Case Study Flashcards
(73 cards)
Describe the construction of the building.
94 Mostyn Street is a three-storey Grade II listed building, constructed in the 1860s. It has rendered brick walls, timber floors, and a slate mansard roof. The ground floor has been modernised for retail use, while the upper floors have traditional timber sash windows and have deteriorated significantly due to prolonged vacancy.
Describe the location of the property within Llandudno.
The property is in the prime retail area of Llandudno, surrounded by a mix of national and independent retailers. Llandudno itself is a popular seaside resort with strong tourist footfall, particularly in summer. Its well-connected transport links, including a railway station and proximity to the A55, make it a desirable retail location.
How did you agree your instructions with your client?
My instructions were agreed upon with my managing director, who sought to acquire the property to prevent further deterioration, protect the value of adjacent assets, and generate long-term rental income. The instruction was agreed in a minute’s meeting and followed up by email.
Did you complete any conflicts of interest checks?
Yes, in line with RICS professional standards, I conducted a conflict-of-interest check. As I was acting on behalf of my employer, Mostyn Estates Ltd, there was no direct conflict. However, I documented the process to ensure transparency.
Why was an asbestos survey necessary for this building?
The building was constructed in the 1860s, and an initial asbestos management survey had identified asbestos-containing materials (ACMs). Given the age and lack of recent maintenance, I suspected further ACMs might be present. A secondary asbestos survey was necessary to fully assess the risks before purchase.
How did you approach the inspection given that the property had been vacant for 5 years?
I conducted desktop research on previous reports, leases, and planning permissions before the physical inspection. I also ensured I wore appropriate PPE, including steel toe cap boots, high-vis jacket, hard hat, gloves, and a torch. I also spoke to the vendor to see if there were any hazards I needed to be aware of.
Are the upper floors self-contained or ancillary to the retail?
The upper floors are self-contained and could potentially be converted into residential use, but currently, they are ancillary to the retail unit, as no planning permission exists for conversion.
Why was this an important purchase for your client?
My client owned the adjacent property, which was negatively impacted by the vacant unit. Acquiring 94 Mostyn Street allowed them to refurbish it, secure a tenant, and improve the overall high street environment, enhancing the wider portfolio.
Based on your analysis what Zone A rate did you adopt?
I adopted a Zone A rate of £440.70 per sqm, based on market comparables and adjustments for condition and location.
What rate did you assign to the upper floors?
The upper floors were valued using a £29.38 per sqm rate, reflecting their ancillary use and lack of residential planning permission.
Why did you adopt a yield of 12.5%?
A 12.5% yield was selected due to the property’s long-term vacancy and associated risk, the estimated refurbishment costs of over £100,000, the leasehold nature of the asset, which may limit investor interest, and comparables for retail properties in similar conditions in Llandudno.
Why did you allow an additional £20k special purchaser value?
As my client owned the adjacent property, acquiring 94 Mostyn Street provided strategic benefits. This allowed for a justified uplift in value, as they were a special purchaser with unique incentives to buy.
Why did asbestos become an issue in the negotiations?
The initial asbestos survey identified ACMs, but a second survey uncovered additional materials in voids and service ducts. This increased removal costs, which had to be factored into negotiations.
Did the second asbestos survey identify additional asbestos containing materials?
Yes, it confirmed additional ACMs that had not been previously documented, increasing the remediation costs.
Why was it important that the vendor removed the asbestos?
If my client had inherited the liability, they would have faced additional costs of £25,000–£30,000. To protect my client, I negotiated that the vendor complete the removal before completion.
What information did you include in the Heads of Terms?
The Heads of Terms included: Agreed purchase price (£220,000), vendor-funded asbestos removal, terms of transaction - simultaneous exchange and completion strategy, confirmation of leasehold structure and responsibilities, and condition - subject to contract and subject to removal of asbestos materials.
How did you report to the client during the acquisition process?
I provided regular updates through written reports, valuation summaries, and verbal briefings to ensure informed decision-making.
Why was it necessary to analyse the head lease when your client was the freeholder?
Although my client was the freeholder, the acquisition was for the leasehold interest (999 years). It was crucial to check for any restrictive covenants or lease conditions that could impact investment potential.
Why did the courtyard become an issue during due diligence?
The courtyard had rights of access for adjoining properties. However, as my client was already the head lessee of these properties, they retained control, mitigating the risk.
How was the courtyard issue resolved?
Legal advice confirmed that my client’s existing leasehold position ensured control over access rights, so no further action was required.
Why did you recommend simultaneous exchange and completion?
This reduced risk by ensuring the vendor completed asbestos removal before transfer. It also allowed for immediate commencement of refurbishment.
Do you consider that you paid a fair price for the property?
Yes, the final price of £220,000 was in line with my valuation of £210,000, adjusted for strategic purchaser value. This reflected the property’s true market worth, considering its condition and investment potential.
What are the estates investment objectives?
Mostyn Estates Ltd seeks to protect and enhance its portfolio by investing in Llandudno’s high street. Their strategy includes preventing asset deterioration, increasing rental income, and ensuring long-term investment value.
How did you know the property was listed?
I confirmed its Grade II listing through a desktop study using the local authority’s planning database and Historic Wales listings.
