Commercial Valuation

Valuation Report Prepared for

MEFIC Capital – MEFIC REIT Fund

30 Apartments, The Pad

Business Bay
Dubai, United Arab Emirates

Valuation Date as at 31 December 2018

 Cavendish Maxwell
2205 Marina Plaza
Dubai Marina
P.O. Box 118624
Dubai
United Arab Emirates

Tel: +971 4 453 9525

Fax: +971 4 453 9526

www.cavendishmaxwell.com

25 February 2019

2019/02/CM/117

MEFIC Capital – MEFIC REIT Fund.

P.O. Box 12333
Riyadh
Kingdom of Saudi Arabia

Attn: Turki A. Al-fozan

Dear Sir,

REPORT & VALUATION FOR INTERNAL PURPOSES (the ‘Purpose’)

30 APARTMENTS (SEE SCHEDULE), THE PAD, BUSINESS BAY, DUBAI, UNITED ARAB
EMIRATES (the ‘Property’)
MEFIC CAPITAL – MEFIC REIT FUND (the ‘Client’)

Further to our Terms of Engagement dated 18 February 2019 and your subsequent signed instructions,
we have inspected the Property in order to advise you as to our opinion of the current Market Value of
the Freehold interest in the Property, as stated with the attached report.

We trust that the attached meets your requirements and should you have any queries, please do not
hesitate to contact us.

Yours faithfully,

James Cresswell BA (Hons) MSc MRICS

Head of Commercial Valuation
RICS Registered Valuer
For and on behalf of
Cavendish Maxwell

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CONTENTS
1.0 TERMS OF REFERENCE ........................................................................................................................... 8
1.1 Introduction ............................................................................................................................................... 8
1.2 Client .......................................................................................................................................................... 8
1.3 Date of Inspection ..................................................................................................................................... 8
1.4 Valuation Date ........................................................................................................................................... 8
1.5 Purpose of Valuation................................................................................................................................. 8
1.6 Basis of Valuation ..................................................................................................................................... 8
1.7 Variation from Standard Assumptions .................................................................................................... 8
1.8 Special Assumptions ................................................................................................................................ 8
1.9 Capacity of Valuer ..................................................................................................................................... 9
1.10 Status of Valuer ......................................................................................................................................... 9
1.11 Disclosure .................................................................................................................................................. 9
1.12 Independence ............................................................................................................................................ 9
1.13 Conflicts of Interest ................................................................................................................................... 9
1.14 Compliance with Valuation Standards and Assumptions ..................................................................... 9
1.15 Sources of Information ........................................................................................................................... 10
1.16 Verification ............................................................................................................................................... 10
1.17 Limitation of Liability .............................................................................................................................. 10
1.18 Reliance.................................................................................................................................................... 11
1.19 Confidentiality & Publication.................................................................................................................. 11
2.0 THE PROPERTY....................................................................................................................................... 12
2.1 Location ................................................................................................................................................... 12
2.2 Situation ................................................................................................................................................... 12
2.3 Property Description ............................................................................................................................... 13
2.4 Accommodation and Use ....................................................................................................................... 14
2.5 Condition and State of Repair ................................................................................................................ 15
2.6 Services.................................................................................................................................................... 16
2.7 Planning and Statutory Enquiries .......................................................................................................... 16
2.8 Site and Ground Conditions ................................................................................................................... 16
2.9 Environmental Issues ............................................................................................................................. 16
3.0 TENURE & TENANCIES .......................................................................................................................... 18
3.1 Title Details .............................................................................................................................................. 18
3.2 Tenancies ................................................................................................................................................. 18
4.0 MARKET COMMENTARY ........................................................................................................................ 19
4.1 UAE Economic Performance and Demographics ................................................................................. 19
4.2 Residential Market ................................................................................................................................... 20
4.3 Price and Rent Performance .................................................................................................................. 20
4.4 Supply ...................................................................................................................................................... 24
4.5 Transactions ............................................................................................................................................ 26
4.6 Market Outlook ........................................................................................................................................ 27
5.0 VALUATION METHODOLOGY & RATIONALE ....................................................................................... 28
5.1 Basis of Valuation ................................................................................................................................... 28

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5.2 Method of Valuation ................................................................................................................................ 28
5.3 Comparable Evidence ............................................................................................................................. 29
5.4 Assumptions and Special Assumptions ............................................................................................... 32
5.5 Valuation Assumptions........................................................................................................................... 32
5.4 Assumptions and Special Assumptions ............................................................................................... 33
6.0 OPINION OF VALUE ................................................................................................................................ 34
6.1 Market Value ............................................................................................................................................ 34

Appendix A - Standard Valuation Assumptions and Bases of Valuation

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EXECUTIVE SUMMARY

Address: The Pad, Business Bay, Dubai, United Arab Emirates

Location: The Property comprise 30 x residential units within the

Pad Tower in Business Bay of a total 2,705.24 sq m
(29,119 sq ft). The Pad is a G+M+P+23 residential
development by Omniyat comprising of 253 furnished
apartments that benefit from a range of views including
Downtown, Dubai Creek and Burj Khalifa

The building is adjacent to the Dubai Canal and the

main access to it is granted via Al Abraj Street.

Description: The Property consists of 1 x studio unit, 1 x studio loft

unit, 17 x 1-bedroom units, 6 x 2-bedroom units and 5
x 2-bedroom loft units in the Pad Tower in Business
Bay. The building is in final stages of construction. As
advised by the Client, completion date for the Property
is 30 June2019.The breakdown of the accommodation
is as below:

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 NSA (sq
Unit Type
ft)
TPD_PD1_002_001 2 Bedroom 1,217
TPD_PD1_002_011 2 Bedroom 1,216
TPD_PD1_003_011 2 Bedroom 1,216
TPD_PD1_004_001 2 Bedroom 1,217
TPD_PD1_004_004 1 Bedroom 653
TPD_PD1_00M_005 1 Bedroom 653
TPD_PD1_00P_006 1 Bedroom 1,191
TPD_PD1_00P_008 1 Bedroom 833
TPD_PD1_00P_009 1 Bedroom 956
TPD_PD1_00P_010 1 Bedroom 945
TPD_PD1_011_008 Studio 519
TPD_PD1_012_005 1 Bedroom 653
TPD_PD1_012_010 1 Bedroom 663
TPD_PD1_021_004 2 Bedroom Loft 1,603
TPD_PD1_021_010 2 Bedroom Loft 1,609
TPD_PD1_022_004 2 Bedroom Loft 1,587
TPD_PD1_022_007 2 Bedroom Loft 1,523
TPD_PD1_022_008 Studio Loft 1,046
TPD_PD1_022_009 2 Bedroom Loft 1,474
TPD_PD1_001_010 1 Bedroom 663
TPD_PD1_006_002 1 Bedroom 667
TPD_PD1_006_009 1 Bedroom 654
TPD_PD1_007_004 1 Bedroom 653
TPD_PD1_015_011 2 Bedroom 1,216
TPD_PD1_016_003 1 Bedroom 653
TPD_PD1_019_009 1 Bedroom 654
TPD_PD1_001_011 2 Bedroom 1,216
TPD_PD1_017_006 1 Bedroom 648
TPD_PD1_012_002 1 Bedroom 667
Total Area 29,119

Tenure Private

Date of Inspection: 19 February 2019

Valuation Date: 31 December 2018

Purpose of Valuation: Internal

6
Basis of Valuation: Market Value

Method of Valuation: Investment & Comparable Methods

Market Value: AED 55,930,000

(Fifty-Five Million, Nine Hundred and Thirty

Thousand Dirhams)

The above executive summary is to be read in conjunction with the valuation report to which it forms
part of and is subject to the assumptions, caveats and bases of valuation stated herein and should not
be read in isolation

7
1.0 TERMS OF REFERENCE

1.1 Introduction
In accordance with our instructions our Terms of Engagement dated 18 February 2019, we have
inspected the Property in order to advise you as to our opinion of the current Market Value of
the Freehold interest.

