Case Study

Question 1

What checks did you carry out at the outset of the instruction?

Answer 1

• Conflict of Interest
• Ensured I was competent

Question 2

How long had the unit been vacant for and why the previous tenant vacate?

Answer 2

• Unit had been vacant for 1 month with the previous tenant having absconded.
• The lease was forfeited on the basis of non-payment of rent.

Question 3

What are the potential void costs incurred by the landlord?

Answer 3

• Business rates.
• Service charge.
• Utilities / bills.
• Cost for securing unit
• Vacant unit inspections.

Question 4

What period of time are vacant industrial properties exempt from business rates?

Answer 4

6 month rates relief

Question 5

What is the current poundage rate for business rates?

Answer 5

Standard multiplier - 51.2 pence
Small business multiplier - 49.9 pence

Question 6

Where did you save your inspection/measurement notes and who else has access to the folder/s?

Answer 6

• Cloud based document filing system and personal files
• Line manager, Colleagues within my team, and the external property management team

Question 7

Why did you undertake a desktop survey prior to attending site?

Answer 7

• To gain an understanding of the unit and surrounding area prior to inspecting and assess what needed to be done
• Review the EPC and any relevant certification
• Establish the boundaries of the unit, establish whether there are any demised spaces or yard

Question 8

What would be the advantages of letting the unit in an unrefurbished condition?

Answer 8

• Negates any capex spend
• Subject to the market conditions - could result in a shorter downtime as works do not need to be undertaken

Question 9

What would be the disadvantages?

Answer 9

• Lower rent
• More incentives required to let
• Longer period of time in which the building undergoes refurbishment
• Issues could get worse if not maintained
• Could fall behind on stat compliance e.g EPCs

Question 10

What is the hierarchy of evidence regarding comparable valuations?

Answer 10

Set out in the RICS GN Comparable Evidence in Vals 2019
- Cat A, B and C

Or Bernstein and Reynolds handbook - OMLs, RRs, renewals, arbitration awards down to sale and leasebacks.

Question 11

Unit 1 Granby Trade Park – what adjustments if any did you make for quantum here?

Answer 11

Not a huge amount - I wouldn’t expect a major variation from 20k to 13k but approx 1-2%. Main factor of variation was the spec and fact it was a single unit with own demised yard.

Question 12

What impact if any does an EPC rating have on a property valuation?

Answer 12

On smaller multi let units - it won’t have a major impact

However there is evidence behind the fact larger, blue-chip occupiers will pay more for higher EPCs to align with their ESG strategies

Question 13

If any of your comparables were protected leases, what adjustments would you make?

Answer 13

Apply a small premium - say 3-5%

Question 14

What evidence is there that protected leases attract a high rate per sq ft?

Answer 14

Typically, protected leases come at a premium with LLs often not wanting to agree a protected lease without financial benefit

Question 15

What were the ESG works considered as part of the refurbishment?

Answer 15

• Removal of gas heaters
• Upgrading to LEDs throughout the warehouse
• Installing a new electric heating system

Question 16

How important to the landlord was achieving a B rating for the EPC?

Answer 16

• In-line with the wider portfolio strategy of improving EPCs and future proofing assets to ensure compliance with impending MEES regulations

Question 17

What additional works would have been required to achieve an A rating?

Answer 17

• Look at PV or solar panels
• EV charging points

Question 18

What analysis (if any) did you carry out to determine whether the capex works were worthwhile?

Answer 18

Worked with our analysts to undertake a Yield on Cost calculation

Yield on Cost = Net Operating Income/Total Project Cost

Question 19

What disclaimers were included on the marketing brochure?

Answer 19

E.g believed reliable but should not be relied upon without verification

Question 20

Was the UK entity a newly formed company? If so how did you carry out your checks?

Answer 20

It was

• I verified the IDs of the directors and cross referenced with companies house
• I undertook a D&B check on the european entity to understand their financial position and also reviewed their accounts

Question 21

As well as rent, which other liabilities would the tenant have to meet and how important factor would that be in determining the suitability of a tenant and their intended use?

Answer 21

• Service charge
• Business rates
• Dilapidations at lease expiry (or earlier)
• Utilities

Question 22

What were the conditions of the break notice under the new lease?

Answer 22

In-line with the code for leasing business premises 2020:

• paying all basic rent payable on any date before the break date
• giving up occupation
• leaving no subtenants or other occupiers

Question 23

Did the new lease include a SoC and why yes/no?

Answer 23

Yes - we’d undertaken an extensive refurbishment so agreed to a SoC to protect our position once it came to dilaps claims.

Question 24

What are the benefits to the landlord of a longer term-certain lease?

Answer 24

Longer security of income and longer WAULB

Question 25

What are the disadvantages to a landlord with a 6-year lease, review at Year 3 as opposed to a straight 3 year term?