Valuing lost assets in occupied territories

Russia's invasion of Ukraine in February 2022 and the subsequent, ongoing war has resulted in damage to, or the destruction of, a vast number of buildings and a large amount of infrastructure. 

The World Bank Group estimated direct damage to property in territory controlled by Ukraine at $195bn (€166bn) as of the end of 2025.

The World Bank Group has also estimated that over the next ten years, the total cost of reconstruction and recovery in territory under Ukrainian control will be approximately $588bn (over €500bn). 

Exact data for the total cost of damaged and destroyed assets in Russian-occupied territories, however, is not available.

Given the impossibility of forecasting when, or if, Ukraine will regain control of some or all of the territory that Russia has occupied, assets valued for financial compensation must be classified by appraisers as expropriated and legally lost.

Regardless of any potential future legal status, as of 24 February 2022 when Russia launched its full-scale invasion of Ukraine, the rightful owners lost access to, or the use of, these expropriated assets, be they physical assets such as residential, commercial or government property, or a once-operating business.

Based on my valuation work throughout Ukraine, which includes asset and business valuation for war-related compensation, I have set out preliminary estimates of the minimum cost ranges for various asset categories within the occupied territories, expressed in US dollars. These lost assets are represented in Figure 2.

These cost estimates have an understandably broad range given the lack of direct access to the assets assessed. However, even low-end estimates underscore the severe financial and economic consequences of the four-year occupation and war, and will most likely have been underestimated.

If it proves possible in the future to obtain financial compensation for these lost assets, it is imperative that valuers apply a methodology that is optimal given these challenging circumstances.

This methodology will need to be transparent, defensible and reproducible. It will also need to adhere to international standards to determine fair financial compensation for the owners of any particular asset or business.

To determine the value of damaged, destroyed or lost property, McGregor on Damages observes that the common law in international arbitration states that a claimant is entitled to 'that sum of money which will put the party who has been injured or who has suffered, in the same position as [they] would have been in if [they] had not suffered the damage for which [they are] now receiving compensation or reparation'. 

This is recognised as reinstatement costs in most cases. For assets located in territory controlled by Ukraine, the reinstatement cost equals the cost of restoring or replacing the damaged or destroyed property to the same level of utility as existed before the damage or destruction at the same location.  

In the case of property expropriated in occupied territories, an owner's compensation includes the cost to purchase either:

• a new property of similar utility at a different location under Ukrainian control
• vacant land of similar utility within territory controlled by Ukraine, in addition to the cost to build (or reinstate) the property to the same level of expropriated (lost) utility.  

Although it is possible to use reinstatement cost as the basis for determining compensation for expropriated property located within occupied territories, in practice it is exceedingly difficult to do so.

The most problematic concern is the determination of similar land utility at a new location relative to the old location, for which the following questions need to be considered.

• What criteria should appraisers use to identify and value the new land plot?
• In which locations in Ukrainian-controlled territory, and in which part of that city, should the new land plot be?
• How are new locations to be analysed or values modified without reference to the original location? 

Under such circumstances, use of the reinstatement cost methodology is highly problematic.

The alternative is to determine the market value of lost property as of a certain date and use this valuation as the basis for compensation.

For lost business entities, the market value of the business, determined as of a certain date, should also include lost profit from that date to the final date the rightful owner receives compensation.

The Ukrainian currency, the hryvnia, is under pressure due to high inflation and interest rates, and the risk of valuation going forward is far higher than for the euro or US dollar. Therefore, appraisers usually quote compensation values in euros or US dollars.

This facilitates stability in values over the period between the date of initial valuation and the date at which the rightful owner receives financial compensation.

The reasoning for using the start of the war as the initial valuation date for an expropriated business is the assumption that had the invasion of Ukraine not taken place, the business in question would have continued to operate as usual.

A date of 23 February 2022 – one day before the Russian invasion and occupation – is a logical choice in many cases.

In other cases, a known date of expropriation after the start of hostilities may be optimal. The choice of an alternative date depends on when Russia occupied a certain territory and when the rightful owners lost control.

Compensation values are determined using market data as of the initial valuation date and rely on the comparable sales or income approach as set out in the International Valuation Standards (IVS) or RICS Valuation – Global Standards (Red Book Global Standards). 

Compensation values are escalated from the date of initial valuation to the date a claim is filed, and subsequently to the date on which compensation is received.

There are several rates that can be used to escalate compensation values.

• The inflation rate: this can be based on the general consumer price index, the rate of inflation of general goods and services, or another sector-specific inflation rate.
• Bank interest rates: this is based on the assumption that the owner could have sold their business or property at market value before the war and deposited that amount in a bank. Market compensation value can be compounded from this initial date of valuation to the date compensation is received.
• The discount rate: this is based on the assumption that the owner could have sold their business or property at market value before the war and invested the funds into a similar business in Ukrainian-controlled territory. The compound rate will equal the discount rate used to determine the present value of the lost income based on a market comparison.

Which of these rates is the most appropriate to use depends on the specific circumstances and the judgement of the appraiser.

It is necessary to document the existence and characteristics of an asset or property as of 23 February 2022. Sometimes this is problematic given the impossibility of physical inspection – the current authorities in occupied territories do not allow inspections.

However, the Ukrainian government allows for the use of remote inspection, including using data from the internet, satellite photos and other technical tools, in support of compensation claims.

As of early 2026, 20,000 applications to the international Register of Damage for Ukraine have been submitted by owners from occupied territories.

If the compensation comes from the Ukrainian state budget, the owner must cede the rights to their property to the state, which, in turn, will demand compensation in an equal amount from the Russian state.

He had preserved lists of equipment and inventory, technical documentation of assets and asset photographs. Documents verifying the payment of taxes and fees were obtained from the State Tax Administration and the Pension Fund of Ukraine in Ukrainian-controlled territory. 

There are no restrictions on access to information on taxes and pension fund data. Moreover, the Mariupol city government has set up an office in Kyiv to provide its former residents with information needed to file a claim for lost real estate.

It was subsequently determined that Russia had demolished the building that housed his business, but we found evidence to factually confirm the building's past existence, layout and technical specifications.

Relevant data on real estate analogues as of the date of initial valuation was available in our company archives, and analogues for equipment were found on the internet.

We analysed market data on income and expenses for the type of business being valued. All data and information used in the valuation was referenced and included in appendices to the valuation report – this is a critical requirement for any court submission.

Company-specific revenue and operating costs were estimated using a variety of sources, including company records, information from the relevant taxation and pension fund authorities, and data for companies offering similar services, all of which were cross-checked for consistency.

Inflation forecasts and other parameters of the discount rate as of 23 February 2022 were available in our archives and we cross-checked them through various internet sources.

The business valuation relied on the income approach using the discounted cash flow (DCF) method. A period of 3.75 years had passed from the initial valuation date to the filing of the compensation claim. Compounding the initial value over this time increased the compensation claim by a factor of 1.71.

When determining the value of lost assets or businesses in the occupied territories, it is reasonable to determine compensation value based on an initial valuation date of one day prior to the date of the large-scale invasion. For assets or businesses expropriated at a later, specifically known date, this date would be used for the initial valuation.

Business values may be determined using a DCF model under the assumption that the business would have operated as usual in the absence of war and expropriation.

Escalation of any asset or business value is applied to update the initial value to the date the compensation claim was submitted, and subsequently to the date that compensation is received.