Case study Flashcards
What is a SLA?
Contract between service provider and customer that defines the scope of work to be provided.
What was the SLA process for this instruction?
Once instructed, the client sends the instruction letter agreed per SLA, my firm sign and return.
What is included in TOB?
Date, property to be valued, identification of the client, identification of the valuer, identification of any other intended users, liability caps, valuation currency, valuation date, basis of value, nature and extent of investigations, assumptions / special assumptions, format of the report, reference to CHO, COI checks, purpose of valuation, ESG.
What were the main things you were looking for on your inspection?
Inspecting the CP - No of pitches, construction of pitches, general condition of park, spacing, access to property, parking, property complying with PP, enviornmental or contamination risks.
Buildings - construction, specification and condition of buildings internally and externally.
Other considerations - general condition, invasive species, ROW, fuel tanks, security, development potential.
Was PEE required?
No site was developed and trading to the public. No areas of the under construction. PPE bag was taken in case their was a need for PPE.
What did you when looking for Japanese Knotweed?
I asked the borrower whether there is any Japanese Knotweed during inspection I looked at the boundary of the railway line. The inspection was in April, therefore not in bloom or visible. I do know it looks like shovel shaped green leaves and is likely to be near a railway line as it was planted intentionally during the Victorian Times to stabilise new embankments.
How would you assess the value of the property if there was Japanese Knotweed?
Japanese Knotweed is not within my area of professional competence. I would inform the client of the suspected JK and ask what further enquiries need to be undertaken to understand its extent.
Key Points:
- Not my area of professional competence, ask client for what further enquries are needed.
What do the symbols mean on the Map?
FB = Footbridge
Short green dots = footpath
Orange dots = cycle path
Green squares = recreational route
What is the scale of the land registry map?
It is 1:1250
Why did you value the property using the profits method?
The property has been developed to be used as a caravan park and therefore the properties value is intrinscially linked to its trading potential of the business.
Is VPGA 4 mandatory?
No - but would need strong rationale not to value the property using it.
Why did the percentage of sales vary so much during the accounting year?
There was a gain/loss on tangilble assets, circa £5,000,000 in one of the accounting years. An adjustment was made in my ANOP.
Can you trust what the borrower says?
Within the TOB I state the extent of the DD and information to be relied upon. I also use sector knowledge of the industry to inform whether the information provided is true. - Reserve the right to amend Valuation if further information becomes available.
How did COVID impact trade?
Positive - stay cation boom, increased disposable income and good weather.
Was the lack of information a limitation of your report?
I spoke to my client regarding this and what this in my principle valuation considerations. Although enugh data was gather for it not be a limiting factor of the report.
Can you explain what FMT is?
Fair Maintainable Trade - Achievable trade when a business is in the hands of a reasonably efficent operator on the assumption the property is in a good condition and maintained.
Can you explain what FMOP is?
Fair Maintainable Operating Profit - Level of profitability stated EBITDA that REO would be able to derive from FMT
What adjustments did you make?
Abnormal, non recurring, finance and depreciation costs. This included one off donation, directors contribution, motor vehicles and interest and deprication costs.
Is the FMOP in line with your expectations of the business?
Yes, would expect a PO owners parks to have an FMOP in the region of 30% - 40%.
How did you control the data base on the comps sheet?
The data is stored on my teams secure network drive which only members of my team have access to data. Data is held within individually named folders and jobs.
Why did you include a comparable in Essex?
Infrequent nature of transaction within the sector, but the Micro market between this area of Essex and Towyn are similar in respect of the target customer base. I deemed it an appropriate comparable due to the micro markets between the two, but also the standard of development, number of pitches, date of transaction. Additionally the transactional markets were inactive in 2023 / 2024 due to wider economic factors.
How far back would you consider for comps?
I would consider upto 12 - 15 months, unless there is a particarly strong reason to include a comparbale. I.e. adjoining property.
What is a special purchaser?
A buyer whom the asset has a special value because of the advantage arising from its ownershop that isn’t available to other buyers in the market. I.e. owning the adjoining land.
Did you do a COI check and why?
COI ensures I am able to provide an objective and unbiased valuation which is impartial and independent.
What is a COI?
Where a member or firm’s impartiality and independence is threatended due to the interest of another party.
What you mean by good security for a loan?
If the client were to take a charge of the property they would be able to recover the debt if the borrower failed to meet the payments. - i.e. selling the asset.
What was the outcome of the advice regarding the Site Licence?
The borrower provided the our client with a copy with an in date Site Licence after the report was submitted. It is a legal requirement for operating a caravan park, however the process for updating the site licence is simple, it requires the occupier to request an updated site licence from the Local Authority. Needs to be done every 5 years.
Was the spacin requirements an assumption or special assumption?
It was an assumption as the special dispensation was factual and did not need to be checked as part of the valuation process.
CPD you attended to aid knowledge
Industry events such as BH&HPA meetings & webinars, university valuation models and Savills training.
What impact has the caravan action group had on the sales of caravan?
It is too early to draw conclusions, but it has been negative press for the industry. Albeit there are wider economic factors which would impacts caravan sales more including interest rates and people’s level of disposable income.
What type of yield did you use?
Gross - no deductions for purchasers costs.
Why does a profits method of valuation not take off purchasers costs?
The profit method focuses on the business’ ability to generate income, rather than the specific costs incurred by a purchaser.
What would be purchasers costs?
Stamp duty - 5%
Agent fees - 1%
Legal fees - 0.5%
What are three categories of comparable’s
A: Direct Comps - Transactional evidence
B: General Market Data - Guidance rather than direct indications, I.e. historic evidence
C: Other sources - other background data a
What types of valuation approaches?
Market approach
Income approach
Cost approach
What RICS document relates to Japanese Knotweed?
RICS Professional Standard: Japanese Knotweed and Residential Property - 2022.
