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Protected Collateral Value: An Approach to Valuation of Commercial Properties for Loan Guarantees

Author

Listed:
  • Florêncio Lutemberg

    (Real Estate Research Group University of São Paulo – São Paulo – Brazil)

  • de Alencar Claudio Tavares

    (Real Estate Research Group University of São Paulo – São Paulo – Brazil)

Abstract

The valuation of commercial properties for the guarantee of loans is extremely relevant for financial institutions, since it directly impacts the calculation of the loan to value ratio (LTV). However, despite the vast literature on the subject, the choice of methodological basis and the definition of the type of value to be employed are not pacified issues among researchers and practitioners. In this sense, the main objective of this paper is to present a methodological approach, as well as a suggestion of the type of value for the valuation of commercial properties bound collateral.

Suggested Citation

  • Florêncio Lutemberg & de Alencar Claudio Tavares, 2020. "Protected Collateral Value: An Approach to Valuation of Commercial Properties for Loan Guarantees," Real Estate Management and Valuation, Sciendo, vol. 28(3), pages 1-11, September.
    • Handle: RePEc:vrs:remava:v:28:y:2020:i:3:p:1-11:n:1
    DOI: 10.1515/remav-2020-0019
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    References listed on IDEAS

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    1. Neil Crosby & Cathy Hughes, 2011. "The Basis of Valuations for Secured Commercial Property Lending in the UK," Real Estate & Planning Working Papers rep-wp2011-02, Henley Business School, University of Reading.
    2. Neil Crosby & Graeme Newell & George Matysiak & Nick French & Bill Rodney, 1997. "Client perception of property investment valuation reports in the UK," Journal of Property Research, Taylor & Francis Journals, vol. 14(1), pages 27-47, January.
    3. Barrell, Ray & Davis, E. Philip & Karim, Dilruba & Liadze, Iana, 2010. "Bank regulation, property prices and early warning systems for banking crises in OECD countries," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2255-2264, September.
    4. David Jansen van Vuuren, 2016. "Valuing specialised property using the DCF profits method," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 34(6), pages 641-654, September.
    5. Sven Bienert & Wolfgang Brunauer, 2007. "The mortgage lending value: prospects for development within Europe," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 25(6), pages 542-578, October.
    6. Vladimir Michaletz & Andrey I. Artemenkov, 2019. "The transactional asset pricing approach," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 37(3), pages 255-288, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Valuation; Commercial property; Loan guarantee; Loan to value; Income approach; Value at risk;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis

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