the difference between the most efficient use of a site without buildings and a property with buildings using the example of industrial real estate that has toxic emissions. The area in which the analyzed object is located, due to its natural characteristics, is being developed as a suburban residential area.

The maximum efficiency of using a site without buildings will most likely be based on its use as a residential cottage. In this case, there will be costs for demolition and disposal of the existing facility. In practice, a potential property owner will only redevelop a site if the residual value of the buildings is low.

Depending on how close in time the selected use requiring new construction is to the valuation date, the existing use may be considered an intermediate use. Thus, if, according to the plan for the expansion of urban land, cottage construction will reach the analyzed land plot in five years, and the period required for the demolition of existing buildings and the construction of a new cottage is one year, the four-year operation of the existing industrial property is considered as an intermediate use.

However, if the competitive level of demand is higher for industrial use, then it is likely that the most effective use of the property may be to maintain the existing use while carrying out the necessary environmental works at associated costs.

The theory of real estate valuation requires the analysis of a piece of land, assuming there are no buildings on it, even if the site is developed, to determine whether the current use is in demand and whether it should be continued or replaced.

The method of determining the best and most effective use of the assessed property as an undeveloped land plot is based on the assumption that it does not have buildings or can be cleared of buildings as a result of their demolition. As a result, the value of land is determined based on the selection of possible uses that ensure the profitability of real estate, and the selection of parameters of real estate in accordance with a specific purpose.

The option of using a plot of land as undeveloped has two main types:

1. Using a plot of land for speculation, that is, for selling it without improvements to an investor who will subsequently develop it in accordance with market requirements or his own preferences. This option is applicable when real estate markets are oversaturated.

2. Development of the land plot with new buildings and structures, including:

- development without intermediate use, if a new use option is being considered, accepted by the market at the date of analysis;

- development with intermediate use involves the temporary preservation of the existing use option until the new option is in demand by the market, based on the forecast of the market situation;

- division or consolidation of a land plot to achieve the most efficient use;

- development of the site with new buildings similar in purpose and physical parameters to the existing facility.

The most common situation for assessing real estate on the basis of an undeveloped plot is its conditional undevelopment. This is due to the fact that there is a building on the analyzed site, which affects the value of the property. In this case, the choice of the option for the most effective use of the site as undeveloped takes the form of investment design at the decision-making stage.

In this case, the appraiser needs to answer a number of questions:

1. How can a plot of land be used if it is not actually developed or can be cleared of existing buildings?

2. What type of building or other structures supporting the selected use can be constructed on this land, based on its physical and other characteristics, and in what time frame?

3. Should the existing use be considered as an interim use?

For example, if construction work is required to achieve the most efficient use of land, the appraiser should determine:

- costs of demolition of existing buildings;

- type of the most effective use of the property (office, hotel, warehouse, etc.), corresponding to current market standards and including elements at the most reasonable prices;

- characteristics of optimal buildings that should be erected to maximize the use of the potential characteristics of the site (number of floors, optimal area of ​​functional units, number of these units, etc.);

- level of rent and operating costs;

- the cost of buildings being constructed, taking into account financing costs.

Reception of the most effective use of land as a built-up one involves the preservation of existing buildings on the analyzed site. The option of using a plot of land as a built-up one has two main types:

1. maintaining the existing purpose of the property being assessed;

2. changing the existing purpose of the property being assessed.

In both cases, the need and possibility are considered:

- maintaining the existing volume and quality of services provided by real estate;

- carrying out construction work on the reconstruction of buildings to improve their class and change rental rates;

- carrying out construction work to expand the area through additional extensions or the construction of additional floors;

- reduction of existing areas due to partial demolition.

The appraiser, comparing the existing use option for buildings located on the land plot with the optimal building option, must receive an answer to the following questions:

1. Is it advisable to continue to operate the building in its current condition?

2. Which building reconstruction option should I choose: reconstruction, expansion, partial demolition?

3. How and in what time frame will the costs be recouped?

The most optimal option for using buildings will ensure the maximum cost of investment-attractive real estate, taking into account the rate of return determined in accordance with the risk of the chosen option. It is clear that the risks of maintaining the existing use of the property and different redevelopment options will not be the same.

