Case Study Flashcards
What is a portal frame? How is it constructed?
Portal frame is a construction technique where vertical supports are connected to horizontal beams or trusses with fixed joints with designed-in moment-resisting capacity. The result is wide spans and open floors.
What guidance did you follow to produce your terms of engagement?
VPS1 (Global Standards Red Book)
a) Identification and status of the valuer
b) Client
c) Intended users
d) Asset(s) or liability(ies) being valued
e) Currency
f) Purpose of the valuation
g) Basis(es) of value adopted
h) Valuation date
i) Extent of valuation
j) Nature and source(s) of information upon which the valuer will rely
k) All assumptions and special assumptions
l) Format of the report
m) Restrictions on use, distribution and publication of the report
n) Confirmation that the valuation in accordance with the IVS
o) Fee basis
p) Complaints handling procedure to be made available
q) Statement that the valuation may be subject to compliance by the RICS
r) Limitations on liability agreed.
What did you check during your conflict of interest check?
Do I, or does my firm have a relationship with the borrower or have we in the last 24 months (VPGA 2). Am I able to act objectively and impartially.
Had a conflict arisen, how would you have proceeded?
consider whether me acting might:
– reasonably be perceived to imply a lack of integrity
– cause embarrassment to my profession or
– mean that I was unable to advise and represent each client objectively and independently.
Seek written informed consent from all parties if I feel it is in my clients best interest to act
What allowance did you make for the subject lease being inside the act and why?
I made no allowance for the subject lease being inside the act as this had no impact on the value for the purpose of the valuation being carried out
How did you calculate the headline rent?
The rent that would be payable after any rent-free period, concessionary rent period has expired
What did you exclude from your GIA measurement?
Perimeter wall thickness and external projections. External open-sided balconies, covered ways and fire escapes.
What adjustment did you make for specification?
Site coverage
Eaves height
Roller shutter mechanism
Insulated roof
Newly fitted out office accommodation
Reception area in offices
Compare these factors to comparable uplift/reduction in demand
You refer to “standard” purchasers costs, what were these and why?
SDLT 4.73%, Agents fees 1.00%, Legal fees 0.5%
Why did the client want a vacant possession value?
This gives the client an understanding of value if the property were to become vacant
How did you record the special assumption?
Written within the terms of engagement and also explicitly in the valuation
Given the high level of interest in industrial property, why did you consider 7% as an acceptable yield for your special assumption valuation?
This added 100 bases points to the yield to reflect additional risk, which was apparent because this is an unknown and so a risk, despite being a good market.
What impact did the 5 year rent review have on your valuation calculations?
No impact as I assessed the investment as rack rented
What are the pros and cons of valuation software like Argus?
- The risk that the valuer don’t understand the way of the valuation is undertaken,
- Anyone should know how to value without the software and understand it
- Errors in the software making the values incorrect.
- Lack of internet / access to the software limits the ability of undertaking the valuation.
What void period did you assume in your vacant possession valuation and why?
Void of 6 months and rent free of 3. This was broadly in line with what was being seen in the market, albeit perhaps slightly on the cautious side. However was confident from market research that the void would be between 6-9 months
How did you act ethically?
I ensured that conflict of interest checks were carried out and the results documented
What were your key achievements?
- I succeeded in carrying out the valuation report in line with the agreed terms and within the agreed time frame.
- I gained valuable experience which can be applied in my role
How do you measure offices
NIA (CoMP) generally
however for my case study GIA was used as it was an industrial use
What would you include using IPMS 3
Useable floor area (this was previously NIA) + limited floor area (additional areas that need measuring, yet do not make up any of the useable floor area i.e balconies, columns) = Office total (total of limited use area plus useable floor area).
Did the type of work effect the property’s condition and repair?
The tenant was not yet in occupation of the unit, it was undergoing a refurbishment of the office space at the time. However the tenant had an FRI lease so would be responsible for the maintenance of the property.
Is 15 years a normal term length for this type of property?
The comparable evidence which I assessed ranged from 5 - 15 years
How often would expect this type of valuation to take place on this property?/When would the next loan security valuation likely take place?
- A loan security valuation is carried out to establish whether the value of the loan requested from the lender will be secure.
- This was carried out to assist the lender in their decision to lend. Further revaluations may take place for the lender to understand the value of the asset in changing economic environments to understand the risk
Is this a usual incentive for warehouses/this property type?
- One year of half rent was given, which is effectively 6 months RF but the LL has the benefit of receiving money right away.
- This incentive related to a fit out that the tenant was carrying out and funding, rather than a market led incentive
Why did you make the assumption that the tenant would break the lease?
- Because the income after a break is not secure, so for the purposes of valuation it is assumed that the tenant will break the lease.
- This reduces the risk to the client.
- However, as the secure income was 10 years I valued into perpetuity so it made no difference to the valuation.
- Had the lease been less than 5 years I would have added a void period
Were there any rent reviews and how were they reflected?
There was a rent review at every 5th anniversary to MR, upwards only. These were not reflected in the valuation as the property was already rack rented
What construction type and materials were used in the property specification?
Industrial
- steel portal frame construction with two canopies
- pitched roof
- painted brick walls and painted concrete floors
- Minimum eaves height to each bay approximately 6.6m
- Hot air blower heaters
Offices
- two storey brickwork office block
- Gas central heating via wall mounted radiators; Air conditioning units in places
- plastered painted walls
- microfibre suspended ceilings
- mixture of concrete and timber floors with carpeted covers
- single glazed steel framed windows with some having additional second glazing fixed
