Case Study Q&A

Question 1

Can you tell me the definition of market value

Answer 1

The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and seller

Question 2

Can you explain what a special assumption is?

Answer 2

is made by the valuer where an assumption either assumes facts that differ from those existing at the valuation date

Question 3

Explain what effect special assumptions had on your valuation?

Answer 3

I assumed the property was rented from day 1 on two separate leases which was not the case at the valuation date

Question 4

Tell me what market rent is?

Answer 4

The estimated amount for which an interest in real property should be leased on the valuation date between a lessor and a willling lessee

Question 5

Can you explain what an FRI lease is?

Answer 5

full repairing and insuring lease is where the tenant takes on all the costs for repairs and insurance for the property being leased from the landlord but also liable for the structure and common areas via a service charge and insurance

Question 6

What other types of leases can you get?

Answer 6

Internal repairing and insuring lease is where you only need to pay for the maintenance and repair costs of the internal parts of the property,

Question 7

Can you tell me some headings you would find within a term of engagement?

Answer 7

“1) Identification and status of the valuer
2) Identification of the client
3)Identification of any other intended users
4) Identification of any other asset or liabilities being valued
5) Valuation currency
6) purpose of the valuation
7)Basis of value adopted
8) Valuation date
9)Nature and extent of work
10) Nature and source of information upon which the valuer will rely
11)All assumptions and special assumptions made
12) Format of the report
13) Restrictions of use, distribution and publication of the report
14)Confirmation that the valuation will be undertaken in accordance with IVS
15) the basis on which the fee will be calculated
16)Where the firm is registered for regulation by RICS, reference to the firms complaint handling procedure
17) a statement that compliance with these standards may be subject to montoring under RICS conduct and disciplinary regulations
18) A statement setting out any limitations on liability that have been agreed.”

Question 8

Talk me through how you carried out a conflict-of-interest check?

Answer 8

I check the address, client and opposition against our databases as well as making all staff member aware of the potential job

Question 9

What types of conflict are there?

Answer 9

1- Party Conflict, 2- Own Interest Conflict, 3- Confidential Information Conflict

Question 10

Tell me what VPS 1 is?

Answer 10

RICS Global Stations VPS 1 covers Terms of Engagement

Question 11

Talk me through how you formed your opinion of value?

Answer 11

“VP- Unity House (same Estate but in 2018) £191psf and Unit 2 A2 Windsor place £249psf (smaller than subject so higher £psf) £215
SA-Boscobel House 5.9% smaller than subject and located towards town centre meaning lower yield
Forest House 6.25% some vacant suites, pre covid subject property would achieve a higher yield
EG House- 5 year term same as the subject but slightly inferior office location. slightly lower yield “

Question 12

How did you determine the building age?

Answer 12

Looked at the construction and it was typical for 1980s construction

Question 13

What typical features would you find in a 1980s office building?

Answer 13

Cavity brick construction, pitched tiled roof, timber framed window. Also checked planning and asked the client about the age

Question 14

How did you determine cavity brick construction?

Answer 14

I could tell it was two separate brick walls running parallel to each other

Question 15

What defects are typically found with timber framed windows?

Answer 15

Cracking, Rotting & Warping wood

Question 16

What was the valuation date?

Answer 16

23rd March 2022

Question 17

Tell what property class E is?

Answer 17

Commercial, business and service uses

Question 18

What is an EPC?

Answer 18

Energy Performance Certificate

Question 19

What is MEES?

Answer 19

Minimum Energy Efficiency standards

Question 20

You note that some ceiling tiles on the GF had some discolouration due to water Ingress. Talk me through how you came to this conclusion?

Answer 20

There was yellow splotches and stains on one of the celing tiles and a common cause of this is water damage

Question 21

What Is IPMS3?

Answer 21

IPMS 3 is lightly like NIA and it measures occupation meaning it includes columns, inclusions- component areas Internal dominant face > 50% surface area

Question 22

What Is excluded from NIA?