This report is subject to and should be read in conjunction with our Standard Valuation
Assumptions and Bases of Valuation attached within the Appendices contained herein.

1.2 Client
Cavendish Maxwell has received instructions from the Client to value the Property.

1.3 Date of Inspection

The Property was inspected on 19 February 2019 by Jace Williams.

1.4 Valuation Date

The Valuation Date is 31 December 2018.

1.5 Purpose of Valuation

Internal.

1.6 Basis of Valuation

Market Value
In accordance with the RICS Valuation Global Standards January 2017 incorporating the
International Valuation Standards Council (IVSC), Market Value is defined as:

“The estimated amount for which an asset or liability should exchange on the valuation date
between a willing buyer and a willing seller in an arm’s length transaction after proper marketing
and where the parties had each acted knowledgeably, prudently and without compulsion”.

1.7 Variation from Standard Assumptions

None.

1.8 Special Assumptions

None.

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1.9 Capacity of Valuer
We have acted in an External capacity in preparing this valuation which is defined by the Red
Book as “A valuer who, together with any associates, has no material links with the client, an
agent acting on behalf of the client or the subject of the assignment.”

1.10 Status of Valuer

The Property has been valued by James Cresswell BA (Hons) MSc MRICS and Vidhi Shah
MBA MSc MRICS, of Cavendish Maxwell, who are qualified for the purpose of the valuation and
are experienced in valuing Property of this nature in the United Arab Emirates.

1.11 Disclosure
We are not aware of any existing conflicts or potential conflicts of interest, either on the part of
Cavendish Maxwell or the individual members of the valuation team assigned to this project,
which would prevent us from providing an independent, objective and unbiased opinion of value
of the Property.

The principal signatory of this report has not continuously been the signatory of valuations for
the same addressee and valuation purpose as this report.

1.12 Independence
The total fees, including the fee for this assignment, earned by Cavendish Maxwell from the
instructing party (or other companies forming part of the same group of companies) are less
than 5.0% of our total annual revenues.

1.13 Conflicts of Interest

We have previously undertaken valuation on behalf of Omniyat Middle East Real Estate
Development LLC of some of the units within the Property including other units as well as at
December 2017. We do not believe this impacts upon our ability to provide an independent and
objective opinion of Market Value in this instance.

We confirm that we are not aware of any other conflicts of interest and have no current or recent
fee earning involvement with the property or any other party connected with this transaction.

1.14 Compliance with Valuation Standards and Assumptions

Our valuation has been made in accordance with the Red Book; and our Standard Valuation
Assumptions and Bases of Valuation as attached in Appendix A.

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 We have made various assumptions regarding tenure, letting, planning and the condition and
repair of the buildings, including environmental and ground conditions. These are attached in
Appendix A. Variations from our Standard Assumptions are referred to below.

If any of the information or assumptions on which this valuation is based is subsequently found
to be incorrect, or any additional information is provided by the Client, then we reserve the right
to amend our opinion of value.

1.15 Sources of Information

We have been provided with the following documentation by the Client in order to undertake our
valuations:

• Area schedule
• Guaranteed rental income details through email dated 07 February 2019

Accordingly, we have relied on the information provided by the client and assumed that any
such information provided is true and accurate. We strongly recommend that this be provided.

We have relied on the information provided to us as being complete and accurate and have not
made any independent inquiries to verify the information. We take no responsibility for any
misrepresentation, omission or misstatement in the information provided to us and any
consequential impact of the valuations reported herein. If the information provided is
subsequently found to be incorrect, we reserve the right to review and amend the valuations
reported herein

1.16 Verification
We recommend that before any financial transaction is entered into based upon this valuation
you obtain verification of the information contained within our property report and the validity of
the assumptions we have adopted.

We would advise you that whilst we have valued the Property reflecting current market
conditions there are certain risks which may become uninsurable. Before undertaking any
financial transaction based upon this valuation, you should satisfy yourselves as to the current
insurance cover and the risks that may be involved should an uninsured loss occur.

1.17 Limitation of Liability

Our liability will be to our Client only and not to any third party. We further note that our liability
is limited to a maximum aggregate of 1.5 times the fees received by Cavendish Maxwell for this
instruction with no liability on the individual valuers.

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1.18 Reliance
This report is for the sole use of the party to whom it is addressed and for the Purpose detailed
herein. No responsibility is accepted to any third party for the whole or any part of the contents.

1.19 Confidentiality & Publication

The report may be published on MEFIC website (in English) but we accept no third-party liability.
Our liability and reliance will only extend to the Client. In no event and under no circumstances
shall we bear any responsibility or accept any liability from and against all third-party claims,
actions, suits, demands, loses, settlements, judgments, costs and expenses which arise our of
the report as a whole or any part of its contents.

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2.0 THE PROPERTY

2.1 Location
The Property comprises 30 x residential units within the Pad Tower in Business Bay of a total
2,705.24 sq m (29,119 sq ft). The Pad is a G+M+P+23 residential development by Omniyat
comprising of 253 furnished apartments that benefit from a range of views including Downtown,
Dubai Creek and Burj Khalifa.

The building is adjacent to the Dubai Canal and the main access to it is granted via Al Abraj
Street.

Source: Google Earth Mapping

2.2 Situation
The individual units are located within the Pad Tower which is located in Business Bay area and
is adjacent to the Dubai Canal. The immediate surrounding area consists medium and high rise
residential and office development, as well as various vacant undeveloped plots. The
development is only 2.5 km away from the Dubai Mall and Burj Khalifa.

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2.3 Property Description

The units comprise 1 x studio unit, 1 x studio loft unit, 17 x 1-bedroom units, 6 x 2-bedroom units
and 5 x 2-bedroom loft units in the Pad Tower in Business Bay.

The Pad is a G+M+P+23 residential development by Omniyat comprising of 253 furnished

apartments that benefit from a range of views including Downtown, Dubai Creek and Burj
Khalifa.

The Pad features a 6.5 degree tilt and a façade lighting scheme that includes 2,000
programmable LED panels.

At the time of the inspection, the Building was at the final stage of construction. The Property
consist of a range unit situated throughout the building and benefiting from a range of different
sizes, bedroom numbers, floor heights and views. All units benefit from 1 x car parking space
and are fully-furnished. Specification of the units include marble tiled flooring, fully equipped
kitchens, built-in wardrobes, plastered and painted walls, suspended ceilings with spot lighting
and floor to ceiling glass windows. The units will be handed over fully furnished. As advised by
the Client, the completion date for the Property is 30 June 2019.

