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Article
Publication date: 1 March 1984

STEPHEN SYKES

The mathematics of property valuations commonly used in practice exist in several formulations which have been adopted over the years. All are similar in that they…

Abstract

The mathematics of property valuations commonly used in practice exist in several formulations which have been adopted over the years. All are similar in that they represent simple discounted cash flow models equating the estimated future earnings capacity of a property to a net present (capital) value. The process, whilst appearing somewhat daunting, is in fact accomplished in a manner such that, under normal circumstances, the estimated future cash flow beyond the next rent review is not explicitly expressed. Instead of generating a future income flow (assuming some rate of rental growth) and discounting at a money rate of interest (suitably adjusted for risk), the estimated rental income at the next review is capitalised at a relatively low investment yield rate which merely implies a future rental growth rate.

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Journal of Valuation, vol. 2 no. 3
Type: Research Article
ISSN: 0263-7480

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Article
Publication date: 1 March 1990

Stephen G. Sykes

Explains how the computer can help investment managers. Categorizesthe principal uses as: valuation, investment analysis, developmentappraisal and estate management. Gives…

Abstract

Explains how the computer can help investment managers. Categorizes the principal uses as: valuation, investment analysis, development appraisal and estate management. Gives an overview of what a good system should be able to do. Concludes that it is a combination of the computer and the expertise of the user which makes for success.

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Property Management, vol. 8 no. 3
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 1 February 1983

ANGUS McINTOSH and STEPHEN SYKES

In a previous paper Sykes derived a mathematically consistent investment valuation model for freehold properties which he referred to as the Rational Model. This new model…

Abstract

In a previous paper Sykes derived a mathematically consistent investment valuation model for freehold properties which he referred to as the Rational Model. This new model overcomes certain serious failings of other methods commonly in use. The present paper readdresses the arguments of the earlier paper in a manner rather more familiar to a practising valuer and compares current methods of valuation with the Rational Model. It is also shown that the Rational Model can be simply adapted for the valuation of leasehold interests without resorting to a separate (and usually quite artificial) ‘sinking fund’ rate.

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Journal of Valuation, vol. 1 no. 2
Type: Research Article
ISSN: 0263-7480

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Article
Publication date: 1 March 1983

STEPHEN SYKES

The quantitative assessment of the degree of risk associated with the direct acquisition of commercial property for investment purposes is practically non‐existent. There…

Abstract

The quantitative assessment of the degree of risk associated with the direct acquisition of commercial property for investment purposes is practically non‐existent. There is almost always a total reliance on unquantified subjective feeling with no attempt to transform such a qualitative treatment into an analytically more acceptable and useful form. Whilst the investment capitalisation rate should, to an extent, reflect the investor's view of the future earnings capacity of a particular property, this yield rate is principally a function of general market sentiment and may not significantly allow for the inherent risk characteristics of an individual investment. This is especially the case at the prime end of the market where the pressure of funds competing to invest in a sector of particularly limited supply remains most severe.

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Journal of Valuation, vol. 1 no. 3
Type: Research Article
ISSN: 0263-7480

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Article
Publication date: 1 January 1985

STEPHEN SYKES

The market value of any property investment will tend to deteriorate over time when compared to similar modern properties if monies are not periodically expended to…

Abstract

The market value of any property investment will tend to deteriorate over time when compared to similar modern properties if monies are not periodically expended to mitigate the effects of obsolescence. This paper examines the relationship between the initial yield of a property at purchase and the rate of future rental value growth necessary to achieve a criterion rate of return on the investment. Traditionally in calculations of the future rental growth rate required to justify an initial investment yield (when compared, say, to the rental shown by gilt‐edged stocks) the simplistic view is taken that following purchase no further expenditure is anticipated. However, if a property is to maintain its original market appeal (or adapt to evolving circumstances), capital must from time‐to‐time be injected for the purposes of refurbishment. Thus, any analytical model which ignores this inevitable expenditure, but nevertheless assumes a constant rate of long‐term future rental growth, is quite unrealistic. A Refurbishment‐Rental Growth Model is derived which allows the introduction of regular future capital expenditure both in terms of magnitude and frequency. Various examples are illustrated of the effect which such expenditure may have in necessarily increasing the required future rental growth for a property investment in order to achieve an anticipated level of return.

