Defvas Project

In Partnership with TEGoVA and the IRRV

EUROPEAN VALUATION APPLICATION - 3PROPERTY VALUATION FOR SECURITISATION PURPOSES

Defvas Project

In Partnership with TEGoVA and the IRRV

INTRODUCTION

• The securitisation of property has become an important

source of financial instruments in capital markets

• The creator of the securities benefits from the removal of

property related assets from its balance sheet

• These securities offer their purchasers a chance to diversify

their funding

• Where property based securities have been created from mortgages,

investors are principally exposed to changes in:

- the underlying value of properties securing the mortgages, and

- the income from those mortgages

• As every investment decision is based on the ability of a property to

produce revenue.

Defvas Project

In Partnership with TEGoVA and the IRRV

SCOPE

• This EVA applies to property valuation for the purpose

of valuing these securities

• Valuations relevant to REIT’s, property trusts and

property unit trusts are considered in EVA1

• The assessment of other risks relating to the assets, are not

considered by this EVA.

Defvas Project

In Partnership with TEGoVA and the IRRV

DEFINITIONS

• Property Securitisation• Property-Related Asset-Backed Securities (PRABSs)• Residential Mortgage Back Securities (RMBS)• Commercial Mortgage Backed Securities (CMBS)• A Special Purpose Vehicle (SPV)• Net Asset Value• A Sustainable Net Asset Value or Sustainable Asset Value• Market Value• Mortgage Lending Value• A Risk Profile

Defvas Project

In Partnership with TEGoVA and the IRRV

STATEMENT OF THE APPLICATION

• Where the valuation will be used to secure a loan this will normally be on the basis of the Market Value. In some jurisdictions, the Mortgage Lending Value may also be used

• When undertaking a valuation for securitisation purposes, valuers should focus on the market and property related risks relevant to the property

• TEGoVA recommends valuers to undertake their tasks in two stages:- The conventional valuation- Assessment of the specific property risk profile

Defvas Project

In Partnership with TEGoVA and the IRRV

COMMENTARY

• The first step is to consider the individual underlying properties

• The valuer should prepare a structured risk assessment

• Valuations and risk assessments are carried out within the context of the market

• The second step, where a portfolio of properties is being assessed, is to assess the entire portfolio

• Cluster analysis• The validity of the market value of the individual

properties should be verified• Sustainable net asses value