In accordance to Client’s instructions we have assumed that the remaining units are similar in
specification and condition to the units inspected. If it transpires that this is not the case, we
reserve the right to amend our valuation and figures stated herein.

Photographs of the Property are shown below:

13
 Source: Cavendish Maxwell

2.4 Accommodation and Use

In accordance with the area schedule and details provided to us by the Client we understand
that the Property comprises the following accommodation:

Unit No Type Floor Level NSA (sq.ft.)

TPD_PD1_002_001 2 Bedroom 2 1,217
TPD_PD1_002_011 2 Bedroom 2 1,216
TPD_PD1_003_011 2 Bedroom 3 1,216
TPD_PD1_004_001 2 Bedroom 4 1,217

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 TPD_PD1_004_004 1 Bedroom 4 653
TPD_PD1_00M_005 1 Bedroom M 653
TPD_PD1_00P_006 1 Bedroom PODIUM 1,191
TPD_PD1_00P_008 1 Bedroom PODIUM 833
TPD_PD1_00P_009 1 Bedroom PODIUM 956
TPD_PD1_00P_010 1 Bedroom PODIUM 945
TPD_PD1_011_008 Studio 11 519
TPD_PD1_012_005 1 Bedroom 12 653
TPD_PD1_012_010 1 Bedroom 12 663
TPD_PD1_021_004 2 Bedroom Loft 21 1,603
TPD_PD1_021_010 2 Bedroom Loft 21 1,609
TPD_PD1_022_004 2 Bedroom Loft 22 1,587
TPD_PD1_022_007 2 Bedroom Loft 22 1,523
TPD_PD1_022_008 Studio Loft 22 1,046
TPD_PD1_022_009 2 Bedroom Loft 22 1,474
TPD_PD1_001_010 1 Bedroom 1 663
TPD_PD1_006_002 1 Bedroom 6 667
TPD_PD1_006_009 1 Bedroom 6 654
TPD_PD1_007_004 1 Bedroom 7 653
TPD_PD1_015_011 2 Bedroom 15 1,216
TPD_PD1_016_003 1 Bedroom 16 653
TPD_PD1_019_009 1 Bedroom 19 654
TPD_PD1_001_011 2 Bedroom 1 1,216
TPD_PD1_017_006 1 Bedroom 17 648
TPD_PD1_012_002 1 Bedroom 12 667
TPD_PD1_012_003 1 Bedroom 12 653
Total Area 30 29,119

We have not measured the Property and have adopted the areas provided to us by the client,
which we have assumed to be correct and accurate being calculated in accordance with the
RICS Property Measurement 2nd Edition (May 2018), incorporating both the Code of Measuring
Practice, 6th Edition and the International Property Measurement Standards (IPMS).

Should our areas adopted differ from those established by measured survey this may materially
affect the valuation hereby reported. In such circumstances, we reserve the right to review our
valuation accordingly.

2.5 Condition and State of Repair

At the time of inspection, the Property appeared to be in a very good condition commensurate
with its age and use. A sample of units was inspected and the apartments were furnished and
benefited from high specifications as detailed in the above section. The majority of the common
areas were at the final stage of construction. The completed sections of the common areas
appeared to be in very good condition and well maintained with no obvious signs of damage.

15
 In accordance with our instructions, we have not been instructed to undertake any structural
surveys, test the services or arrange for any investigations to be carried out to determine the
presence of any deleterious materials at the site.

The services have not been tested by us and we are therefore unable to report on their present
condition. However, for the purposes of this report, we have assumed they are in good and
proper working order.

During our inspection, no major defects or serious items of disrepair were noted which would be
likely to give rise to a substantial capital expenditure in the foreseeable future or which would
fall outside of the scope of a normal annual maintenance programme.

2.6 Services
We have assumed that the Property has the benefit of all standard services and amenities
including utility connections to the Municipality supplied services.

2.7 Planning and Statutory Enquiries

We have assumed for the purpose of this valuation that the relevant planning permissions and
building consents from the relevant authorities have been obtained. If this is subsequently found
not to be true, we reserve the right to alter our valuation.

2.8 Site and Ground Conditions

No obvious signs of any adverse ground conditions were noted during our inspection, but should
it transpire following further ground surveys that more extensive works are required, we reserve
the right to review our valuation. We have assumed that you will commission appropriate ground
and environmental surveys and would recommend that specialist consultants are instructed to
advise you on ground conditions, foundation design and contamination. We reserve the right to
amend our valuation should any adverse factors from such reports arise.

2.9 Environmental Issues

We were not instructed to undertake or commission an environmental assessment to establish
whether contamination exists or may exist, nor are we aware of any such assessment having
been prepared by a specialist advisor in respect of the Property or its environs.

However, during the course of our inspection and our usual subsequent enquiries, the possibility
that the property may be contaminated has been considered by complying with the various
requirements of the Royal Institution of Chartered Surveyors. In particular we have had regard
to the contents of the RICS Valuation Standards, a separate Guidance Note “Contamination

16
and Its Implications for Chartered Surveyors”, and the property observation checklist for
identifying apparent potential for contamination included therein.

We did not observe any evidence of potential or actual contamination or deleterious materials
in the property or immediate vicinity that we consider would be likely to affect our valuation.

We have assumed for the purposes of this valuation report that no contamination or deleterious
materials exist to be sufficient to affect our opinion of value. However, should this assumption
prove to be incorrect, the values reported herein may be reduced.

17
3.0 TENURE & TENANCIES

3.1 Title Details

Unless otherwise stated we have relied upon information provided by the instructing party. From
this we understand that the Property is held under Private Title and have assumed there to be
a good and marketable title to the Property.

We have taken account, in so far as we are aware, planning proposals, onerous restrictions or
local authority intentions which affect the Property. We have also assumed that the Property is
free from any charges or other encumbrances and that there are no easements affecting the
Property other than those mentioned in this report. This valuation assumes that no further
easements exist. Should any of these assumptions prove to be incorrect, the valuation figure
may also be incorrect and should be reconsidered.

We have not undertaken any official searches and for the purposes of this valuation we have
assumed that any such searches or enquiries would not reveal any detrimental factors.
We have not been provided with the individual Title Deeds for the Subject Property.

Your lawyer should confirm that the above information is accurate and correct.

3.2 Tenancies
As at the Valuation Date, the Property were vacant. However, as advised by the Client, we note
that the Property have been sold in 25 September 2018 for a total amount of AED 61,149,536.
As part of the Sales and Purchase Agreement, the seller agreed to guarantee to the buyer a
rental income for the Property as follows:
• Rent Term: 4 years commencing on the 25th September 2018
• Guaranteed rental income for the first six months, an amount equal to 12% of the above
purchase price, equating to a total rent income for the period of AED 3,668,972
• Guaranteed rental income for the first remainder (42 months), an amount equal to 8%
per annum of the above purchase price, equating to a total rent income for the period
of AED 20,790,842

We note that as at the Valuation Date, the remaining expected guaranteed rental income for the
Property amounts to AED 18,956,356. Finally, we note that we have not been provided with the
actual and executed Sales and Purchase Agreement and we have been provided only with the
expected guaranteed rental income details through an email by the Client dated 07 February
2019. However, we have assumed that the information provided is true and accurate. If this
transpires not to be the same, we reserve the right to amend our opinion of Market Value
accordingly.

