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RICS APC Valuation Pathway > Case Study > Flashcards

Case Study Flashcards

1
Q

What year was your GOAD plan from?

A

2012

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2
Q

The GOAD plan is from 10 years ago, who is in the neighbouring / surrounding units now?

A

Newells Travel Agens and Smile Dental Care with Miller Countryide opposite

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3
Q

What is a GOAD plan?

A

Details individual street maps with their occupiers and uses.

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4
Q

To the rear of the property there appears to be an extension, what is its construction?

A

The rear of the property was also of masonry construction.

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5
Q

How did you arrive at your best comparable for market rent?

A

I had regard to the hierarchy of evidence and then considered similarities in location, situation, accommodation and size.

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6
Q

You say your bases of valuation for this project was ‘Market Value’, can you name the other bases of value?

A

Market Value, Market Rent, Fair Value, Investment Value, Equitable Value and Liquidation.

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7
Q

Which of the bases of value are not used within the UK?

A

Liquidation and Equitable.

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8
Q

With regards to conflict of interest, what are the 3 types of conflict?

A

Party, Own Interest and Confidential Information.

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9
Q

Which professional statement provides mandatory guidance on Conflict of Interest?

A

Professional Statement on Conflicts of Interest, 2017. Effective 1 January 2018.

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10
Q

What is informed consent?

A

Where the valuer has been transparent, informative and the 3rd party understands what they are doing then informed consent can be given in writing.

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11
Q

When must a valuer not proceed even if informed consent has been given?

A

If it is not in the interest of those who are affected.

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12
Q

Give an example of when a conflict has arisen?

A

I had previously undertaken work for a site in Holbeton on behalf of a different client, which I disclosed to the existing client. After being instructed to proceed, i ensured that the terms of engagement detailed the nature of previous involvement.

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13
Q

What do you understand by the word Stakeholder?

A

Someone who has an interest in the property.

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14
Q

What does your inspection checklist comprise?

A

Date of inspection, weather, who inspected the property, time of arrival and departure, prompts for for external and internal detail, locality and surrounding area, measurement basis, environmental considerations, statutory considerations and an area for floor plan if applicable.

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15
Q

How did you verify the property boundary?

A

When undertaking my due diligence prior to inspecting the property i had obtained a copy of the title plan from land registry and then cross referenced this with the demise within the lease plan.

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16
Q

Define ‘Prime Pitch’

A

A way of assessing a properties situation, location and condition

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17
Q

Describe the construction of the property to me?

A

The original property was of masonry construction under a pitched slate roof with the front being exposed granite, the rear of the property comprised various extensions which were also masonry construction with a hipped roof and flat roof in various spaces. Elevations were pebbledash rendered and uPVC clad. Elevation openings were timber framed with single glazing.

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18
Q

What was the NIA of the property?

A

3,378 SQFT.

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19
Q

Summarise the lease?

A 
Term: 15 years from 2003
Initial Rent £33,500 PA
passing rent: £35,000 PA 
FRI
SOT: Within LTA 1954, currently holding over under s24-28. 
RR: every 5 years.
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20
Q

What does Experian show you?

A

Credit rating of registered companies, showing risk from 0-100 (100 being extremely low risk)

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21
Q

Name some of the minimum reporting requirements for Redbook valuation?

A
  • Identification and status of valuer
  • Client
  • Purpose
  • Basis of value
  • Valuation date
  • Nature and source of information
  • Methodology
  • Limitations and liability
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22
Q

What are the three valuation approaches?

A
  1. Market
  2. Income
  3. Cost
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23
Q

What are the 5 methods of valuation?

A
  1. Market
  2. Residual
  3. Investment
  4. Profits
  5. DRC
24
Q

What does ITZA stand for?

A

In terms of zone A

25
Q

Name the key documents for measuring practice?

A

RICS Property Measurement, 2nd Edition, 2018

Code of measuring practice, 6th Edition, 2015

26
Q

What is excluded within NIA measurements?

