It is the present value of a series of projected income streams - (usually 10 years) discounted at an appropriate hurdle rate/rate of return/weighted average cost of capital/etc; with the final years income stream capitalised.
Basically it is a huge spreadsheet making lots of assumptions over a long period of time .. hence I call it garbage in garbage out .. favoured by the institutional buyers/investors.
Just another question, for valuation purposes, when sale price/m2 and rent/m2 figures are quoted, do people usually do this with respect to total land + building area, or net lettable area??