The assessment report must separate the best use of the site as undeveloped from the best use of the site as developed. The assessment report must clearly identify, explain and justify the purpose and conclusion for each use.

3. Methods for assessing the most effective use of land

land plot building capitalization

Determining the most effective option for using the property being assessed involves the sequential implementation of the following stages:

1. Analysis of all possible options for the most effective use of an undeveloped plot or a plot with buildings based on the current market situation at the date of assessment and the prospects for its change.

2. Checking the legal admissibility of the selected options.

3. Checking the physical feasibility of the selected options.

4. Assessment of the financial viability of the selected options.

5. Selecting the most effective option for using real estate, ensuring its maximum productivity.

Assessing maximum productivity depends on determining the most efficient use of real estate. If the land plot is considered undeveloped, then, depending on the assessment of the capitalization rate, three methods can be used.

First method: The land plot is considered as undeveloped; capitalization rates for land and buildings are different.

1. Determining the cost of developing a conditionally vacant land plot with buildings and structures for a specific purpose, taking into account market demand and supply.

3. Making adjustments to account for load factor and collection losses.

4. Determination of the possibility of obtaining and the amount of other income.

5. Estimation of actual gross income.

6. Calculation of operating costs.

7. Calculation of capital cost reserves.

8. Calculation of net operating income.

9. Calculation of capitalization ratio for buildings.

10.Assessment of income generated by constructed buildings and structures.

11.Calculation of income attributable to land.

12.Calculation of the capitalization ratio for a land plot.

13.Assessing the value of a land plot using the method of capitalizing the income generated by the land.

Second method: The land plot is considered as undeveloped, capitalization rates for buildings and land are the same.

1. Determination of the cost of developing a conditionally vacant land plot with buildings and structures for a specific purpose, taking into account market demand and supply.

2. Calculation of potential gross income.

3. Making adjustments taking into account the load factor and losses in collecting payments and the amount of other income.

4. Estimation of actual gross income.

5. Calculation of operating costs and capital cost reserves.

6. Calculation of total net operating income.

7. Calculation of the overall capitalization ratio for the property being assessed.

8. Valuation of real estate by the method of capitalization of net operating income generated by real estate.

9. Estimation of the value of a plot of land as income as the difference between the estimated value of the property and the costs of improvements.

Third method: The land plot is considered undeveloped, and the market price for selling the property for its intended purpose is known:

1. The market value of a finished property for a specific purpose that can be built on the analyzed land plot is determined.

2. The cost of construction is calculated, including the developer’s profit.

3. The value of a land plot is estimated as the difference between the sale price of the property and total costs.

Fourth method: The land plot is considered as built-up; the buildings require some improvements:

4. Calculation of costs for improving the facility.

5. Calculation of the increase in the value of real estate taking into account the improvements made.

Fifth method: The land plot is considered as built-up and does not require reconstruction:

1. Calculation of net operating income generated by real estate.

2. Determination of the overall capitalization ratio.

3. Valuation of real estate using the method of capitalization of net operating income.

Literature

1. Bobrova N.P. Some aspects of the theory and practice of land valuation: Educational and methodological manual. -M. 2004.- 112 p.

2. Vasilenko S.S. "The evolution of the principles of land valuation in the process of reforming land relations in Russia", Publishing House of ZAO "Ekonomika", M. - 2006;

3. Varlamov A.A., Sevostyanov A.V. Land cadastre: In 6 volumes. Volume 5: Valuation of land and other real estate. - M., 2008. - 265 p.

