Guidelines

The value of the property should be its unbiased market value or fair value.

The valuation methods include, individually or a combination of, among others:

• market approach - based on market comparables;
• income approach - based on income capitalisation, discounted cash flow methodology or earnings multiple;
• cost approach - such as replacement cost less depreciation that should only be used in specific and rare circumstances when other valuation methods cannot be applied.

Valuations of property under construction should be stated at market value. Refer to INREV NAV adjustments in the INREV NAV module . The valuation of property under construction should generally be based on the fair value at completion less costs to complete (residual approach). Appropriate focus should be made on the sensitivity associated with input assumptions given the development status of the property.

However, in certain circumstances, the fair value may be determined by using the initial cost of acquisition plus subsequent construction costs. An example is during the initial phases of construction when the level of uncertainty is high. Particular care should be taken to ensure that construction and materials costs are up to date. Irrespective of local legal requirements or contractual obligations, such as vehicle regulations, the valuation methodology applied should lead to market value as defined by these guidelines.
 

The investment manager should ensure that external valuers comply with applicable laws and a recognised international professional valuation standards such as IVS, RICS and EVS.
 

All parties involved in the valuation process should strive to meet the highest professional standards of ethics and integrity.

See for more detail the inrev-guidelines">Governance module (G03) and other relevant valuation standards for ethical requirements related to the conduct of the valuer.
 

The vehicle documentation should include details of the valuation procedure along with the frequency and methodologies used to value all material assets and liabilities of the vehicle, including property.

As a key component of the vehicle’s legal framework, the investment manager should describe the underlying valuation methodologies, procedures performed, specific pricing methodologies (see inrev-guidelines"> INREV Governance module for more information) and special assumptions applied for the valuation of hard-to-value assets and liabilities, as appropriate.