At the end of 2019, our company received a case in which it was necessary to determine the market value of a land plot within the framework of challenging the cadastral value. The President Hotel is located on this land plot, and for the validity of the valuation, we used the remainder method within the framework of the income approach. According to the chosen methodology, the cost of a single real estate object was calculated, followed by subtraction of the cost of improvements based on the results obtained as part of the cost approach.
The proximity of the object to the central part of the city and, consequently, the high cost of land, is characterized by unusual development and the share of land in the cost of a single real estate object. Also, according to the decision of the Administration of the President of Russia, a project for the comprehensive reconstruction of this facility has already been agreed upon at the valuation date.
Despite the fact that the President Hotel was opened back in 1980, it is still popular and expensive, but it no longer meets modern requirements and standards. Thus, in the next two years, the planned reconstruction should begin, and in fact, this will lead to the fact that the existing building will be completely dismantled and rebuilt according to the current standards for this class of hotel facilities.
Calculating wear and tear, when valuing improvements within the framework of the cost approach, we take into account not the physical condition of the structural elements, but the remaining period of the economic life of the object. Thus, the depreciation amounted to about 70-80% and the total cost of the capital construction facilities turned out to be relatively small, and the cost of the land plot, on the contrary, was significant. In the total cost of a single object, it amounted to about 70%. It must be said that if we had used the standard norms of the State budgetary institution or some other analytical collections, the share of land would have been about 20-25%.
Both the administrative plaintiff and the Moscow City Property Department, and therefore the court, agreed with the results of our valuation, and made a decision based on the results of our examination.