4. Medvedeva O.E. "Assessment of the value of agricultural land and other agricultural property", International Academy of Valuation and Consulting, M. - 2005;

5. Nanazashvili I.Kh., Litovchenko V.A. Cadastre and valuation of land property: Textbook. M., 2007. - 88 p.

6. Petrov V.I. Valuation of land plots. Tutorial. - 2nd ed., revised and additional. M.: 2008. - 224 p.

7. Prorvich V.A. "Land assessment in Moscow: models, algorithms, practical experience", Publishing House "Economy", M. - 1996;

8. Prorvich V.A., Kuznetsov V.N., Semenova E.A. and others. Assessment of urbanized lands. - M. 2004.- 776

9. Rumyantsev F.P., Khavin D.V., Bobylev V.V., Nozdrin V.V. Land valuation: Textbook. Nizhny Novgorod, 2013. - 279 p.

10. Series "Legal Consultation" Payment for land. Land valuation. Comments. Explanations. Questions and answers. M. 2008. 414 p.

11. Amelin O.A. Historical experience in assessing land plots in Russia // Property relations in the Russian Federation. 2011. No. 11. P. 67-71.

12. Artamonov I.V. On the issue of the complexity of assessing the market value of land // News of the Irkutsk State Economic Academy (Baikal State University of Economics and Law). 2013. No. 2. P. 30.

13. Gubina V.S. Valuation of agricultural land for investment purposes // Science and business: ways of development. 2013. No. 10 (28). pp. 83-87.

14. Kovaleva A.M., Dvoryadkin K.S. Methods for calculating adjustments in a comparative approach to the assessment of land plots // International Journal of Applied and Fundamental Research. 2015. No. 4-1. pp. 112-115.

15. Lamert D.A. Management systems and assessment of land resources in developed countries // Interexpo Geo-Siberia. 2014. T. 3. No. 2. P. 3-11.

16. Popova I.V., Zorin A.V. Problems of regulation and organization of valuation activities in the field of land use // Economics and modern management: theory and practice. 2014. No. 34. P.191-196.

17. Rabinovich L.M. Land resources as a factor in effective economic development // Vestnik ASTU. Series: Economics. 2013. No. 2. P.45-51

18. Taradanov R.A. Determination of the amount of compensation to the owner of a plot seized for state or municipal needs // Law. 2014. No. 2. P.79 - 84

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Development of project proposals for the redistribution of land and streamlining the boundaries of land plots in the territory of a rural settlement. Characteristics and assessment of land plots, land uses, agricultural land holdings.

course work, added 01/08/2016


Principles, factors and approaches to assessing the market value of land. Cadastre and valuation of land property. Classification of undeveloped and built-up land plots, their cadastral registration, engineering, construction and operational characteristics.

test, added 05/01/2017


The need for state cadastral valuation of land. Characteristics of the use of land resources when assigning state land assessment using the example of a region (Moscow region, Khimki). Factors determining the optimal use of land.

2. Real estate valuation

2.7. Features of land valuation

2.7.3. Analysis of the best and most efficient use of land

When assessing a land plot, it is necessary to determine the option for its best and most effective use, which is determined by the interaction of a number of factors.

Best use analysis includes studying alternative uses (development, development) of a land plot and selecting the optimal one. This takes into account the prospects of the location, the state of market demand, the cost of development, the stability of expected income, etc.

When assessing the value of a property consisting of a land plot and buildings, great importance is attached to the analysis of the best use, firstly, of the presumably vacant land plot and, secondly, of the land plot with existing improvements.

Analysis of a supposed vacant land plot is a necessary step in determining its value, and it is based on establishing the most profitable option for using the land.

Analysis of a land plot with existing improvements involves making a decision on the demolition, modernization or preservation of existing improvements on the land plot in order to ensure maximum profitability of the property.

The likely and most profitable use of the site ensures its highest value. Use cases must be legal, physically feasible, and cost-effective.

