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APC > Case Study Questions > Flashcards

Case Study Questions Flashcards

1
Q

How was the valuation in line with the RICS Red Book?

A
  • VPS1 - Terms of Engagement
  • VPS2 - Inspections
  • VPS3 - Valuation Reports
  • VPS4 - Valuation Bases
  • Loan Security Valuation VPGA2
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2
Q

How did you provide the valuation subject to vacant possession?

A

Valued as one site. Adopted a rate of £17.50 psf to the entire area.

£3.2M

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3
Q

How did you prepare for the inspection?

A
  • Received instruction and Terms of Engagement
  • Arranged with the bank’s customer
  • Undertook a risk inspection
  • Enquired for a lease plan
  • Assessed PPE requirements
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4
Q

How did the location of the property affect the value?

A
  • Consider access routes
  • The town - Hull (secondary city)
  • The location - good road links (motorway access)
    Popular industrial estate
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5
Q

How did you notice the asbestos roofs?

A
  • Dark corrugated roof
  • Aged
  • Banks customer informed us that it had been identified as Asbestos
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6
Q

How did you report the asbestos roofs within your valuation?

A
  • Asbestos roofs to the Omar units
  • Informed by the property manager that asbestos was present and had a management survey (required 6 monthly)
  • Duty of the tenant if a repairing lease
  • Did not have site of the asbestos register but understood asbestos to be present
  • We clarify that our valuation inspection does not constitute a building survey and therefore we do not comment in detail about the asbestos containing materials
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7
Q

How did you account for the value of the office unit in your valuation?

A
  • I included the office property within the GIA area as it was ancillary to the industrial space and not out of the ordinary at (8-9%)
  • In terms of value, I included it within the same MR psf figure to reflect this.
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8
Q

What did the 1954 Act Protection mean for the tenants?

A

The 1954 Landlord and Tenant being contained within the lease gives Security of Tenure and the right to a new lease for the tenant. The terms of this are to be agreed.

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9
Q

Were your land comparables fully surfaced?

A

The majority of the comparables were fully surfaced and therefore the value returned for the subject would be below this evidence.

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10
Q

Who did you discuss the valuations with?

A
  • I spoke with my supervisor, other valuation colleagues, as well as agency colleagues.
  • I spoke with other agents and professionals within the market to undertake market research.
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11
Q

Why did you adopt a rate of £3.25 psf to the Omar units and £2.55 psf to the Rettig units?

A
  • The additional to the Omar units was reflective of mostly the yard area
  • The Omar unit was also of a more open plan space with better access from Hedon Road also
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12
Q

Where did you get evidence for £20,000 per acre for the land in option B?

A

Gathered rental comparable evidence for industrial land in the area. This is Appended within the comparables.

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13
Q

Why did you adopt the same yields for both leases?

A
  • Both properties of a similar covenant strength
  • Both similar natures of companies
  • Both had a similar amount of time remaining on the lease
  • Both similarly under-rented slightly
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14
Q

What was the rent review clause in the Omar lease?

A

Review to Market Rent

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15
Q

Why did you adopt a 9 month re-letting period?

A

Despite being a demanded market, two units to let with a shared site. Additional time to reflect the difficulty of marketing the unit on this basis.

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16
Q

Why did you adjust the yield by 1.5% on the reversion?

A

A suitable adjustment to reflect:
- The unknown of a new tenant
- Adjustment to paying a slightly higher rent (MR)

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17
Q

Why did you deduct purchaser’s costs and how did you do it?

A
  • Good practice to deduct purchaser’s costs
  • SDLT
  • 1% agency
  • 0.5% legal
    + VAT 20%
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18
Q

What does the Equivalent Yield represent?

A
  • Weighted yield from the Term and the Reversion
19
Q

How did the property fall against your comparable evidence in the end?

A

Market Rent:
- Towards the lower end of the comparable evidence - relfecting specification, size

Market Value:
- At the higher end of the yield evidence
- Reflective of the occupier, the remaining term, the rent, the location, specification

20
Q

What were the clients requirements and how did you meet them?

A
  • The bank required a valuation for secured lending purposes and detailed there requirements within the instruction and Terms of Engagement.
  • They required advise on the value of the property
  • Made secured lending comments:
    *Age of the property
    *Economic life
    *Estimated marketing period
21
Q

What competencies have you demonstrated and how?

A

Ethics, Health and Safety, Client Care, Conflict Avoidance, Data Management, Inspection, Measurement, Valuation, Loan Security Valuation

22
Q

How did you abide by the RICS Rules of Conduct?

