Types of Commercial Real Estate

Market price

The most probable price at which the object of valuation can be alienated on the open market in a competitive environment, when the parties to the transaction act reasonably, having all the necessary information, and the value of the transaction price does not reflect any extraordinary circumstances.

Market value is determined in cases where:

• a transaction is foreseen for the alienation of the appraisable object, including when determining the redemption price, when withdrawing the appraisable object in the absence of state regulated prices, or for state needs;
• when determining the value of shares of a company acquired by a company by decision of the general meeting of shareholders or by decision of the board of directors (supervisory board) of the company;
• The object of valuation is the object of pledge, including the mortgage;
• when making non-monetary contributions to the authorized (share) capital, in determining the value of donated property;
• in determining the value of securities that either do not circulate at the auctions of trade organizers on the securities market, or circulate at the auctions of trade organizers on the securities market for less than six months;
• when deciding on the initial sale price of the property as part of bankruptcy proceedings.

Investment value

The value of the property for a particular investor or class of investors with established investment objectives. This subjective concept relates a particular property to a specific investor, a group of investors, or an organization that has specific goals and / or criteria for investing. The investment value of the property being valued may be higher or lower than the market value of the property being valued.

Investment value is determined in the following cases:
• if a deal is to be made with the object of valuation in the conditions of the presence of a single counterparty;
• if the object of evaluation is considered as a contribution to an investment project;
• in the justification or analysis of investment projects;
• in the implementation of measures for the reorganization of the enterprise.

Liquidation value

The most probable price at which the object of evaluation may be alienated for a period insufficient to attract a sufficient number of potential buyers, or in circumstances where the seller is forced to make a transaction for the alienation of property.
Liquidation value is determined by the sale at a public auction of the property of a bankrupt enterprise, the seizure of property as a result of legal proceedings, or at customs. Liquidation value can be determined in addition to the market value when lending on the security of property.

Utilization cost

The most probable price at which the object of evaluation can be alienated as a combination of the elements and materials contained in it if it is impossible to continue its use without additional repair and improvement.
The utilization value is determined at the end of the useful life of the property being valued, or if there is significant damage, if it is impossible to continue using the property assessed.

Replacement cost

(cost of reproduction and replacement) – the sum of costs at market prices existing at the valuation date, to create an object identical to the object of valuation, using identical materials and technologies, or to create an object similar to the object of valuation, using the existing ones at the date of valuation materials and technologies.

Replacement value is determined by:
• when calculating the tax base for income tax, property tax;
• for tax accounting purposes when making a fixed asset as a contribution to the share capital;
• when revaluation of fixed assets for accounting purposes;
• in the framework of the cost approach for property valuation.
Replacement value can be determined when insuring property.