Let us name the main factors that determine the optimal use of land:

1) location - a factor that has a major impact on the cost of a land plot (the prospects of the location, transport accessibility, and the nature of the environment are taken into account);

2) market demand - a factor reflecting the relationship between supply and demand in the market;

3) financial feasibility - the ability of the project to provide income from the use of the land plot, which would be sufficient to reimburse the costs of investors and ensure the expected profit;

4) physical suitability of the site - the prospect of creating improvements - size, topography, soil quality, climate, engineering-geological and hydrogeological characteristics of the site, existing zoning, environmental parameters, etc.;

5) technological feasibility and physical feasibility - analysis of the relationship between quality, costs and timing of the project, the likelihood of natural disasters, accessibility of transport, the ability to connect to utilities, taking into account the size and shape of the site, for example, the size may be small for the construction of an industrial facility;

6) legislative (legal) admissibility - compliance of the option for using the land plot with the current legislation. Identified as a result of an analysis of construction and environmental standards, restrictions on the number of floors, the presence of temporary bans on construction in a given location, difficulties in the area of ​​historical urban development, possible changes in regulations, compliance with zoning rules, negative sentiments of the local population;

In other words, physical possibility implies such possible use that corresponds to the size, shape and landscape of the land plot, and the characteristics of the soil. In addition, it is necessary to take into account the presence of communications or the possibility of laying them.

1. Is the intended use reasonable and probable?

2. Is the use legal or is there a reasonable likelihood that a legal document for the right to use can be obtained?

3. Is the property physically fit for use?

4. Is the intended use financially feasible?

The testing option is shown in Table 1.

Once the analysis shows that one or more use cases are reasonably likely, their validity is verified with financial point of view. The use in which the subject property will have the maximum value and which meets other requirements is considered the most efficient use.

It is at this stage that the main difficulties for appraisers begin, since this is where questions of assessment methodology begin, and as you know, methodology issues are not considered in the MCO. Modern publications on real estate valuation also do not answer this question, continuing to repeat in various ways the well-known provisions of textbooks of the 90s.

In turn, in practical assessments the practice of replacing this most important stage of assessment with references to one’s own opinion continues, as a rule, to justify the existing use of the property. However, due to the transition of our real estate market to a new stage of development, this is clearly not enough. Indeed, even the IVS states that “in markets characterized by extreme volatility or significant disequilibrium between supply and demand, the most efficient use of property may be to preserve it for future use” or “intermediate use” in the case “where land use and zoning is in a state of change." However, the authorities have recently carried out some work aimed at creating a civilized real estate market, and a professional real estate appraiser has no right not to take these changes into account.

We are primarily talking about urban planning zoning of cities. When there is no zoning, it is impossible to evaluate the NEI when determining legal admissibility construction of objects for various purposes on a selected plot of land. In previous years, permission to use land for development was given by officials based on their plans. Zoning of territories presupposes legally established various types of land use, within which the developer himself determines the object for construction, based on the economic efficiency of the planned project.

When analyzing the NEI, a real estate appraiser must also carry out the same work, and for this he must know the legislation in the field of urban planning and master the methods of economic analysis of development activities.

Unfortunately, our real estate appraisers are considered to be people who have attended short-term courses that do not even discuss these issues. For some reason, we have developed a rather superficial attitude towards real estate valuation. In this regard, I would like to quote some excerpts from the MCO:

• “1.7 All member countries of the ICSD recognize that real estate valuation requires special education, training and experience."(MP1 MSO)
• « Real estate represents a significant share of the world's wealth, and its Valuation is fundamental to the viability of global property and financial markets"(Types of property" IVS 2003 p.83)
• “...Proper understanding and proper application of these standards (MSAs) will inevitably contribute to the viability of international and domestic real estate transactions among other investment alternatives and will reduce the incidence of fraud and abuse"(MR 1 MSO p. 195)

The last quote is especially relevant for our country. Huge petrodollars poured into the real estate market, ensuring its constant growth. At the same time, approximately 75% of all profitable real estate is in state ownership and managed by officials. The transfer of ownership rights to these objects, according to the law, is carried out only through an independent assessment. Hence the increasingly important role of professional real estate appraisers, who, in accordance with the MCO, are subject to increased requirements both in terms of professionalism and in terms of compliance with the Code of Conduct.

Since December 30, 2004, a new Town Planning Code has been in force in our country. In accordance with it, four steps can be distinguished on the path from an open field to a building site:

• territorial planning,
• urban planning zoning,
• territory planning
• design, construction and reconstruction of capital construction projects.

