1. Asset overview
The subject asset is a Class A office building in the heart of Hay Riad, Rabat, adjacent to Mohammed VI Tower and Technopolis. Delivered in 2020, it comprises:
- Lettable area (GIA): 4,200 sqm over 7 floors, 600 sqm divisible plates
- Parking: 85 underground spaces over 2 levels
- Tenancy: 4 tenants, weighted average unexpired lease term (WAULT) 4.2 years
- Current passing rent: 205 MAD/sqm/month (contracts 2021-2024)
- Occupancy: 95% (structural frictional vacancy 5%)
- Ownership: Moroccan OPCI fund (context: IFRS 13 annual fair value revaluation for AMMC)
2. RICS methodology framework
RICS VPGA 2 — Valuation for secured lending and VPS 5 §30 (Income approach) recommend Discounted Cash Flow (DCF) for multi-tenant office assets with firm leases: direct capitalisation artificially smooths temporal mismatches between passing rent and market rent.
Basis of value: Market Value (VPS 4). Explicit horizon: 10 years, with:
- Lease-by-lease contractual rent projection to expiry
- Rent reversion to Estimated Rental Value (ERV) at renewal
- Non-recoverable expenses + cyclical CAPEX + frictional vacancy
- Terminal value by direct capitalisation at Year N+10
- Discount at real estate WACC
3. Key assumptions (2026)
| Parameter | Value used | Rationale |
|---|---|---|
| ERV (market rent) | 225 MAD/sqm/mth | 5 Hay Riad comparables 2025-2026 |
| Rent indexation | +2.5% / year | In line with BAM inflation target |
| Frictional vacancy | 5% stabilised | 2022-2025 history |
| Non-recoverable costs | 11% of GRI | Property management, vacancy, uninsured |
| Cyclical CAPEX | 65 MAD/sqm/yr | TI, technical, adaptations |
| Exit cap rate | 7.50% | Rabat prime + 25 bps obsolescence |
| Disposal costs | 2.0% | Transfer taxes + broker fees |
| WACC (discount rate) | 9.00% | Risk-free 3.5% + premiums 5.5 pts |
4. Cash flow projection N+1 to N+10
Simplified table (k MAD, rounded) — passing rents converge to ERV as leases renew:
| Year | Gross rent | Vacancy | Non-rec. | CAPEX | NOI | DF @ 9% | PV |
|---|---|---|---|---|---|---|---|
| N+1 | 10,332 | (517) | (1,137) | (273) | 8,405 | 0.917 | 7,711 |
| N+2 | 10,590 | (530) | (1,165) | (280) | 8,615 | 0.842 | 7,251 |
| N+3 | 10,855 | (543) | (1,194) | (287) | 8,831 | 0.772 | 6,818 |
| N+4 | 11,431 (rev.) | (572) | (1,257) | (294) | 9,308 | 0.708 | 6,594 |
| N+5 | 11,717 | (586) | (1,289) | (302) | 9,540 | 0.650 | 6,201 |
| N+6 | 12,010 | (601) | (1,321) | (309) | 9,779 | 0.596 | 5,830 |
| N+7 | 12,310 | (616) | (1,354) | (317) | 10,023 | 0.547 | 5,483 |
| N+8 | 12,618 | (631) | (1,388) | (325) | 10,274 | 0.502 | 5,157 |
| N+9 | 12,933 | (647) | (1,423) | (333) | 10,530 | 0.460 | 4,844 |
| N+10 | 13,256 | (663) | (1,458) | (341) | 10,794 | 0.422 | 4,555 |
| Σ PV NOI | Sum of discounted cash flows | ≈ 60,444 | |||||
* (rev.) = reversion: one lease expires and rent is reset to ERV 225 MAD/sqm/month (indexed).
5. Terminal value & present value
Terminal Value (TV) at end of year N+10 calculated by capitalising NOI of year N+11:
Gross TV
NOI N+11 = 10,794 × 1.025 = 11,064 k MAD
TV = 11,064 / 7.50% = ≈ 147,520 k MAD
Net TV (after 2% disposal costs) = ≈ 144,570 k MAD
TV discounted at WACC 9% over 10 years (factor 0.422):
Total DCF value = Σ PV NOI + PV TV:
6. Cross-check via comparables
Five recent transactions (2024-2025) of Class A office buildings in Hay Riad and comparable tertiary zones:
| Comparable | Area | Price/sqm | Cap rate |
|---|---|---|---|
| B1 — Rabat Hay Riad Tower 2022 | 5,800 sqm | 31,200 MAD | 7.2% |
| B2 — Rabat Hay Riad Anfa-Med | 3,900 sqm | 27,800 MAD | 7.6% |
| B3 — Casablanca CFC (ref.) | 4,500 sqm | 34,500 MAD | 7.0% |
| B4 — Rabat Agdal Premium | 3,100 sqm | 26,400 MAD | 7.8% |
| B5 — Rabat Hay Riad recent | 4,800 sqm | 29,500 MAD | 7.4% |
After adjustments (location, age, WAULT, build quality), adjusted price per sqm converges to 28,500 to 30,000 MAD/sqm GIA. The DCF value (28,930 MAD/sqm) sits in the middle of the comparables range — a satisfactory ±3% convergence.
7. Two-variable sensitivity
Market Value sensitivity to discount rate (WACC) and exit cap rate (in M MAD):
| WACC \ Exit cap | 7.00% | 7.50% | 8.00% |
|---|---|---|---|
| 8.50% | 133.9 | 126.1 | 119.4 |
| 9.00% (central) | 128.9 | 121.5 | 115.1 |
| 9.50% | 124.3 | 117.2 | 111.2 |
The value corridor [111.2 — 133.9 M MAD] represents ±10% around the central case, consistent with a Class A tertiary asset. 10-year levered-free IRR = 8.4%, within Moroccan OPCI / MRE family office target IRR range.
8. Reconciliation & final value
| Approach | Value (M MAD) | Weight |
|---|---|---|
| 10-year DCF (primary) | 121.5 | 80% |
| Adjusted comparables | 120.0 | 20% |
| Final Market Value | ≈ 121.2 M MAD | 100% |
For a RICS Red Book report to an OPCI, the <2% convergence between DCF and comparables validates the robustness of the valuation. Final Market Value: 121.2 M MAD (≈ 28,850 MAD/sqm GIA) — consistent with IFRS 13 Level 3 fair value.
Frequently asked questions
Why use a 10-year DCF for an office building?
A 10-year DCF explicitly models contractual cash flows (in-place leases), rent reversion to ERV at renewal, cyclical CAPEX and exit value. Direct capitalisation smooths these temporal mismatches approximately — acceptable for single-tenant or stabilised assets, not for multi-tenant with meaningful residual WAULT.
What exit cap rate for a Hay Riad Rabat office?
Recent Class A office in Hay Riad Rabat 2026: 7.25-7.75% exit cap (prime Mohammed VI Tower / Anfa-Med at 7%). For Class B+, use 7.75-8.25%. Exit cap adds +25 to +50 bps vs. entry cap to reflect technical obsolescence over 10 years.
What real estate WACC for Morocco in 2026?
In 2026, prime office WACC: 8.5-9.5%. Risk-free (10Y BDT) 3.5%, real estate premium 3-4 pts, equity premium 2-3 pts. For Hay Riad Rabat, 9.0% aligns with institutional target IRR 8-10%.
RICS appraisal — offices & tertiary assets
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