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4.0 MARKET COMMENTARY

4.1 UAE Economic Performance and Demographics

Despite economic and geo-political headwinds in the region, UAE’s GDP is expected to grow
3.7% in 2019, according to the International Monetary Fund. Government spending on
infrastructure in Dubai for Expo 2020 and the AED 50 billion stimulus package announced for
the period of 2019-2021 in Abu Dhabi are expected to spell a revival for the largest economies
within the country. Forecasts for Dubai GDP stand at 4% in 2019 compared to 3.4% in Abu
Dhabi for the same period. Diversification in the fiscal base is expected to continue even as oil
price volatility remains a key determinant of market sentiment and investments in the region.
Business activity and job growth are primary drivers of real estate demand in the UAE and
structural shifts in the regulatory framework, especially around foreign ownership and longer
term visas, could provide an impetus for resilient economic performance. Among the Northern
Emirates, manufacturing, real estate, wholesale and retail trade sector are the leading
contributors to GDP. Infrastructure and tourism have been outlined as the key sectors for
government spending in the coming years and this is expected to improve the investment profile
of the areas.

According to data published by the Federal Competitiveness and Statistics Authority (FCSA),
the population of UAE stood at 9.3 million in 2017, compared to 9.1 million in 2016 and 4.1
million in 2005

Dubai
According to data published by the Dubai Statistics Centre, the emirate’s population rose to 3.18
million by September 2018. Nearly 90% of the total population are expatriates and over the last
five years almost 40-45% of these have been white-collar workers who primarily drive housing
demand and retail spending in Dubai. Government forecasts put the Dubai population at 3.2
million by 2021 and it remains to be seen how much of this is the blue-collar workforce moving
to the emirate in the construction and services sector in the lead up to Expo 2020. This is
expected to fuel development activity around specialist accommodation for labour and services-
sector staff in particular.

19
 Source: FDI, Dubai Statistics Centre, Cavendish Maxwell 2018

4.2 Residential Market

The residential real estate market in Dubai saw unprecedented levels of growth during 2007
and early 2008 following the establishment of the freehold areas, and the subsequent law
governing them in 2006. Prices peaked in 2008 following high levels of speculation and then
dropped just as drastically in the wake of the global financial crisis. The emerging market of
Dubai has seen relatively short cycles with prices bottoming out in Q1 of 2011 before seeing
growth till Q2 2014. This new market peak was short-lived as prices began to decline in the
second half of 2014 and have continued to drop into 2018.

4.3 Price and Rent Performance

In 2018, apartments traded within a close range of AED 1.2 to 1.26 million, while
villas/townhouses traded from AED 1.8 to 2.5 million on average. Sales prices softened and
rents declined across Dubai, continuing the trend from 2017. The price gap narrowed markedly
between apartments and independent homes (villa/townhouses). The average trading price for
villas/townhouses in Dubai moved from AED 2.3 million at the end of 2017 to AED 1.8 million in
the last quarter of 2018. Prices for apartments also moved towards the lower end of the range,
averaging at AED 1.2 million. According to the Property Monitor Index, apartment and
villa/townhouse prices have registered 12-month declines of 6.9% on average at the end of
2018. Rate of decline in residential property prices across key communities in Dubai has

20
increased over the last 12 months in comparison to 2017. In Q4 2018, sales prices across the
residential market registered quarterly declines of 4.3% for villas and apartments on average.

Source: Property Monitor, Cavendish Maxwell

Price movement in the last 12 months has varied between communities as well as among
different buildings within the same community, thus reflecting greater differentiation in how
available Property were traded. This differentiation is expected to continue in 2019 as buyers
have increasing supply options to choose from, with property fundamentals such as developer
track record, proximity to social and public infrastructure, ease of access and maintenance,
among other factors, driving price movement. According to data from Property Monitor, 26% of
the off-plan transfers for apartments in 2018 were in the AED 1,200 to 1,500 per sq ft price
bracket, whereas, in the case of villas, 59% of the total off-plan transactions were in the range
of AED 500 - 800 sq ft.

21
22
12 month declines in rent for residential properties in Dubai averaged 8% during 2018, and 3.7%
between Q3 and Q4 2018. During 2018, residential property rents declined at a more
pronounced rate than sales prices, which resulted in yield compression in most residential
communities. Rental declines were more pronounced in Dubailand, the Greens in Emirates
Living, Discovery Gardens, Al Furjan Villas and Victory Heights, averaging a 12-month change
of more than 8%. Rent decline is expected to continue in the beginning of 2019, with new
handovers planned in both freehold and leasehold communities in Dubai.

As of December 2018, rents in Dubai ranged from AED 51 per sq ft in peripheral locations such
as Liwan to AED 122 per sq ft in the Central Business District areas such as Downtown and
DIFC.

23
4.4 Supply
More than 22,000 apartments and over 4,400 villas/townhouses were handed over in Dubai
during 2018. The majority of units handed over in 2018 were in Jumeirah Village Circle,
Business Bay, Town Square, Remraam and Nad Al Sheba. More than 1,000 units were handed
over in each of these locations. Majority of the units (84%) handed over were apartments.
Upcoming supply in 2019 is primarily concentrated in Jumeirah Village Circle, Business Bay,
Dubai Sports City, Dubai Silicon Oasis, Al Furjan and Mohammed Bin Rashid City.

24
Approximately 85% of the upcoming supply comprises apartment units. The materialisation rate
for residential units in 2019 is expected to be similar to recent years, where annual handovers
ranged between 16,000 and 20,000 units.

25
4.5 Transactions
Off-plan transfers accounted for 56% of total transfers in 2018, with more than 17,300
transactions, including both apartments and villa/townhouses. In 2018, the volume of
villa/townhouse transfers decreased by 6% compared to 2017. However, the trend was reversed
with secondary transfers outpacing off-plan transfers in 2018. For apartments, off-plan transfers
continued to dominate, though the volume of transfers for under-construction apartments
declined by 25% year-on-year. According to data from Property Monitor, 26% of the off-plan
transfers for apartments in 2018 were in the AED 1,200 to 1,500 per sq ft price bracket, whereas,
in the case of villas, 59% of the total off-plan transactions were in the range of AED 500 - 800
sq ft.

According to property transfer data from Dubai Land Department, the majority of the residential
units sold both in the off-plan and secondary markets during 2018 were from Emaar Properties.
Other top developers with high sales volumes and values in 2018 were Damac Properties, Azizi
Developments and Danube Properties.

26
4.6 Market Outlook
Residential property sales prices and rents in Dubai are expected to continue to decline further
in H1 2019. However, the rate of decline is expected to slow towards the end of the year.
Upcoming supply remains the greatest threat to the sector’s performance, as a substantial
number of residential units are expected to be delivered over the next six months, provided
there are no delays in handover schedules. Dubai’s real estate market will continue to mature
throughout 2019, in line with increased transparency and improved regulatory conditions. The
announcement by the UAE government in 2018 on new 10-year visa regulations for certain
categories of residents, as well as the 100% foreign ownership in companies, could have a
positive impact on housing demand from expatriates. However, the laws will only come into
effect in 2019 and the direct impact on real estate will only become clear in the medium- to long-
term.

