VALUATION OF…
Hospitals
Hospital buildings let to an operator on commercial terms, valued as investment property rather than specialised owner-occupied stock.
Content status: Methodology and evidence log — Sources, Caselaw and Market Information are added incrementally.
Methodology
Where a hospital building is let to an operating group on a commercial lease, it is valued using the Income Capitalisation or Discounted Cash Flow Method, in the same manner as other income-producing property, in contrast to an owner-occupied hospital valued on a Cost Approach basis (see Healthcare).
Applying the Big Five framework, the Income Generating Units are the ward, theatre, consulting and ancillary space, each let on potentially different terms; contract rental is compared to market rental for comparable healthcare-tenanted buildings, and the capitalisation rate applied reflects the covenant strength of the hospital operator and the remaining lease term.
Operator covenant and lease term are the dominant value drivers. A Direct Comparison cross-check on a rate per square metre against sales of comparable tenanted hospital buildings should be used to test the primary valuation.
Caselaw
Case law, regulatory rulings and expert-determination disputes relevant to valuing this asset class. Each entry cites its source and summarises the practice implication for valuers — this is not investment, financial, or legal advice.
The Evidence Log is for VDH Members
The Evidence Log for Hospitals — sourced sales, disposals and rentals with Valuer’s Lens commentary — is included in VDH Membership: from R125/month for SACPVP candidates and students, R399/month standard. All prices include VAT.
The methodology and case law on this page remain free to read.