A
  • W/C’s
  • Shared facilities
  • Areas under 1.5m
  • Stairwells
  • Columns
27
Q

What rate did you apply to the Zone C area?

A

A/4

28
Q

What do you mean by reasonable area?

A

An area to be of a size where i believed it impacted upon the value of the remaining retail area.

29
Q

Why did you apply 10% discount?

A

I believe this was proportionate to the impact of accessibility to the area beyond.

30
Q

What do you mean by standard glazed shop frontage?

A

Where a significant amount of the shop frontage is a largely glazed.

31
Q

Define masking?

A

Masking is where part of a retail unit or area is hidden.

32
Q

What rate did you apply the ground floor storage?

A

A/8

33
Q

What rate did you apply to the first floor storage?

A

A/10

34
Q

What was the ITZA area of the property?

A

1,304 SQFT ITZA

35
Q

What property did you have the most regard to when establishing your opinion of market rent?

A

28 Meneage Street in November 2021. £16,000 per annum (£18.37 ITZA)
5 year FRI lease, rebased rent.
871 SQFT ITZA, c. 450 SQFT ITZA smaller than subject property.

36
Q

Define Market Rent

A

The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion.

37
Q

What was your opinion of Market Rent?

A

£22,500 per annum, £17.24 PSFT ITZA.

38
Q

What was the passing rent of the property?

A

£35,000 per annum, £16.82 PSFT ITZA.

39
Q

Which valuation approach and method did you adopt?

A

Income approach, investment method

40
Q

Which valuation did you undertake and why?

A

The property was over rented so i undertook a hardcore and topslice valuation.

41
Q

Why does an over rented property provide more risk than one let at market rent level?

A

It is not certain that the property will continue to receive the same level of rent in perpetuity.

42
Q

What sections of the LTA 1954 act relates to security of tenure?

A

S.24-28

43
Q

What was the main risk associated with the property?

A

Lack of security relating to the 3 month notice period if the tenant were to serve notice. The tenant had been subject to nationwide store closures which also provided further risk.

44
Q

What were your two key investment risk factors?

A
  1. Lack of security

2. Significantly overrented

45
Q

What was your best comparable for your investment yield?

A

23-27 Trelowarren Street, Camborne in September 2021.
NIY 7.15%
12 months unexpired.
However had to have regard to the redevelopment potential of the upper floors.

46
Q

Which was your second best comparable for your investment yield?

A

6-7 Market Jew Street, Penzance in May 2021.
9.16% NIY
Similar pitch on high street and occupied by national occupier.
However benefitted from 3 years and 9 months unexpired.

47
Q

Talk me through your valuation..

A

Initial Hardcore: £22,500 @ 9.5% for 3M.
Topslice: £12,500 @ 11% for 3M.
Hardcore: £22,500 @ 9.5% in perp deferred by 9M.

48
Q

What was your opinion of MV?

A

£225,000

49
Q

What was the reversionary yield?

A

10%

50
Q

What purchasers costs did you deduct?

A

Agency fees, legal fees and SDLT

51
Q

What are the current SDLT rates?

A

Up to £150,000 - 0%
£150,001 - £250,000 - 2%
£250,000 + - 5%

52
Q

What is the definition for Market Value?

A

The estimated amount for which an asset or liability should. exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing where the parties had each acted knowledgeably, prudently and without compulsion.

53
Q

What is VPS 1?

A

Terms of engagement (scope of work)

54
Q

What is VPS 2?

A

Inspections, investigations and records

55
Q

What is VPS 5?

A

Valuation approaches and methods

56
Q

What is your understanding of Zoning?

A

Zoning is a valuation technique, not a measurement method.

It established the rent in terms of Zone A, with a halving back principle applied from the front of the shop in 6.1m depth zones.

RICS APC Valuation Pathway (21 decks)

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