ABSTRACT
This chapter deals with leaseholds which are bought and sold as investments. Assignment lease pricing and key money are market sensitive and will be very dependent on supply and demand at the time of pricing. An important advantage of the method in the leasehold market is its emphasis on making the assumptions as to future income explicit, which is potentially the key to understanding where value lies when head rents are reviewed less frequently than the occupation lease rents. The chapter looks at different types of leaseholds and the market's approach to their valuation. It explains that leases have value if there is a profit rent or expectation of a profit rent. The chapter shows that the profit rent can be capitalised for the appropriate period of time, say for the unexpired term of the lease, or to the point in time when the head rent and rent received are the same at a market capitalisation rate.
