Case study

Question 1

What was the building constructed of?

Answer 1

Detached building of traditional construction beneath a pitched slate roof with plastic frame fenestration and plastic rainwater goods.

Solid brick wall as could see headers

Question 2

Where there any special assumptions?

Answer 2

MV2 - Business Closed, no trading records available

MV3 - Business Closed, no trading record available and restricted marketing

The above factors can effect MV from 10-50% based on comparable evidence.

For this value it was 25% and 50%. so £3m and £2m respectively.

Question 3

Why was the clubhouse etc not accounted for within the profits method as an end allowance?

Answer 3

It is included within the £45k rental figure so would be double counting to include as an end allowance.

Question 4

Why is the clubhouse the same YP as the park?

Answer 4

The clubhouse represent a small portion of income and its trade is intrinsically linked to the park and therefore is not standalone.

Question 5

Why would you not quantify the change in units rather than take a %,

Answer 5

Based on the information provided I was unable to do that and neither would a hypothetical purchaser.

It is also dependant on how a hypothetical purchaser would run the site what units they would put on, what the spec would be and what density.

A topographical survey would be required to fully understand the the extend.

Question 6

Why did you quantify it at 5%? why not 10 or 12?

Answer 6

The other comps had issues but not all the issues that were shown on this site hence an adjustment was required on top of the pitch rate.

The 5% represents the costs in reconfiguring the site and the loss of vans and this is something a prudent purchaser would reflect in their bid.

I had to address this using an % adjustment as I could not quantify this using an exact figure due to how that would be based on the hypothetical purchaser and how they would reconfigure the site.

Similarly, I would have needed to commission a typographical survey in order to understand the extent of the issue and understand the extent of the density is to see how many vans could fit on site.

Having spoken to a senior colleague and given the tone of the evidence and the severity of the issue they agreed with me that 5% seemed a reasonable adjustment.

Question 7

Why did you adjust the YP down to 9.0? and what were these adjustments based off?

Answer 7

I adjusted down to reflect the occupancy issue, the limited trading evidence and the outmoded layout.

These adjustments were based off comparable evidence and valuer judgement based on experience in the market.

I also discussed it with a senior colleague who agreed with my judgement.

Question 8

What stipulated the density? Why could you not have more vans?

Answer 8

The site licence granted by Environmental Health stipulates that vans have to be 5m away from each other and 3m away from the site boundary due to fire risks and spread of fire.

Question 9

Why are the comps from such a wide geographical spread?

Answer 9

-Firstly it is a national market in which purchasers will operate across the UK.

-Due to the size of the market there is a smaller pool of comparable evidence.

-Due to the key valuation factors I have had to draw evidence from appropriately similar comparables.

-The site fees paid by owners reflect how the customers view the site and therefore the quality. This therefore provides a the key comparable evidence across the UK.

Question 10

Waht value did you put on the land to the north?

Answer 10

None as it is an amenity space which the value is accounted for within the pitch fee paid by owners.

Question 11

What was the loan conditions?

Answer 11

The term was 15 years and the loan was £1.5m.

Question 12

What was the LTV Ratio?

Answer 12

40%

The bank can require different rates which is sometimes shown on the instruction letter.

Usually no more than 50%.

Question 13

Why are the 10ft caravans outmoded?

Answer 13

No longer the consumer demand and manufacturers have stopped making them due to this.

Question 14

Why did you apply a rate of £230k for the clubhouse and other buildings?

Answer 14

Although it is not shown in the evidence there were some facilities buildings in the comparables that were accounted for separately.

Based on the comparable evidence I applied a rate of £200k for the clubhouse, £30k for the wardens accommodation
This equated to £230k.

I cross checked this using the investment method. The rental income equated to £20k for the clubhouse, and £8k for the wardens accommodation.

I capitalised this on a YP of 9.0 which equated to £252k.

I adopted a figure of £230k in the valuation.

Question 15

You mentioned parking alongside pitches in your presentation, where was this factored in?

Answer 15

Within the quality heading in my comparable comparison table.

Question 16

Was the clubhouse let at MR?

Answer 16

As usual we did not have access to the tenants accounts. Within trading businesses the rent was decided on an affordability basis rather than a market rent figure. Based on my experience £20k seemed reasonable and proportionate.

Question 17

Why was the wardens home £30k?

Answer 17

This was based on a blend of pitch value and the value of the unit above is. Split between £20k for the pitch and £10k for the unit.

Question 18

Where the clubhouse comps, let or owner occupied?

Answer 18

It as a mixture but due to the size as facility the comp evidence suggest this value.

Question 19

Was the clubhouse let on a lease?

Answer 19

No it was let on a tenancy at will which gave the landlord more flexibility as tenant not provided security of tenure.

Question 20

What is a tenancy at will? and what are the drawbacks.