The allocation of sites should begin with territorial planning, during which federal, regional and local authorities will identify areas for the construction of housing, infrastructure, industry and agriculture. Territorial planning schemes developed by the federal authorities are sent to the highest executive bodies of the constituent entities of the Russian Federation and municipalities whose territories they belong to. Documents must be agreed upon within three months. If during this period no corresponding conclusion is received from regional or municipal authorities, the documentation is considered approved “by default.”

After territorial planning, the authorities must carry out urban zoning. As a result, territorial zones will be defined on the territory of each municipality and urban planning regulations will be established. The government gave five years to complete this task - until January 1, 2010. Before this date, land use rules must be developed for the territories of settlements and inter-settlement areas, if they are subject to development. The detailed content of the rules is set out in the code. Since the beginning of 2010, in the absence of these documents, the issuance of construction permits is not allowed.

Then the territories allocated as a result of zoning must be subject to planning. The latter involves dividing the zone into blocks, microdistricts and other elements, as well as establishing boundaries for development sites. Planning must be carried out in relation to both built-up and empty areas. This task also falls on the shoulders of local authorities and the local budget. In addition, local authorities will decide which set of documents is necessary for planning the territory.

During planning, each plot of land must be assigned regulations regarding the purpose for which a building can be built on it. In addition to its purpose, its number of floors, contour of the recess, area, etc. will be indicated.

However, the work on developing urban planning codes requires significant funds and the involvement of highly qualified personnel in this work. Accordingly, work in this direction is being carried out behind schedule. Even in the most advanced city in the field of information support for urban planning activities, Moscow, the Urban Planning Code has not yet been adopted (although according to the plans, it should be developed at the end of 2006 by order of the Moscow Government dated December 28, 2005 N 2664-RP).

The Urban Planning Cadastre is still in effect in Moscow, on the basis of which the appraiser can test the NEI. In accordance with the Moscow Law of December 15, 2004 No. 88 “On the urban planning cadastre of the city of Moscow”, “The urban planning cadastre is created and maintained for the purpose of information support for urban planning activities in the territory of the city of Moscow. Information from the urban planning cadastre is open in nature and is provided to all interested parties in accordance with their written requests, with the exception of information constituting a state secret.” Upon request, the Urban Planning Cadastre Service of the City of Moscow issues a cadastral certificate, which reflects fragments of the plan of urban planning regulation lines (“red lines”), topographic plan, urban zoning schemes, location of utility main networks and structures, administrative-territorial division, natural complex, monument protection zones history and culture, initial permitting, urban planning and design documentation, data on the approval of architectural and urban planning decisions, materials of the historical and architectural survey of the Central Administrative District of Moscow, etc. The cadastral certificate was formed on the basis of the approved materials of the General Development Plan of Moscow for the period until 2020 of the year.

For the purposes of determining NEI, important information is presented in the following sections of the help:

• scheme for the development and reorganization of production zones,
• functional zoning,
• building zoning,
• layout plan for utility networks and structures.

Let us give an example of information from a cadastral certificate in relation to one of the industrial zones of Moscow.

Functional zoning scheme: Quarter 1001. Quarter of specialized administrative and business purposes (B1) - administrative and business areas occupy more than 25% of the territory, and areas of other types - less than 25% each. At the same time, areas for municipal, warehouse, industrial and special purposes should occupy no more than 10% of the territory.

Construction zoning scheme: Quarter 2130. Quarter of medium-density buildings of mixed contrasting number of storeys, the average building density on the territory of the built-up plots is more than 5 thousand sq.m./ha and no more than 10 thousand sq.m./ha, with areas of low-rise and multi-storey types of development occupy more than one third of the territory, and areas of other types of development occupy less than one third of the territory each.

Thus, information from the cadastral certificate serves as the basis for selecting possible development options for analysis in order to determine the NEI. Therefore, when concluding an agreement for the assessment of real estate, it is necessary in the assessment agreement to stipulate the customer’s obligation to provide the contractor with a cadastral certificate from the Town Planning Cadastre or an extract from the Town Planning Code of the city when it is adopted.

Issues of urban planning regulation in different cities have their own specifics, and a real estate appraiser needs to know them well, otherwise it is impossible to conduct a professional real estate appraisal.

