As part of one of the cases challenging the cadastral value in Moscow, as determined by the court of first instance, the company's specialists Valrus performed a forensic examination on one of the company's projects "INTECO". The Moscow City Court raised the issue of determining the market value of a group of land plots that form the common territory of the construction of the housing estate "Garden quarters". The construction area previously belonged to the "Rubber" plant. The total area of the territory is about 10 hectares. The total construction area is more than 360 thousand square meters, including about 155 thousand square meters of housing, 38 thousand square meters of commercial premises and more than 2.2 thousand parking spaces.
Since it is extremely difficult to apply a comparative approach for such objects, the valuation was carried out using the method of intended use with consideration of all cash flows for this development project: income from the sale of apartments, commercial premises on the first floors of houses, construction costs, communications, etc.
Source: photo material from the website of housing estate «Garden quaters»
The peculiarity and complexity of the valuation was caused by the construction project consisted of several queues, and there was very little information for valuation in the case materials. Therefore, additional information was requested through the court on the construction of the housing estate "Garden quarters": urban planning documentation, the architectural part of the project, all technical and economic indicators, data on house areas, construction schedules, the financial model of the developer, including the construction budget and data on real sales of apartments and premises in the first stages. Due to the fact that the plaintiffs provided all the documents we requested, we were able to conduct a qualitative valuation and consider the entire project in detail.
Cash flows were not done according to a simplified scheme, but taking into account the order of construction, the degree of elaboration of the initial permits for each of the queues. For the first stages of construction, there were already documents for the commissioning of facilities, for the part where construction was still underway – projects that had passed the expertise and construction permits. For those queues for which permits have not yet been received and the state examination has not been passed, we were based on the available parameters of the projects of stage "P", or a preliminary concept. As a result, we built a rather complex financial model that separately took into account income and expenses for each queue, took into account the dynamics of sales and price changes, taking into account the simultaneous market launch of a certain amount of housing in different queues. As a result, this allowed us to come to the most reasonable valuation of the land plots forming the territory of the development.
As all the land plots formed a single construction site and belonged to one owner, it was decided to distribute the received value among individual land plots evenly, in proportion to their area.
Source: photo material from the website of housing estate «Garden quaters»
From the side of Department of Urban Property of the city of Moscow the court of first instance received remarks, at the same time, they did not dispute either the methodology or the financial parameters, but made an attempt to challenge the average cost of housing sales prices used, this is one of the most significant factors. As an argument, the City Property Department cited prices on sales of apartments in this complex at the moment. However, they did not take into account that the cost of an apartment in a complex under construction depends on the area, on the floor of its location, the degree of readiness of each house at a particular time. In fact, the Department gave an example of ads for the sale of apartments on the upper floors of already built houses, the most expensive apartments in the complex. In our financial model, we used average prices, which, of course, were lower.
We managed to prove to the court, based on both current information about the market and data on real sales available in the case materials, that in the bulk of apartments currently sold in the housing estate "Garden quarters" their average price is closest to the value calculated by us in the conclusion and therefore our valuation is reliable and justified.