Answer 22

WCs, plant and lift rooms, cleaners cupboard, service risers and meter cupboards, continuous heating units, areas with head height > 1.5m, areas of unusable space if opposite face <0.25m

Question 23

Tell me the difference between IPMS3 and NIA.

Answer 23

IPMS-office columns included, limited use areas with restricted ceiling height, internal measurements taken from internal dominant face

Question 24

Explain a main point within the RICS GN Comparable evidence In Real Estate

Answer 24

Aims to ensure global application of comparable evdience based on sound, robust principles. It also aims to address the challenes of availability and transparency

Question 25

Talk me through how you applied a hierarchy when analysing your comparable evidence?

Answer 25

Category A- Direct transactional evidence, Category B- general market data providing guidance, Category C- other sources, other property types and locations

Question 26

When comparing your evidence, you state the subject property had a better specification compared to Unit 4 Charlwood Court. You stated you applied an upward adjustment. Talk me through how you applied this adjustment?

Answer 26

“Unit 4 Charlwood £15.25 similar in terms of construction and specification but the subject slightly better
Ground Floor Amberley Court at £19 higher specification than the subject property”

Question 27

What do you mean by Grade A specification?

Answer 27

Air con, floor boxes, suspended ceilings, 2 lifts, 10 m2 pp, BREEAM excellent, new refurb, high status

Question 28

Tell me what upward rent reviews are?

Answer 28

It means the rent can only go up even if the market rent goes down

Question 29

What is a Net initial yield?

Answer 29

Passing rent divided by the gross property value adding purchasers costs

Question 30

How did you determine your net initial yield?

Answer 30

“SA-Boscobel House 5.9% smaller than subject and located towards town centre meaning lower yield
Forest House 6.25% some vacant suites, pre covid subject property would achieve a higher yield
EG House- 5 year term same as the subject but slightly inferior office location. slightly lower yield
Unpredictable market, there was a lack of transactional evidence so I relied on market knowledge, company and external. Most occupiers want to be located near the high street so this increases the yield “

Question 31

How did you determine there was a decline within office investments? Where did this information come from?

Answer 31

This was found when searching for comparable evidence and a lack of transactional evidence due to the covid 19 pandemic

Question 32

You talk about a risk being associated with the subject property. Talk me through how this associated risk was reflected within your valuation?

Answer 32

Risk in relation to uncertainty which increases the yield

Question 33

Tell what the usual deductions are made to reflect purchaser’s costs?

Answer 33

Agency fees, legal fees and stamp duty

Question 34

Explain what factors which have an effect on value

Answer 34

Location, size, specifcation, lease terms and planning

Question 35

Explain how COVID 19 had an impact on your valuation

Answer 35

Investors were waiting for more clarity and many tenants were working from home causing an unpredictable market

Question 36

Explain what is meant by material valuation uncertainty

Answer 36

highlights a degree of caution when relying on valuation reports. Especially relevant in reports since the Covid outbreak of March 2020

Question 37

What is VPS3?

Answer 37

Reporting- minimum headings i.e the advice to the client is the front page

Question 38

What is VPGA 10?

Answer 38

VPGA 10- valuation for commercial secured lending purposes

Question 39

Talk me through the investment method of valuation?

Answer 39

The investment method is used where there is an income stream to value i.e. the property is tenanted. Term and reversion for under rented Hardcore top and slice over rented

Question 40

What is the comparable method of valuation?

Answer 40

Comparing similar transactions to give an indication of value. Using the comparable matrix to find out the market rent and market value

Question 41

Explain how you communicated effectively?

Answer 41

Written communciation with emails and reportd and oral communication talking to the client whilst at and setting up the inspection.

Question 42

Tell me how you acted ethically?

Answer 42

I acted ethically when looking at conflicts of interest and taking instructions and quoting on the valuation

Question 43

What would you do differently next time?

Answer 43

I would leave more time to write the report as the turn around was quite quick

Question 44

What were your key achievements?

Answer 44

“Inspection and measurement IPMS and NIA- necessary to work out the Market rent and market value
Data management competency- I researched comparable evidence
Valuation competency- Advised on Market Rent and Market Value. Furthered my understanding on valuations for internal accounts purposes”