Once possible development options and approximate parameters of buildings by number of floors and areas have been determined, it is necessary to select analogues of objects, for example, according to RSS-2007, and proceed directly to calculating land value indicators to select the most effective solution. Today there are no recommendations on the methodology of these calculations. Each appraiser comes up with his own approaches to calculations, and often makes gross mistakes that lead to incorrect decisions.

A feature of the calculations at the stage of determining the NEI is the need to comply with two conflicting requirements. On the one hand, it is necessary to carry out sufficiently detailed calculations to achieve acceptable accuracy, and on the other hand, these calculations must be as simple as possible. It takes a special skill on the part of the real estate appraiser to find that “sweet spot” and carry out this core part of the real estate appraisal report convincingly. In general, the professionalism of a real estate appraiser can be assessed by how he conducts a NEI analysis.

To competently resolve these issues, it is necessary to turn to the theory and practice of development. In developed market countries, this theory has been worked out quite well and has shown its effectiveness in conditions of great competition in the real estate market. Unfortunately, we pay very little attention to development issues. Moreover, we do not even have this concept in our legislative and regulatory documents. We replaced it with concepts such as “developer”, “investor-developer”, “customer”, etc. This confusion in terms leads to high costs and problems during construction. Defrauded shareholders are a consequence of unclear wording in laws and a lack of understanding of the developer’s role in the process of creating or reconstructing a property.

The format of this article does not allow us to dwell on these issues in more detail; they will be reflected in the book being prepared for publication. Let us only pay attention to the fact that the developer is the main actor in the process of improving real estate, bears all the risks of the project and receives profits or losses corresponding to these risks. Moreover, he receives this profit last, after satisfying all the requirements of the project participants, and this fundamental principle is monitored by all project participants and regulatory authorities. If, as often happens here, the developer manages to get his profit earlier, then there are long-term construction projects and defrauded investors. Whether we like it or not, the laws of the market and increasing competition in the real estate market will lead to the fact that this principle will be respected. And the developer will be a professional, and not, as we have now, banking structures, factories, research institutes, builders, etc.

Thus, in our calculations we must comply with the first principle: the main player is the developer, and he is the last to make a profit. Here it is appropriate to dwell on the discussion that has unfolded among appraisers about the “entrepreneur’s profit” when valuing real estate and, first of all, on the question of which entrepreneur we are talking about when calculating this parameter. A large number of works by such well-known scientists and valuation practitioners as Ozerov E.S., Gribovsky S.V., Tarasevich E.I., Yaskevich E.E., Kozyr Yu.V., Zelensky Yu.V. are devoted to the profit of an entrepreneur in real estate valuation. etc. However, there is still no clarity on this issue.

Most often, in practical assessments, this profit is defined as opportunity costs or interest on the capital invested in the project, and we are talking about the developer’s profit. But a developer is, as a rule, a professional who manages the development process and does not invest in the project. If such investments exist, they are insignificant. He invests his labor, knowledge, skills, and established connections in the project, that is, an intangible asset. How then to calculate his profit? And is it the profit that we should determine in the real estate valuation process?

In the theory and practice of development, this issue is resolved as follows. Investments in a development project consist of the raised equity capital of the project (30-40% of the total investment), in which the developer can participate, and a construction loan, which is usually issued by banks or other credit organizations. Moreover, a construction loan is issued only after investing equity in the project and subject to its reinvestment with a long-term loan after the planned occupancy of the property by tenants. Thus, the entrepreneur's profit is return on project equity, and the developer’s profit is, as a rule, 50% of the excess profit after satisfying the profit requirements of equity investors.

An example of the cash flow of a development project in which the owner of a land plot receives income in the form of a certain percentage of areas in improved real estate (investment project) is shown in the graph.

What else can appraisers take from the theory and practice of development for the purposes of determining the NEI and valuing real estate?

1. Features of a construction loan. It is issued at an increased rate only after investing your own capital in the project. It covers the running costs of the project. In this case, interest is accrued, but not repaid. Repayment of interest and the principal of the loan occurs when the project is reinvested with a long-term loan after the property is filled with tenants or the property is sold.