27
5.0 VALUATION METHODOLOGY & RATIONALE

5.1 Basis of Valuation

In accordance with our instructions, we have set out in this report our opinion as to the Market
Value defined by RICS Valuation Professional Standards and settled by the International
Valuation Council (IVSC) as follows:

“The estimated amount for which an asset or liability should exchange on the valuation date
between a willing buyer and a willing seller in an arm’s length transaction after proper marketing
and where the parties had each acted knowledgeably, prudently and without compulsion”.

5.2 Method of Valuation

We have valued the Property as it would be in the United Arab Emirates market, which is by
having regard to market and transactional evidence, as well as our general market knowledge
of such properties in the local market.

Income Approach – DCF Method

The investment method (otherwise known as the Income Approach) is adopted for income
producing assets. The method provides an indication of value by converting future cash flow to
a single current value. Under the investment method, the value of an asset is determined by
reference to the value of income, cash flow and cost savings generated by the asset.

Under the Discounted Cash Flow Method (DCF), the forecasted cash flow is discounted back
to the Valuation Date, resulting in a present value of the asset. The projected cash flow should
capture the amount and timing of all future cash inflows and outflows associated the subject
asset from the perspective appropriate basis of value.

Also, especially for long-lived assets, where the asset is expected to continue beyond the explicit
forecast period, values must estimate the value of the asset at the end of the period. The
terminal value is then discounted back to the Valuation Date, normally using the same discount
rate as applied to the forecast cash flow. The rate at which the forecast cash flow is discounted
should reflect not only the time value of money, but also the risks associated with the type of
cash flow and future operations of the asset.

In order to provide our opinion of Market Value of the Property, we considered the expected
guaranteed rental income of the Property, as per the Sales and Purchase Agreement, and then
we applied the Comparable Method in order to establish the value of the Property assuming
vacant possession upon expiry of the guaranteed rental income by considering transactional
and quoting evidence available within the locality. Finally, we have applied a discount rate of

28
 5.00% to reflect time value of money, but also the risks associated with the type of cash flow
and future operations of the asset.

5.3 Comparable Evidence

We derived the Aggregate Market Value of the individual units within the building utilising the
comparable approach whereby a sales rate was applied to the individual apartments.

Comparable Evidence
Dubai is not a very transparent market and hence full details of transactional evidence are
difficult to obtain. We have however analysed transactional data from similar buildings in
Business Bay available from Dubai Land Department for the last 12 months. Please note that
the transactional data from DLD are available as at the date of registration which in some cases
can be different to the actual transactional date or the date of agreed MOU. Further the DLD
data doesn’t provide details regarding floor, view, specification, condition etc which are
important factors when arriving at the valuation. Hence the above transactions are subject to a
degree of uncertainty. Given below are the details:

The Pad

Price
Total Sales
Evidence Date Beds AED/sq Unit Size (sq ft)
Price (AED)
ft
20/12/2018 1-bedroom 1,372,526 2,007 684
20/12/2018 1-bedroom 1,400,553 2,085 672
20/12/2018 2-bedroom 2,553,143 1,979 1,290
20/12/2018 1-bedroom 1,372,074 2,006 684
20/12/2018 1-bedroom 1,372,077 2,006 684
15/11/2018 1-bedroom 2,553,143 1,999 1,277
15/11/2018 2-bedroom 2,501,380 2,035 1,229
13/11/2018 1-bedroom 1,750,242 2,028 863
12/11/2018 1-bedroom 1,372,300 2,006 684
12/11/2018 1-bedroom 1,372,074 2,006 684
12/11/2018 1-bedroom 2,007,026 2,086 962
01/11/2018 1-bedroom 1,400,556 2,081 673
01/11/2018 1-bedroom 2,555,178 2,001 1,277
01/11/2018 1-bedroom 1,361,682 2,045 666
01/11/2018 1-bedroom 2,553,143 1,999 1,277
01/11/2018 1-bedroom 1,372,074 2,006 684
01/11/2018 1-bedroom 1,372,074 2,006 684
01/11/2018 1-bedroom 1,090,878 1,878 581
01/11/2018 1-bedroom 2,553,143 1,999 1,277
01/11/2018 1-bedroom 2,555,178 2,001 1,277
01/11/2018 1-bedroom 1,372,526 1,998 687
23/10/2018 3-bedroom 2,500,000 1,539 1,624

29
 20/03/2018 Studio 1,453,153 2,500 581
07/03/2018 1BR loft 2,400,000 2,292 1,047
Source: Internal database – DLD Data

The Sterling

Price
Total Sales
Evidence Date Beds AED/sq Unit Size (sq ft)
Price (AED)
ft
20/11/18 Studio 888,930 1,800 494
24/11/18 Studio 925,000 1,850 500
20/1218 2-bedroom 2,111,400 1,800 1,173
20/11/18 Studio 867,600 1,800 482
20/11/18 1-bedroom 1,804,410 1,800 1,002
20/11/18 1-bedroom 1,804,410 1,800 1,002
20/11/18 1-bedroom 1,804,410 1,800 1,002
20/11/18 1-bedroom 1,804,410 1,800 1,002
20/11/18 1-bedroom 1,804,410 1,800 1,002
20/11/18 1-bedroom 1,804,410 1,800 1,002
29/11/18 1-bedroom 1,804,410 1,800 1,002
20/11/18 Studio 867,600 1,800 482
13/08/18 1-bedroom 1,506,702 1,300 1,159
15/10/18 2-bedroom 3,305,284 1,898 1,741
15/10/18 2-bedroom 3,332,516 1,914 1,741
15/10/18 2-bedroom 3,361,450 1,931 1,741
15/10/18 2-bedroom 3,407,404 1,957 1,741

Source: Internal database – DLD Data

Further, we have also analysed transactions in 2018 available from DLD and our internal
database from other buildings within the locality. Given below is the list:

J One – 2018 transactions (past 12 months):

Type No. of Transactions Average Size (sq ft) Average Rate (AED) psf
Studio 30 535 2,009
1 BR 18 877 1,813

Avanti – 2018 transactions (past 12 months):

Type No. of Transactions Average Size (sq ft) Average Rate (AED) psf
Studio 3 470 1,849
1 BR 7 881 1,710
2 BR 1 1,211 1,619

30
Bay’s Edge – 2018 transactions (past 12 months):
Type No. of Transactions Average Size (sq ft) Average Rate (AED) psf
Studio 4 439 1,520
1 BR 8 857 1,403
2 BR 2 1,254 1,456

Damac Maison Court Jardin – 2018 transactions (past 12 months):

Type No. of Transactions Average Size (sq ft) Average Rate (AED) psf
Studio 27 353 1,306
1 BR 7 798 1,267

Damac Towers by Paramount – 2018 transactions (past 12 months):

Type No. of Transactions Average Size (sq ft) Average Rate (AED) psf
Studio 14 479 2,817
1 BR 56 998 2,094
1 BR 29 1,401 1,953

In addition to the above, we have also analysed asking prices of similar properties available in
the market. The list of asking prices are as given in the table below:

