Long Leasehold Interest Flashcards
1
Q
How would you value a long leasehold interest?
A
Deduct ground rent from the gross rent to calculate the net rent received. Then can either:
- Capitalise at a yield for the remaining length of the lease
- Use a dual rate to adjust the valuation to set up a sinking fund, so it is comparable to freehold investments
- Discounted cash flow (DCF)
- Capitalise into perpetuity at an adjusted yield to reflect the additional element of risk for the wasting asset