A

Competency - undertook competency checks prior to accepting the instruction

Good-quality and Diligent Service - Gaining copies of the lease documentation

Respect - Liaising with the client and the bank’s customer to gain full details of the property and arrange a successful inspection

23
Q

What valuations have you done since that time that supports your valuation?

A

Valuation of industrial estate in Hull. 13 units of 1,250 sq ft. Very close location to the subject property.

  • Evidence shows demand for industrial space in this location
  • Investment evidence in the same region
  • Have to account for the significant difference in size between the properties
24
Q

How does the shared site work? Are there any agreements?

A
  • Shared right of way within the leases
25
Q

What else do institutional investors target in an industrial property?

A
  • 8m eaves
  • 5-10% offices
  • c.40% coverage
  • Profile metal cladding and blockwork to 2m
26
Q

What were the EPCs on the properties?

A
  • All rated C having been assessed a few years ago
  • Advised that new EPCs would be required when re-let or refurbished
27
Q

What is the likelihood of the units being let in the same configuration if brought to the market?

A
  • Come available at slightly different times
  • Could suit separation although difficulties with circulation space
  • Spoke with agents and others within the firm
  • Gained comparable evidence that proved similar units on the market
  • Willbery Homes nearby comparable
28
Q

What does the 1954 Act Protection mean?

A
  • Both leases have Security of Tenure
  • Potential for new leases at Market Rent
  • Inserted void periods for vacating at end of lease
  • Could potentially separate units a bit
29
Q

What is the circulation space of the site like?

A
  • Shared access
  • Rettig self-contained yard
  • Omar self-contained yard
  • Limited circulation space to the centre of the site
  • Reflected in comparable evidence
30
Q

What did you include in your confirmation of instruction?

A
  • Returned confirmation of the instruction
  • Updated bank manager as to arrangements of site inspection
  • Terms of Engagement signed and returned
31
Q

What were the EPCs of the properties?

A
  • Two main EPCs for the properties reflecting the largest units.
  • Rettig C
  • Omar D
  • Others D rated
  • Recommended that whilst these meet current requirements, there would be some reassessments required for a new letting
  • A few years old so try to get new assessments for better reflection of current spec
32
Q

What was the rateable value of the property?

A
  • Total circa £300,000
33
Q

What advice did you give to the client about the security of the investment?

A
  • Covenant strengths very good
  • WAULT - not long if assume break
  • Potential to re-let, 9 month void factored in
  • Chance to increase both rents to MR in near future
34
Q

What is the Acid Test for checking if a tenant can pay rent?

A
  • Compares short-term assets with short-term liabilities
  • Determines the level of turnover required to pay the rent
  • Ratio of 1:3
35
Q

What was the turnover of the tenants?

A
  • Omar = £70M
  • Rettig = £80M
36
Q

Why did you apply the same yields to both of the leases on the Term?

A
  • Omar =
    Worse condition
    Longer lease
  • Rettig =
    Land-locked
  • Both under-rented
37
Q

You have identified a comparable at West Carr Business Park which is very similar. Why is the rate so different from £5.01 psf?

A
  • Far smaller unit
  • Quantum reflected for the difference in size of the property
  • Similar at Amsterdam Road
38
Q

Your comparable at Seafood Village Grimsby has a Long Leasehold with ground rent of £75,000 p.a. How do you reflect this when assessing the comparable?

A
  • Deducting the ground rent from the income would create a profit rent
  • This is then reflected in the yield which will be altered
39
Q

What do you know about demand from this type of tenant in this location?

A
  • Large quantity of caravan manufacturers in the location
  • Willerby Homes
  • Europa
  • Delta
40
Q

Are Rettig and Omar connected?

A
  • Not connected
  • Checked on Companies House
41
Q

Why did you adopt a void period of 9 months to the Rettig reversion?

A
  • Both 9 months
  • Landlocked… however:
  • Better quality unit than the other (more attractive)
  • Less maintenance works to be done
42
Q

How would you account for dilapidation’s in your valuation?

A
  • LL has potential liability over dilapidation’s
  • Lease stated to be returned to condition of occupation
  • Some roof works to undertake
  • Valuation reflects this in the yield
  • Assume return to condition
  • Building Surveyor for further investigation into dilapidation’s
43
Q

What about business rates liabilities for the Landlord?

A
  • Void period 9 months
  • Business rates relief for 6-months
  • Potential liability there
  • Factored into the yield
44
Q

How does the shared access route work? Who is responsible for it?

A
  • The access is not within the demise of either tenant and is a communal area
  • Therefore the Landlord charges a service charge to maintain the shared yard
  • The rent I have capitalised is net of costs
  • Yield reflected the condition of the property and site
  • Can’t capitalise or profit from a service charge

APC (32 decks)

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