Asking Prices:
Building Description Area Sq ft Total Rate
The Pad 1 BR 673 999,000 1,484
The Pad 1 BR 684 1,099,990 1,608
The Pad 1 BR 666 1,100,000 1,652
The Pad 1 BR 683 1,100,000 1,611
The Sterling Studio 493 790,000 1,602
The Sterling Studio 500 800,000 1,600
The Sterling 1 BR 1,000 1,500,000 1,500
The Sterling 1 BR 979 1,727,000 1,764
Avanti 1 BR 745 1,275,000 1,711
Avanti 1 BR 892 1,375,000 1,541
Avanti 2 BR 1,214 1,840,000 1,516
Avanti 2 BR 1,633 1,980,000 1,213
Bay’s Edge Studio 448 785,000 1,619
Bay’s Edge Studio 426 815,000 1,913
Bay’s Edge 1 BR 861 1,099,990 1,278
Bay’s Edge 2 BR 1,255 1,893,900 1,509

Comments:
We note that the above comparables are quoting prices which are usually inflated to allow for
negotiation. We would expect the units to attract a similar rate per sq ft comparing to these
comparables.

31
 Taking into consideration the above we have applied the following base rates to the different
accommodation type of units in the Property, as follows:-
Description Rate AED Psf
Studio apartment 1,600
One-bedroom apartment 1,600
Two-bedroom apartment 1,600

Having adopted the various rates at the Property, this provides for an Aggregate Market Value
of AED 46,590,000, which equates to an average capital value per sq ft of AD 1,600. It should
be noted that some of the transactions will have been sales directly from the developer. Not all
sales in the secondary market will achieve the same levels as developers usually having access
to more marketing platforms.

5.4 Assumptions and Special Assumptions

This valuation specifically assumes that the Property is held under Private Title without
restrictions on sale or transfer into perpetuity. If this is subsequently found to be incorrect, then
the valuation figure may also be incorrect and should be reconsidered.

We have relied upon information provided by the instructing party and have assumed that all
the information received is true, accurate and correct. If this is found not to be the case we
reserve the right to amend this report and valuation figure.
We have not made any allowance for vendor’s sale costs, nor for any tax liabilities that may
arise upon the disposal of the property or any parts thereof.

5.5 Valuation Assumptions

The following assumptions have been used in formulating our opinion of Market Value.

Expected Guaranteed Rental Income

Year 1 (Valuation Date – 31/12/2019) - AED 4,280,468
Year 2 - AED 4,891,963
Year 3 - AED 4,891,963
Year 4 - AED 4,891,963

Discount Rate - 5.00%

32
5.4 Assumptions and Special Assumptions
This valuation specifically assumes that the Property is held under Freehold title without
restrictions on sale or transfer into perpetuity. If this is subsequently found to be incorrect, then
the valuation figure may also be incorrect and should be reconsidered.

As of 01 January 2018, Value Added Tax (VAT) is applicable in United Arab Emirates at a rate
of 5.00%. The exact details and workings are still being considered although current information
indicates that residential property sales and leases would be exempt from VAT, with the
exception of the first sale/lease of new residential property whereas sales and leases of
commercial Property are likely to be taxed at a standard VAT rate. All rents and capital values
stated in this report are exclusive of VAT. We recommend the exact position be clarified by an
appropriately qualified advisor.

33
6.0 OPINION OF VALUE

6.1 Market Value

Subject to the contents of this report, we are of the opinion that the Market Value of the Private
interest in the Property, subject to all assumptions set out above in this report, as at the
Valuation Date is:

AED 55,930,000

(Fifty-Five Million, Nine Hundred and Thirty Thousand Dirhams)

Yours faithfully,

James Cresswell BA (Hons) MSc MRICS Vidhi Shah MBA MSc MRICS
Head of Commercial Valuation Associate
RICS Registered Valuer RICS Registered Valuer
For and on behalf of For and on behalf of
Cavendish Maxwell Cavendish Maxwell

34
Appendix A
Standard Valuation Assumptions and Bases of Valuation

Compliance with Valuation Standards

All valuations have been carried out in accordance with the Practice Statements and Guidance Notes set out in the
RICS Valuation – Global Standards July 2017 incorporating the International Valuation Standards 2017 or as
amended.

We are a RICS regulated firm and follow best practice procedures as part of our commitment to the RICS Valuer
Registration scheme.

We confirm that we have sufficient current local and national knowledge of the particular property market involved,
and have the skills and understanding to undertake the valuation competently. Where the knowledge and skill
requirement of the Red Book have been met in aggregate by more than one valuer, we confirm that a list of those
valuer’s have been retained on file together with confirmation that each named valuer complies with the requirement
of the Red Book.

Disclosure

The principal signatory of this report has not continually been the signatory of valuation s for the same addressee
and valuation purpose of this report.

Unless agreed otherwise in writing, or stated otherwise in our Valuation Report, the following Standard Conditions
of Engagement shall apply:

1. Assumptions: In preparing the Valuation Report, we have made the following general assumptions:

a) We rely upon information provided to us, by the identified sources, as to details of tenure and
tenancies, planning consents and other relevant matters, as summarised in our report. We
assume that this information is up-to-date, complete and correct and may be safely relied on.

b) That all information provided as to ownership (e.g. tenure, lease terms, tenant's improvements,
development expenditure, etc.) is up to date, complete and correct. Also, that there are no
encumbrances or unduly onerous or unusual easements, restrictions, outgoings or conditions,
likely to have an adverse effect upon the value of the property, attaching to the relevant interest
in the property of which we have not been made aware and that a good and marketable title to
the relevant interest is held.

c) The properties have been valued as if wholly owned with no account being taken with any
outstanding moneys due in respect of mortgage bonds, loans, or any other third party claims.

d) Where we have read leases, no reliance should be placed on our interpretation of these
documents without reference to solicitors, particularly where purchase or lending against the
security of a property is involved. We assume that all covenants in any head leases have been
complied with and that there are no disputes with the lessors or notices received from the lessors
or lessees which would adversely affect the valuation. Information regarding tenure and
tenancies must be checked by your legal advisers.

e) That, unless we have been informed otherwise, each property complies with all relevant statutory
requirements (including, but not limited to, fire regulations, bye-laws, disability access, asbestos
and Health and Safety).

f) That each property has been constructed and is occupied in accordance with valid planning
consents and building regulations. That they comply with any other relevant statutory and bye-
law requirements and that there are no outstanding statutory notices or other notices in
connection with the properties or their current use.

g) That, unless we have been notified otherwise, the presence of high alumina cement, calcium
chloride additive, blue asbestos or any other deleterious, harmful or hazardous material has not
been determined and our valuation assumes that these materials have not been used in the
construction of any of the buildings or subsequently added.

35
 h) With regard to development properties, we have assumed, except where notified otherwise, that
there are no leases, under-leases, tenancies, licences or other agreements under which any person
has or will have any right to possession, occupation or use of the property or any part thereof and
that the client is therefore able to offer or obtain vacant possession for development.

2. Special Assumptions: Where special assumptions are necessary in order to adequately provide the
valuation(s) required, these will have been agreed and confirmed in writing before the Valuation Report is
issued. Special Assumptions may only be made if they can be regarded as realistic, relevant and valid, in
connection with the particular circumstances of the valuation.

