Case Study Questions Flashcards by Chris Rutter

When did you receive the quote?

06 April 2023

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When did you receive letter of instruction?

12 April 2023

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When did you send the confirmation of instuction letter (COIL)?

14 April 2023

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What was the date of valuation?

21 April 2023 - same date as inspection

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When did you report to the client?

28 April 2023

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What was contained within the Terms of Engagement?

Client: Bank of Scotland
Purpose: Secured lending purposes
Interest to be valued: 1 x leasehold
Type of Asset or Liability: trading as a Pharmacy
Basis of Value: Market Value
Valuation Date: date of inspection
Disclosure of Material Involvement: no involvement within 24 months, independant and no conflicts of interest
Identity of Valuer: Jamie Savage
Confirmation of PI Cover
Acting in capacity of external valuers
Currency: GBP £
Information Relied On: Client and any third party directed by client
Publication: Limited to addressee
Fee: £2,000
Complaints Handling Procedure

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What was the age and construction of property?

The building is of traditional stone construction under a pitched roof clad in slate dated back to probably the early 20th century.

The entrance is full height and width with roller shutter doors. The condition of the building is good with no signs of any material defects.

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What source of errors are associated with using a laser measuring device?

Human error – not using the device appropriately i.e. not measuring a horizontal distance
Systematic error – devices should be regularly checked for accuracy of calibration by checking a known distance and recording the results in a log

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What did you include / exclude from your NIA measurement?

I included everything to the internal face of the perimeter walls and excluded:
1. Structural columns
2. Toilets
3. Rear lobby and stairwell

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What is the use class of the Property

Class 1A (Formerly Class 2 prior to 31.03.2023)

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What is the rateable value?

£19,900

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What is the EPC?

Expires: 18.10.2028

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How did you rank the comparable evidence?

I had regard to recency, location, size of business and style of disposal

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Where did you get the comparable evidence from?

Our own internal database

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Did you inspect the roof of the property?

A visible inspection from the roadside which didn’t identify any material defects

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What was the fee for the job and how did you decide on the fee level?

£2,000.
Typical single asset pharmacy valuations started at £1,750 - but this was a slightly more complex job given the lack of trading information, so there was a small premium on top.

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What was the deal agreed?

£1,135,000

Did you make any further enquiries about the deal agreed?

Yes, I contacted the sales agent to see how long the Property had been marketed for and if there were any special purchasers. The agent confirmed that there was lots of interest and underbidders close to the deal agreed.

Did your due dilligence uncover anything that could have affected material value?

Fire safety - normal risk
ACM - register dated July 2020
Coal Mining area - Yes
Flood risk - low
Contamination probability - low
Invasive plants - none advised and none identified

What notional rent did you build into your FMOP?

£26,500

What information did you request from the Bank’s Customer?

We issue a wishlist containing documentation relating to the Property, Finances and Business

Property
* Floor plans
* Asbestos register
* Utility bills
* Site plan showing boundary

Financials
* P&Ls for the last three years
* Management accounts for latest 12 months
* FP34s for last 12 months
* Staffing details (anonymised)
* Details of any other income

Business
* Opening times
* Any care home contracts
* Other services offered (advanced & enhanced)
* Deliveries?
* Nearest competitors

What are ‘Professional Services’?

Anything that isn’t considered to be traditional retail pharmacy such as:
* home delivery
* providing methadone
* administering flu vaccinations
* conducting consultation appointments

Can you explain to me what PharmData is?

Third party website that uses NHS data to show prescription levels and trends - usually 6 months behind real time

Can you briefly outline the structure of the Red Book?

Part 1 Introduction
Part 2 Glossary
Part 3 Professional Standards
PS 1 - Compliance
PS 2 - Ethics, competency, objectivity and disclosures
Part 4 Valuation technical and performance standards
VPS 1 - Terms of engagement
VPS 2 - Inspections, investigations and records
VPS 3 - Valuation reports
VPS 4 - Bases of value, assumptions and special assumptions
VPS 5 - Valuation approaches and methods
Part 5 Valuation applications
VGPA 1 - 10 (Valuation Guidance Practice Applications)
Part 6 International Valuation Standards

What was your FMT?

£1,100,000

What was your FMOP?

£140,000

What was your Market Value

£1,180,000

What was your Multiple of Turnover

x1.05

Which comparable did you place most reliance on and why?

Why number 1 comparable was the Glasgow based owner operated pharmacy that transacted in October 2022. * It was within 6 months * It was geographically similar (although city rather than town) * It was trading at a similar level in terms of prescrptions (7,850 items per month)

What was the most recent prescription level of the business?

roughly 8,100 items

What was the most recent wage level of the business

roughly 23%

In your assessment, you have only included £40,000 of professional services, whereas historical figures are higher than this - can you explain your reasoning?

We were made aware that one of contracts that provided professional services income was not transferring with the sale.

How big was the building?

1,757 sq ft 1,397 sq ft (ITZA)

What additional advice did you give in regard to LSV?

* Alternative use is retail * Useful economic life in excess of 25 years * Local market: the context of the disposal project will impact value in the short term, but demand should improve over the long term when assets return to established nature * LAP: advised lease subject to 15 year extension * Marketability * Buyer profile * Security of the loan

Were you made aware of the terms of the loan?

£794,500 over a 15 year term, rate reviewed after five years

What does does the acronym PW stand for?

Place of Worship

What does the acronym TCB stand for?

Telephone Call Box

What does the acronym LB stand for?

Letter Box

What bases of value did Bank of Scotland ask you to provide?

* MV1 - fully equipped operational entity * MV2 - 180 day marketing period * MV3 - closed, stripped and with licence lost * MV4 - vacant possession (which we have assumed to be the same as MV3) * Market Rent

Did you inspect the roof?

Visual inspection only for any obvious visible defects. This is not a building survey.

What changes did you make to the wages assessment?

* Didn't get full granularity of current wages assessment * Locum costs high as no resident pharmacist in site * Placed resident pharmacy at cheaper hourly rate * 80 dispensing hours * 40 hours cashier * 20 hours driver * 7 hours locum