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Journal of Valuation, vol. 3 no. 1
Type: Research Article
ISSN: 0263-7480

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Article
Publication date: 1 December 1990

Stephen G. Sykes

Discusses some problems associated with people using computerpackages who are unwilling or unable to understand how to run thesystem, its limitations, the techniques…

Abstract

Discusses some problems associated with people using computer packages who are unwilling or unable to understand how to run the system, its limitations, the techniques employed and the end results. Explains a model of discounted cash flow.

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Journal of Property Finance, vol. 1 no. 4
Type: Research Article
ISSN: 0958-868X

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Article
Publication date: 1 March 1990

Stephen G. Sykes

Suggests that conventional approaches to development appraisal aresimplistic even when a computer is used. Overviews some conventionalapproaches with advantages and…

Abstract

Suggests that conventional approaches to development appraisal are simplistic even when a computer is used. Overviews some conventional approaches with advantages and disadvantages. Discusses computer modelling. Concludes that the property world has lagged behind others in taking advantage of computing power.

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Journal of Property Finance, vol. 1 no. 1
Type: Research Article
ISSN: 0958-868X

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Article
Publication date: 1 March 1986

GERALD BROWN

Analysing depreciation and obsolescence requires a model which separates the effect of abnormal changes in the market from the underlying growth trends. The model…

Abstract

Analysing depreciation and obsolescence requires a model which separates the effect of abnormal changes in the market from the underlying growth trends. The model presented by Sykes fails to recognise the economic principles involved and, therefore, gives rise to results which are open to misinterpretation. Using the best methods available it is shown that over the period from 1978–85 there is no evidence to suggest that valuers have been misinterpreting growth prospects in either the office or retail sectors. There is some evidence, however, to suggest that this may be the case as far as the industrial sector is concerned. There is insufficient data available at present to confirm whether this trend is one which is likely to be sustained over very long periods. At the practical level it is shown that by combining properties into portfolios it is possible to diversify away the effects of obsolescence.

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Journal of Valuation, vol. 4 no. 3
Type: Research Article
ISSN: 0263-7480

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Article
Publication date: 1 February 1985

ANDREW BAUM and YU SHI MING

A preceding paper by Baum examined the valuation of reversionary freehold interests, distinguishing between conventional and modern approaches. This paper applies the same…

Abstract

A preceding paper by Baum examined the valuation of reversionary freehold interests, distinguishing between conventional and modern approaches. This paper applies the same approach to the valuation of leaseholds, and falls into two parts. Part 1 examines conventional leasehold valuations and the criticisms that may be made, concluding that both dual rate and single rate conventional valuations should be abandoned except in limited circumstances. Part 2 identifies three alternative modern approaches — real value, rational model and DCF — and compares their use in three general variations of leasehold valuation. The results are compared, and recommendations for their use are made. Finally an overview of the application of modern approaches to investment property valuation is presented.

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Journal of Valuation, vol. 3 no. 2
Type: Research Article
ISSN: 0263-7480

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Article
Publication date: 1 January 1993

Ernest Raiklin

In the epigraph of the paper, Aristotle reminds us that confusion and inconsistency arise when people attach more than one meaning to any particular term (“name”). It…

Abstract

In the epigraph of the paper, Aristotle reminds us that confusion and inconsistency arise when people attach more than one meaning to any particular term (“name”). It seems that Aristotle could not have better described the situation with the connotation of Jewishness in the contemporary world.

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International Journal of Sociology and Social Policy, vol. 13 no. 1/2
Type: Research Article
ISSN: 0144-333X

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