Answer 20

They are usually used as a temporary arrangement when a tenant is holding over as a stop-gap between leases.

The drawbacks are that it does not give security over long term income and if it is not appropriately managed and extends over a long period of time it can become a protected tenancy and the tenant gain security of tenure.

Question 21

How was the tenancy of will tackled in the val.

Answer 21

The rent received from the clubhouse only equated to a small amount of the total valuation so would not have a impact on the marketability or suitability for loan security so the lack of a secure income was not of affect.

The comparable approach also covered this off the property became owner occupied.

Question 22

How did you keep the client updated?

Answer 22

I kept the client update throughout via phone and email correspondence.

I would discuss with them the key issues as they became apparent to which they understood as they are a relationship manager for number of other park owners and ware aware of some of the key issues.

Question 23

What other analysis could you have undertook?

Answer 23

A Swot analysis which was included within the main body of the report and executive summary.

Question 24

What is your service level agreement with Natwest?

Answer 24

Detailed reporting terms, fees and payment, Liability limit, terms and definitions

Question 25

What was the liability limit?

Answer 25

£5m. As the value was less than £5m.

Question 26

How are conflicts logged?

Answer 26

Salesforce , and check with relevant teams whether they have had an relationship with the borrower or property.

Question 27

Did the borrower know they were breaching the licence.

Answer 27

They informed me they were unaware.

As the property had a 12 month holiday licence it is less obvious in regards to breaches as people can be on site all year round.

Question 28

How did you agree the fee quote?

Answer 28

This was made on a market led basis based on the number of pitches /size of the property.

Question 29

What are the limitations of the comparable and profits method?

Answer 29

The comparable method you are relying on the data and the your adjustments to the comparable evidence in order to compare it with the subject site.

With the profits method you are working based of the information provided by a borrower or client which may be inaccurate or misleading. Similarly you have to rely on a larger amount of valuer judgement when making relevant adjustments to replicate a REO.

Question 30

What format where the accounts in?

Answer 30

Within the mgmt accounts there was not a breakdown of turnover therefore I had to derive a number of figures from additional mgmt information provided.

Such as :
Site Fees
rates recharge

Others I had to comprise my own opinion based on market norms such as caravan sales and purchases.

Question 31

Who gives greater weight to each purchasing approach?

Answer 31

Corporates tend to use profits and private individuals or more traditional purchasers use comparable.

Question 32

What would have changed if you had spoken to the vendor on site in regards to the occupancy issues?

Answer 32

This would allow me to understand the issue immediate and what plans they had in place to remediate it.

Question 33

How did you work out the site fees?

What was the %?

Answer 33

Based on mgmt info which detailed that the total pitch fee income was consistent across the 3 years except for small increases to account for pitch fee review. £300k was in line with prior years.

42%

Question 34

How did you work out the rates recharge?

What was the %?

Answer 34

Based on mgmt info which showed that each unit paid £390 a year and across the 205 units - VAT = around £65k.

9%

Question 35

How did you work out the caravan sales?

What was the %?

Answer 35

In the absence of any info I assumed an average of 15 sales a year at £20k to get to £300k. £20k is a low figure but is reflective of the quality of the park. This represented a sales churn of 7.5% which is less than the market norms of 10-20% but was reflective of the residential occupancy and the fact that these van trade less frequently.

42%

Question 36

How did you work out the rent?

Answer 36

Based on the current passing rent of the Clubhouse (£20k), and the wardens lodge of (£8k)

Question 37

How did you work out the caravan purchases?

What was the %?

Answer 37

Assumed a 40% gross margin so 60% cost on van sales based on market norms.

60% of sales

Question 38

How did you work out the wages?

What was the %?

Answer 38

Based upon the current costs. This was for a groundsmen.

As a lifestyle operator the borrower also worked on the site themselves at no cost which would be the case for a hypothetical purchaser.

3.5%

Question 39

How did you work out the repairs and renewals

What was the %?

Answer 39

Based on market norms of 3-4%.

3.5%

Question 40

How did you work out the general overheads?

What was the %?

Answer 40

I adopted a figure of £50k. This was an allowance for:
-utilities for the common parts
–business rates
-insurance
-admin costs.

7%

Question 41

Do you think 4 comps are enough?

Answer 41

There were more comps that i considered but these were the most pertinent in the valuation.

Given the size of the market and the material valuation factors, the four comps were selected given the similarity in key issues within the valuation.

Question 42

Comparable 4, why was the YP 10.0 when it is in an inferior quality and position yet the subject property was 9.0?

Also it was a lesser rather per pitch.

Answer 42

This was because the property was under trading so the accounts were not reflective of a REO which skews the multiplier and my FMT reflects an REO.

Question 43

What was the EPC ratings?

Answer 43

Clubhouse: C