Case Study Basics

Question 1

What were the different site densities?

Answer 1

Omar: Units 1-3 (122,000 sq ft) 35% Site Density

Rettig: Units 4-8 (57,000 sq ft) 50% Site Density

Question 2

What was the construction of the properties?

Answer 2

• Developed piecemeal since 1930’s
• Varying age and construction
• Typically steel-portal frame with pitched profile metal roofs
• Elevations brickwork and profile metal cladding
• Low eaves with 3.62m maximum
• Asbestos roofs to some of Omar units

Question 3

When did the leases commence?

Answer 3

Both in 2018

Question 4

What was the Credit Score of Omar?

Answer 4

96 (V Low Risk)

Question 5

What was the Credit Score of Rettig?

Answer 5

78 (V Low Risk)

Question 6

What did you learn from the comparables when establishing MR?

Answer 6

Storage Land comparables - £25,000 to £45,000 per acre

Unit comparables - £2.50 to £5.00 psf

Site Density comparables – 20% to 65%

Question 7

What was your best comparable for establishing MR?

Answer 7

Comparable 5 – Hedon Road – 9.5-acre site with 86,000 sq ft unit (20% site density)

• Series of similar type units
• Holiday Home manufacturer (Willerby)
• Similar location
• £3.37 psf rent
• Sale and leaseback however

Question 8

What were the MR calculations?

Answer 8

Valuation:
Omar - £3.25 psf (including land) x 122,000 sq ft = £400,000 p.a.

Rettig - £2.55 psf x 57,000 sq ft = £145,000 p.a.

= £545,000 p.a.

Question 9

How did you triangulate the options?

Answer 9

TRIANGULATE -
- £2.65 psf units x 122,000 sq ft = £325,000 p.a.

• 3.7-acres x £20,000 per acre = £75,000 p.a.

= £400,000 p.a.

Question 10

What did you learn from the comparables when establishing MV?

Answer 10

Yields comparables – 6% to 13.5% (provided on NIY)

Investment rates psf - £12 to £60 psf

Question 11

What was your best comparable evidence for reaching MV?

Answer 11

Comparable 5 – Hedon Road – June 2021, £33 psf and 9.4% NIY

Comparable 7 – Grimsby – July 2020, 13.55% NIY – let on 2 leases

Question 12

What voids did you assume in your MV?

Answer 12

Voids 9 months re-letting

3 months rent-free typical

Question 13

What was your calculation for the MV?

Answer 13

Valuation:

Omar –

Term: Passing Rent £360,000 p.a. x 10.5% for 0.9 years (assuming break in 12 months)

Reversion: MR £400,000 p.a. x 12% in perpetuity (deferred 2 years)

=£2,985,000

Rettig –

Term: Passing Rent £115,000 p.a. x 10.5% for 1.12 years (14 months remaining)

Reversion: MR £145,000 p.a. x 12% in perpetuity (deferred 2 years)

=£1,050,000

= £3,800,000 after purchaser’s costs of 6.52%

(£21.16 psf)

Question 14

What were the purchaser’s costs for the MV?

Answer 14

Purchaser’s Costs = SDLT £190,000
Agent 1%
Legal 0.5%
VAT on these at 20%
Total = £260,000

Question 15

What was the equivalent yield?

Answer 15

11.98%