2. Long-term loan. Issued by institutional lenders, such as REITs (real estate trusts), real estate mutual funds, pension funds, insurance companies, etc. The maximum loan amount is determined as the minimum value of two parameters: LTV - the share of the loan in the cost of real estate (60-70%) and DCR - the debt coverage ratio (part of the funds for debt servicing in NOI).

3. The filling of a constructed income-producing property does not occur instantly, but over a certain period, depending on the state of the market. During this period, it is necessary to take into account the costs of operating expenses and servicing the construction loan in the calculation model. Estimators typically do not consider these costs, which results in underestimating project costs.

An example of determining the NEI for the conditions of a plot of land as free in one of the Moscow industrial zones planned for reconstruction and taking into account the above features is given in Table 2.

As can be seen from the calculation table, none of the calculation options has a clear advantage in terms of the cost of land lease rights. It must be remembered that the accuracy of these calculations is low and all calculation results are within the limits of computational error.

When carrying out these deterministic calculations, we assumed that all input parameters are fixed. In fact they are in a definite range. It is inappropriate to use probabilistic methods for this stage of calculations due to their great complexity.

Over the past few years, the author has studied the application of the theory of option pricing for the purposes of real estate valuation. In work /4/ it was first proposed to use the modified Black-Scholes technique for the purpose of determining the NEI. In further works /5-7/ this topic was developed and brought to the level of a methodology with recommendations for setting the input parameters of the calculation model.

A detailed presentation of the theory and methodology is also beyond the scope of this article. We present only the results of calculations using this method as applied to our example.

As can be seen from the table, taking into account the option characteristics revealed clear advantages for the options for constructing an office building and a residential complex on the plot of land under consideration. The appraiser must make the final decision on NEI based on all the information available to him.

Conclusion

This article is aimed at highlighting the problems that practicing real estate appraisers face when determining NEI and providing some theoretical and practical recommendations. Of course, a number of the stated considerations are debatable. However, it is important to talk about them and not hush them up.

In today's growing real estate market, it is extremely important to have a federal real estate appraisal standard to, as the MCO states, “...reduce the incidence of fraud and abuse.” Numerous attempts to create such a standard in our country have not yet led to success and, as far as I know, there is not even an agreed upon draft of such a standard.

The transition to self-regulation taking place before our eyes should force SROs to deal with this problem more closely, but for this it is necessary to somehow unite specialists in the field of real estate valuation, of whom there are enough in the country, but they are located in different SROs and cities.

Literature

1. Friedman D., Ordway N. Analysis and assessment of income-generating real estate. Per. from English, - M.: “Delo LTD”, 1995. - 480 p.
2. Harrison G. Real estate appraisal. Tutorial. Per. from English - M.: RIO Mosobluprpolitigraphizdata, 1994. - 231 p.
3. Korostelev S.P. Fundamentals of the theory and practice of real estate valuation. Tutorial. - M.: Russian Business Literature, 1998. - 224 p.
4. Grabovyi P.G., Korostelev S.P. Property Valuation. Part 1. Real estate valuation. Tutorial. - M.: MGSU-ROOS, 2003. - 180 p.
5. Korostelev S.P., Konoshenko M.V. Evaluating the effectiveness of investment and construction projects using the theory of option pricing. /Essays on economic theory. Actual problems. Part II. Under the general editorship of N.Yu. Yaskova. Consulting Center MAGMU of the Russian Academy of Public Administration under the President of the Russian Federation, M.: 2006, pp. 52-94.
6. Korostelev S.P. , Konoshenko M.V. Application of the theory of option pricing in the valuation of real estate and business “Problems and prospects for the formation and development of the construction and housing and communal services complex in Russia” Coll. tr/Moscow state builds. University: MGSU, 2004, pp. 28-32.
7. Konoshenko M.V. Methodological basis for analyzing the economic efficiency of investment and construction projects, taking into account their optional characteristics. Abstract of the dissertation for the degree of Candidate of Economic Sciences, M: 2007.