In October 2019, Valrus was contacted by our regular customer Castorama RUS for a valuation to challenge the cadastral value of a number of its hypermarkets located in different regions of the country. Based on the results of a preliminary analysis of the feasibility of this procedure and consultations, it was decided to conduct a valuation and begin the process of adjusting the cadastral value for three objects in Moscow, the Moscow Region and the Perm Territory.
Being operating hypermarkets of household goods and repairs (the segment of DIY hypermarkets), the valued Castorama stores belong to the class of investment objects, that is, a potential buyer estimates the value of such an asset, guided by considerations of what rental income he will receive, for how long and what risks will be inherent in obtaining this income. It is in this regard that the main approach to valuing this type of real estate is a profitable approach. We approach the determination of the cost of a single object based on the amount of rent calculated taking into account the turnover generated by hypermarkets, taking into account all the features of the location, the competitive environment, etc.
At the same time, when challenging the cadastral value of real estate in the regions, it is necessary to take into account the established local valuation practice, the requirements of Commissions, Administrative bodies and the Court. This imposed its own peculiarities on the valuation approach and the general course of the case to challenge the hypermarket in Perm.
In local practice, both valuers and inspectors rarely encounter the valuation of high-quality retail facilities, the practice of determining rental income as a percentage of turnover, structuring the rental rate according to triple net standards for the basic component, compensation for operating expenses and utility bills, as well as taxes. Therefore, a comparative approach was chosen as the main approach for valuation in this region.
The final market value of a hypermarket as an object of capital construction, obtained within the framework of this approach, was determined as the value of a single real estate object minus the value of the land plot related to it. The cost of the plot, in turn, was also calculated as part of a comparative approach based on proposals for the sale of land for the construction of large commercial facilities. A cost-based approach was used as a verification approach.
A feature of the course of the case in the Perm Region was also that the amount of market value determined by us exceeded the average level at which similar capital construction projects in the city of Perm are disputed by local valuers. As a result, the cost according to our report did not raise any questions from the authorities, the Ministry of Property of the region. However, due to the changing practice in relation to VAT at that time, the court made a remark on clearing the prices of offers of analogues from the amount of tax.
The practice of the local court differs from the Moscow region, where in almost 100% of cases a forensic examination is appointed. In the Perm Region, the court makes a decision based on the valuation report, if the valuer proves its reliability in a reasoned manner. And this is correct, since burdening the process with excessive court costs goes against the principles of judicial proceedings. In this case, specific issues were identified, in the elimination of which the court was ready to make a positive decision based on the valuation report without the appointment of a forensic examination. At the request of the client, we prepared an updated (corrected) valuation report in which the value of the object was calculated regardless of VAT, and it was based on it that the court decided to establish the cadastral value in the amount of the market value.
Once again, our company has provided the best level of service for the customer and achieved the solution of the task
In another case, you can read about valuation for "Castorama RUS" in Moscow and the Moscow region.