3. Restricted Information: Where we have undertaken a valuation on the basis of restricted information, the
nature of the restriction and the impact upon the accuracy of the valuation has been referred to in our
Valuation Report.

4. Restricted Access: Where either no, limited or partial only internal access was possible we have made
assumptions that the property is currently in a reasonable state of repair and in a condition commensurate
to other properties of a similar type in the locality where we have not been provided with any detail on the
quality, specification and condition of the property.

5. Revaluations: Revaluations without re-inspections are made only on the assumption that the client has
confirmed that no material changes to the physical attributes of the property and the area in which it is
situated have occurred. Unless otherwise agreed, we will not undertake revaluations without re-inspections
if the property was inspected more than 12 months previously because the condition of such property can
materially change significantly during this period of time, especially when let.

6. Structural Condition: No structural surveys have been carried out, nor have we tested any services or
inspected roof voids, woodwork or any parts of the structures which are covered, unexposed or
inaccessible, and, therefore, such parts are assumed to be in good repair and condition and the services
are assumed to be in full working order. Any obvious defects or items of disrepair have been taken into
account, but we are not able to give any assurance that any property is free from defect.

7. Plant and machinery: Plant and machinery and trade fixtures and fittings have not been included in the
valuation unless forming part of the structure or service installations and normally valued with the building.

8. Deleterious Materials: We do not normally carry out investigations on site to ascertain whether any
building was constructed or altered using deleterious materials or techniques (including, by way of example
high alumina cement concrete, woodwool as permanent shuttering, calcium chloride or asbestos). Unless
we are otherwise informed, our valuations are on the basis that no such materials or techniques have been
used.

9. Site Conditions: We do not normally carry out investigations on site in order to determine the suitability
of ground conditions and services for the purposes for which they are, or are intended to be, put nor do we
undertake archaeological, ecological or environmental surveys. Unless we are otherwise informed, our
valuations are on the basis that these aspects are satisfactory and that, where development is
contemplated, no extraordinary expenses, delays or restrictions will be incurred during the construction
period due to these matters.

10. Environmental Contamination: Unless expressly instructed, we do not carry out site surveys of
environmental assessments. or investigate historical records, to establish whether any land or premises
are, or have been, contaminated Therefore, unless advised to the contrary, our valuations are carried out
on the basis that properties are not affected by environmental contamination However, should our site
inspection and further reasonable enquiries during the preparation of the valuation lead us to believe that
the land is likely to be contaminated we Will discuss our concerns with you.

11. Insurance: Unless expressively advised to the contrary we assume that appropriate cover is and will
continue to be available on a commercially acceptable terms.
12. Measurements: All measurements have been carried out in accordance with the latest Code of Measuring
Practice issued by the Royal Institution of Chartered Surveyors, unless stated. Where we have not
measured the property we have assumed and in accordance with the Clients instruction, have adopted
areas provided, which we have assumed to be correct and accurate being calculated in accordance with
the code of measuring practice 6th edition. Should areas adopted differ from those established by to other
properties of a similar type in the locality where affect the valuation hereby reported. In such circumstances
we would wish to review our valuation accordingly. Where we have not been provided with individual

36
 residential or other units sizes, we have made the assumption that such units are of a size similar to other
properties in the locality unless measured as part of this instruction.

13. Planning: We have assumed that the property is used in accordance with its lawful use. We recommend
that formal written enquiries should be undertaken by your lawyers. Our valuations are prepared on the
basis that the premises (and any works thereto) comply with the relevant statutory and other legislations
including fire, regulations, access and use by disabled persons.

14. Tenant Covenant(s): We have not undertaken any research into the strength of covenant offered by any
(commercial, residential or other) tenants in order to form a view of the likely perception of their financial
status from the standpoint of potential purchasers. We have assumed that their financial standing is
average and satisfactory within the prevailing market. Unless informed to the contrary, we have assumed
in all cases that there are no significant arrears of payment and that all commercial tenants are capable of
meeting their obligations under the terms of leases and agreements.

15. Taxation/Costs of Realisation: No account has been taken of any liability for taxation, which may arise
upon the disposal of the property, nor have we deducted the likely costs of such disposal. However, normal
purchaser’s costs are reflected in our valuations where necessary.

16. Development Properties: For properties in course of development, we have reflected the stage reached
in construction and the costs remaining to be spent at the date of valuation. We have had regard to the
contractual liabilities of the parties involved in the development and any cost estimates that have been
prepared by the professional advisors to the project. For recently completed developments, we have taken
no account of any retention, nor have we made allowance for any outstanding development costs, fees, or
other expenditure for which there may be a liability.

17. Valuation Date: The date specified in our Valuation Report.

18. Comparables: Information quoted in our reports is typically based upon our verbal enquiries and
electronically available information and its accuracy cannot be assured. However, such information is only
referred to where we have reason to believe its general accuracy, or where it is in accordance with our
expectation. We have not inspected comparable properties. Should the accuracy of the information
gathered subsequently differ from that disclosed or available this may detrimentally affect the valuation
hereby reported and in such circumstances we would wish to review our valuation accordingly.

19. Estimated Rental Value: Our opinion of rental value is formed (where applicable) purely for the purposes
of assisting in the formation of an opinion of capital value. It does not necessarily represent the amount
that might be agreed be negotiation, or determined by an Expert, Arbitrator or Court, at rent review or lease
renewal.

20. Property Taxation: It is assumed for the purpose of this report that the property is not subject to any
taxation.

21. Value Added Tax: The United Arab Emirates is currently subject to 5% Value Added Tax (VAT).

22. Publication: Prior consent in writing is required for any reproduction or public reference to the Valuation
Report.

23. Reliance on the Report: The Valuation Report has been provided only for the specific purpose agreed
with the instructing Client and is for the sole use of that Client. As such, it is confidential to the Client and
its professional advisors to whom we accept responsibility that the Valuation Report has been prepared
with the skill, care and diligence that can reasonably be expected of a competent valuer. We accept no
responsibility whatsoever to other parties that subsequently rely on this Valuation Report, for the whole or
any part of its contents.

24. Loan Security: Where instructed to comment on the suitability of property as a loan security, we are only
able to comment on any inherent property risk. Determination of the degree and adequacy of capital and
income cover for loans is the responsibility of the lender having regard to the terms of the loan.

25. Financial Verification: We recommend that before any financial transaction are entered into based upon
these valuations, you obtain verification of the information contained within our report and the validity of
the assumptions we have adopted. We would advise you that whilst we have valued the Properties
reflecting current market conditions, there are certain risks which may be, or may become, uninsurable.
Before undertaking any financial transaction based upon this valuation, you should satisfy yourselves as
to the current insurance cover and the risks that may be involved should an uninsured loss occur.

37
26. Complaints Procedure: In accordance with the requirements of the RICS, a copy of Cavendish Maxwell
complaints procedure is available on request. Compliance with RICS standards mean that valuations are
subject to monitoring to RICS conduct and disciplinary regulations.

27. Independent Redress Provider: Any dispute arising out of or in connection with this contract, including
any question regarding its existence, validity, professional fees or termination, shall be referred to and
finally resolved by arbitration under the Arbitration Rules of the DIFC-LCIA Arbitration Centre, which Rules
are deemed to be incorporated by reference into this clause. The number of arbitrators shall be 1. The
seat, or legal place, of arbitration shall be Dubai. The language and governing law to be used in the
arbitration shall be English and English common law.

