Case Study Questions

Question 1

When did you receive the quote?

Answer 1

06 April 2023

Question 2

When did you receive letter of instruction?

Answer 2

12 April 2023

Question 3

When did you send the confirmation of instuction letter (COIL)?

Answer 3

14 April 2023

Question 4

What was the date of valuation?

Answer 4

21 April 2023 - same date as inspection

Question 5

When did you report to the client?

Answer 5

28 April 2023

Question 6

What was contained within the Terms of Engagement?

Answer 6

• Client: Bank of Scotland
• Purpose: Secured lending purposes
• Interest to be valued: 1 x leasehold
• Type of Asset or Liability: trading as a Pharmacy
• Basis of Value: Market Value
• Valuation Date: date of inspection
• Disclosure of Material Involvement: no involvement within 24 months, independant and no conflicts of interest
• Identity of Valuer: Jamie Savage
• Confirmation of PI Cover
• Acting in capacity of external valuers
• Currency: GBP £
• Information Relied On: Client and any third party directed by client
• Publication: Limited to addressee
• Fee: £2,000
• Complaints Handling Procedure

Question 7

What was the age and construction of property?

Answer 7

The building is of traditional stone construction under a pitched roof clad in slate dated back to probably the early 20th century.

The entrance is full height and width with roller shutter doors. The condition of the building is good with no signs of any material defects.

Question 8

What source of errors are associated with using a laser measuring device?

Answer 8

• Human error – not using the device appropriately i.e. not measuring a horizontal distance
• Systematic error – devices should be regularly checked for accuracy of calibration by checking a known distance and recording the results in a log

Question 9

What did you include / exclude from your NIA measurement?

Answer 9

I included everything to the internal face of the perimeter walls and excluded:
1. Structural columns
2. Toilets
3. Rear lobby and stairwell

Question 10

What is the use class of the Property

Answer 10

Class 1A (Formerly Class 2 prior to 31.03.2023)

Question 11

What is the rateable value?

Answer 11

£19,900

Question 12

What is the EPC?

Answer 12

G

Expires: 18.10.2028

Question 13

How did you rank the comparable evidence?

Answer 13

I had regard to recency, location, size of business and style of disposal

Question 14

Where did you get the comparable evidence from?

Answer 14

Our own internal database

Question 15

Did you inspect the roof of the property?

Answer 15

A visible inspection from the roadside which didn’t identify any material defects

Question 16

What was the fee for the job and how did you decide on the fee level?

Answer 16

£2,000.
Typical single asset pharmacy valuations started at £1,750 - but this was a slightly more complex job given the lack of trading information, so there was a small premium on top.

Question 17

What was the deal agreed?

Answer 17

£1,135,000

Question 18

Did you make any further enquiries about the deal agreed?

Answer 18

Yes, I contacted the sales agent to see how long the Property had been marketed for and if there were any special purchasers. The agent confirmed that there was lots of interest and underbidders close to the deal agreed.

Question 19

Did your due dilligence uncover anything that could have affected material value?

Answer 19

Fire safety - normal risk
ACM - register dated July 2020
Coal Mining area - Yes
Flood risk - low
Contamination probability - low
Invasive plants - none advised and none identified

Question 20

What notional rent did you build into your FMOP?

Answer 20

£26,500

Question 21

What information did you request from the Bank’s Customer?

Answer 21

We issue a wishlist containing documentation relating to the Property, Finances and Business

Property
* Floor plans
* Asbestos register
* Utility bills
* Site plan showing boundary

Financials
* P&Ls for the last three years
* Management accounts for latest 12 months
* FP34s for last 12 months
* Staffing details (anonymised)
* Details of any other income

Business
* Opening times
* Any care home contracts
* Other services offered (advanced & enhanced)
* Deliveries?
* Nearest competitors

Question 22

What are ‘Professional Services’?

Answer 22

Anything that isn’t considered to be traditional retail pharmacy such as:
* home delivery
* providing methadone
* administering flu vaccinations
* conducting consultation appointments

Question 23

Can you explain to me what PharmData is?

Answer 23

Third party website that uses NHS data to show prescription levels and trends - usually 6 months behind real time

Question 24

Can you briefly outline the structure of the Red Book?

Answer 24

• Part 1 Introduction
• Part 2 Glossary
• Part 3 Professional Standards
  PS 1 - Compliance
  PS 2 - Ethics, competency, objectivity and disclosures
• Part 4 Valuation technical and performance standards
  VPS 1 - Terms of engagement
  VPS 2 - Inspections, investigations and records
  VPS 3 - Valuation reports
  VPS 4 - Bases of value, assumptions and special assumptions
  VPS 5 - Valuation approaches and methods
• Part 5 Valuation applications
  VGPA 1 - 10 (Valuation Guidance Practice Applications)
• Part 6 International Valuation Standards

Question 25

What was your FMT?

Answer 25

£1,100,000

Question 26

What was your FMOP?

Answer 26

£140,000

Question 27

What was your Market Value

Answer 27

£1,180,000

Question 28

What was your Multiple of Turnover

Answer 28

x1.05

Question 29

Which comparable did you place most reliance on and why?

Answer 29

Why number 1 comparable was the Glasgow based owner operated pharmacy that transacted in October 2022.
* It was within 6 months
* It was geographically similar (although city rather than town)
* It was trading at a similar level in terms of prescrptions (7,850 items per month)

Question 30

What was the most recent prescription level of the business?

Answer 30

roughly 8,100 items

Question 31

What was the most recent wage level of the business

Answer 31

roughly 23%

Question 32

In your assessment, you have only included £40,000 of professional services, whereas historical figures are higher than this - can you explain your reasoning?

Answer 32

We were made aware that one of contracts that provided professional services income was not transferring with the sale.

Question 33

How big was the building?

Answer 33

1,757 sq ft
1,397 sq ft (ITZA)

Question 34

What additional advice did you give in regard to LSV?

Answer 34

• Alternative use is retail
• Useful economic life in excess of 25 years
• Local market: the context of the disposal project will impact value in the short term, but demand should improve over the long term when assets return to established nature
• LAP: advised lease subject to 15 year extension
• Marketability
• Buyer profile
• Security of the loan

Question 35

Were you made aware of the terms of the loan?

Answer 35

£794,500 over a 15 year term, rate reviewed after five years

Question 36

What does does the acronym PW stand for?

Answer 36

Place of Worship

Question 37

What does the acronym TCB stand for?

Answer 37

Telephone Call Box

Question 38

What does the acronym LB stand for?

Answer 38

Letter Box

Question 39

What bases of value did Bank of Scotland ask you to provide?

Answer 39

• MV1 - fully equipped operational entity
• MV2 - 180 day marketing period
• MV3 - closed, stripped and with licence lost
• MV4 - vacant possession (which we have assumed to be the same as MV3)
• Market Rent

Question 40

Did you inspect the roof?

Answer 40

Visual inspection only for any obvious visible defects. This is not a building survey.

Question 41

What changes did you make to the wages assessment?

Answer 41

• Didn’t get full granularity of current wages assessment
• Locum costs high as no resident pharmacist in site
• Placed resident pharmacy at cheaper hourly rate
• 80 dispensing hours
• 40 hours cashier
• 20 hours driver
• 7 hours locum