28. Definitions: The definitions of the various valuation bases set out therein, which are reproduced below as
follows:

Market Value (MV)

In accordance with the RICS Valuation - Global Standards July 2017 (effective 1st July 2017), and
incorporating the International Valuation Standards Council (IVSC), Market Value is defined as:

“The estimated amount for which an asset or liability should exchange on the valuation date between a
willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties
had each acted knowledgeably, prudently and without compulsion”.

“The estimated amount…”

Refers to a price expressed in terms of money (normally in the local currency) payable for the asset in an
arm's-length market transaction. Market Value is the most probable price reasonably obtainable in the
market on the valuation date in keeping with the Market Value definition. It is the best price reasonably
obtainable by the seller and the most advantageous price reasonably obtainable by the buyer. This
estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances
such as atypical financing, sale and leaseback arrangements, special considerations or concessions
granted by anyone associated with the sale, or any element of Special Value.

'...an asset should exchange...'

Refers to the fact that the value of an asset is an estimated amount rather than a predetermined amount
or actual sale price. It is the price in a transaction that meets all all the elements of the market value
definition at the valuation date.

'...on the valuation date...'

Requires that the estimated Market Value is time-specific as of a given date. Because markets and market
conditions may change, the estimated value may be incorrect or inappropriate at another time. The
valuation amount will reflect the market state and circumstances as at the valuation date, not those at any
other date.

'...between a willing buyer...'

Refers to one who is motivated, but not compelled to buy. This buyer is neither over-eager nor determined
to buy at any price. This buyer is also one who purchases in accordance with the realities of the current
market and with current market expectations, rather than in relation to an imaginary or hypothetical market
that cannot be demonstrated or anticipated to exist. The assumed buyer would not pay a higher price than
the market requires. The present owner is included among those who constitute “the market”.

The present asset owner is included among those who constitute 'the market'. A Valuer must not make
unrealistic assumptions about market conditions or assume a level of Market Value above that which is
reasonably obtainable.

'... a willing seller...'

Is neither an over-eager nor a forced seller prepared to sell at any price, nor one prepared to hold out for
a price not considered reasonable in the current market. The willing seller is motivated to sell the asset at
market terms for the best price attainable in the open market after proper marketing, whatever that price
may be. The factual circumstances of the actual owner are not a part of this consideration because the
'willing seller' is a hypothetical owner.

'...in an arm's-length transaction...'

Is one between parties who do not have a particular or special relationship, eg parent and subsidiary
companies or landlord and tenant, that may make the price level uncharacteristic of the market or inflated
because of an element of Special Value. The Market Value transaction is presumed to be between
unrelated parties each acting independently.

38
'... after proper marketing...'
Means that the asset would be exposed to the market in the most appropriate manner to effect its disposal
at the best price reasonably obtainable in accordance with the Market Value definition. The method of sale
is deemed to be the most appropriate to obtain the best price in the market to which the seller has access.
The length of exposure time is not a fixed period but will vary according to the type of asset and market
conditions. The only criterion is that there must have been sufficient time to allow the asset to be brought
to the attention of an adequate number of market participants. The exposure period occurs prior to the
Valuation Date.

'... where the parties had each acted knowledgeably and prudently...'
Presumes that both the willing buyer and the willing seller are reasonably informed about the nature and
characteristics of the asset, its actual and potential uses and the state of the market as of the Valuation
Date. Each is further presumed to use that knowledge prudently to seek the price that is most favourable
for their respective positions in the transaction. Prudence is assessed by referring to the state of the market
at the Valuation Date, not with benefit of hindsight at some later date. For example, it is not necessarily
imprudent for a seller to sell assets in a market with falling prices at a price that is lower than previous
market levels. In such cases, as is true for other exchanges in markets with changing prices, the prudent
buyer or seller will act in accordance with the best market information available at the time.

'... and without compulsion'

Establishes that each party is motivated to undertake the transaction, but neither is forced or unduly
coerced to complete it.

Market Value presumes a price negotiated in an open and competitive market where the participants are
acting freely. The market for an asset could be an international market or a local market. The market could
consist of numerous buyers and sellers, or could be one characterised by a limited number of market
participants. The market in which the asset is exposed for sale is the one in which the asset being
exchanged is normally exchanged.

The Market Value of an asset will reflect its highest and best use. The highest and best use is the use of
an asset that maximises its potential and that is possible, legally permissible and financially feasible. The
highest and best use may be for continuation of an asset’s existing use or for some alternative use. This
is determined by the use that a market participant would have in mind for the asset when formulating the
price that it would be willing to bid.

The highest and best use of an asset valued on a stand-alone basis may be different from its Highest and
Best Use as part of a group, when its contribution to the overall value of the group must be considered.

The determination of the highest and best use involves consideration of the following:

(a) To establish whether a use is possible, regard will be had to what would be considered reasonable by
market participants.
(b) To reflect the requirements to be legally permissible, any legal restrictions on the use of the asset, eg
zoning designations, need to be taken into account.
(c) The requirement that the use be financially feasible takes into account whether an alternative use that
is physically possible and legally permissible will generate sufficient return to a typical market
participant, after taking into account the costs of conversion to that use, over and above the return on
the existing use.

Investment Value is the value of an asset to the owner or a prospective owner for individual investment
or operational objectives.

This is an entity-specific basis of value. Although the value of an asset to the owner may be the same as
the amount that could be realised from its sale to another party, this basis of value reflects the benefits
received by an entity from holding the asset and, therefore, does not necessarily involve a hypothetical
exchange. Investment value reflects the circumstances and financial objectives of the entity for which the
valuation is being produced. It is often used for measuring investment performance. Differences between
the investment value of an asset and its market value provide the motivation for buyers or sellers to enter
the marketplace.

Fair value is the estimated price for the transfer of an asset or liability between identified knowledgeable
and willing parties that reflects the respective interests of those parties.

39
The definition of fair value in IFRS is different from the above. The IVSB considers that the definitions of
fair value in IFRS are generally consistent with market value. The definition and application of fair value
under IFRS are discussed in IVS 300 Valuations for Financial Reporting.

For purposes other than use in financial statements. fair value can be distinguished from market value.
Fair value requires the assessment of the price that is fair between two identified parties taking into account
the respective advantages or disadvantages that each will gain from the transaction. It is commonly applied
in judicial contexts. In contrast, market value requires any advantages that would not be available to market
participants generally to be disregarded.

Fair value is a broader concept than market value. Although in many cases the price that is fair between
two parties will equate to that obtainable in the market, there will be cases where the assessment of fair
value will involve taking into account matters that have to be disregarded in the assessment of market
value, such as any element of special value arising because of the combination of the interests.

Examples of the use of fair value include:

(a) determination of a price that is fair for a shareholding in a non-quoted business, where the holdings
of two specific parties may mean that the price that is fair between them is different from
the price that might be obtainable in the market,

(b) determination of a price that would be fair between a lessor and a lessee for either the permanent
transfer of the leased asset or the cancellation of the lease liability.

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