Case Study Questions

Question 1

Please can you tell me about Golders Green and the sort of market it is?

Answer 1

Golders Green is an affluent suburban location which is located north of Central London

It has strong transport links with Golders Green Tube Station being served by the northern line.

The location itself is a secondary retail pitch

East of the property there is a good retail offering

Located close to the property are several national occupiers including KFC, Cafe Nero, Natwest, Llyods Bank, Sainsburys

Junction 1 of M1 is just over 1 mile west

Question 2

Please can you tell me about the specification of the building?

Answer 2

The Property forms part of a period building parade which was constructed in the early 1911-1912 and is of traditional construction with sold wall construction

Solid wall construction - Solid brickwork with headers normally at least one brick thick this is different to cavity walls where no headers are used

The Property itself comprises a metal framed glass shop front including partial rendering to the return frontage onto Golders Green Way.

Additionally, the Property sits under a flat roof

Question 3

What are some common building defects in period retail buildings?

Answer 3

Dry rot and wet rot

Tile slippage on the roof

Damp penetration at roof and ground floor level

Water ingress

Structural movement / settlement

Question 4

What are some common defects with flat roofs?

Answer 4

Excess pooling of water which would result in leaks

Tears and holes in the material

Generally has a shorter life span of around 15 years in comparison to a pitched roof which is much longer at 30 years

Question 5

Can you tell me about Regent Street Disease

Answer 5

Corrosion related damage which occurs in some buildings constructed in the first half of the 20th Century

Construction uses a steel frame embedded within the facing stone

Problems arise when the steel corrodes and causes a secondary effect and cracks the stone work

Question 6

How could the flat roof impact trading?

Answer 6

If this needs replacing it could disrupt the trading of the store

Additionally, if it has caused internal damage for example leaks this could further disrupt the store

Question 7

Common defects with rendering?

Answer 7

Cracking walls

Damp and mould

Hollow or loose render

Question 8

What did your planning inquiries identify?

Answer 8

Grade II Listed Property

Located within Golders Green Conservation Area

Question 9

Chimney Stacks

Answer 9

Triple shafted chimney stack is present

Question 10

Common defects with chimney stacks

Answer 10

Deterioration due to the age and exposure to weather

Cracking

Flacking / Crumbling of the brickwork

Water penetration

Question 11

What is the equivalent yield?

Answer 11

The internal rate of return of the cash flow for the Property assuming a rise to ERV at the next review

It will lie between the initial yield and the reversionary yield

Question 12

How did you apply an equivalent yield to the comparables?

Answer 12

The comparables were ran through Argus Enterprise

I discussed the inputs with the relevant agents to gauge their opinion as to the Market Rent

Question 13

Why did you utilise the equivalent yield?

Answer 13

It is a common practice to apply the equivalent yield to the comparable evidence

Due to the difficulties in the retail market at the time it was a useful to identify the equivalent yield to understand the changes in the market rents at the time

Question 14

Did you consider Vacant Possession?

Answer 14

Within the instruction letter the Client did not request the vacant possession value

However due to the nature of the covenant and property type i considered vacant possession sales too

Based upon my opinion of Market Value with Vacant Possession £640,000 equating to £285 per sq ft an equivalent yield of 7.50% and a reversionary yield of 8.36%

12 Mont void period and 6 months rent free

Question 15

What alternative method could be used to value this property?

Answer 15

Discounted Cash Flow

Question 16

Please can you outline the DCF method?

Question 17

Did you consider a reinstatement figure?

Answer 17

Due to the nature of the Property the reinstatement value was done on the basis of the entire mixed use building and was estimated to be £1,730,000 the value was derived from BCIS

The reinstatement figure was not on a formal reinstatement cost assessment and is purely for guidance only and should not be relied upon

If there are any discrepancies I outlined that a formal reinstatement cost assessment should be commissioned

Question 18

The basis of the reinstatement figure?

Answer 18

For fire insurance purposes

Including cost of clearance and professional fees but excluding VAT except on fees

Loss of rent

Cost of alternative accommodation for the reinstatement period

Question 19

Consideration of reinstatement?

Answer 19

It is an end terrace property

Consideration for party walls and neighboring units

Question 20

There are several national occupiers on the pitch at what level would you consider that they would transact at?

Answer 20

I would expect a stronger covenant to transact at a much lower yield

This is evident in the sale of 58-60 Golders Green Road - this transacted after the valuation date but i am aware it achieved Net Initial Yield of 5.11% and included 3 residential flats

Question 21

What was the total Market Value for the property inclusive of the residential element?

Answer 21

£3,260,000

5.02% NIY, 4.93% EY, 4.94% RY

Question 22

What is the black dashed line on the OS Map?

Answer 22

This are denoted paths which have been identified by Ordnance Survey but they are not necessarily rights of way as their status is not defined or known

Question 23

What is the red cross on the OS Map?

Answer 23

This is the Spot Height which records the elevation at that point which is 0.67m

Question 24

What is GP & TCB on the OS map

Answer 24

Guide Post

Telephone Call Box

Question 25

What is the purple dashed line?

Answer 25

Boundary line

Question 26

PO and PW on a map?

Answer 26

Post office

Place of worship

Question 27

What occurred with regards to the Liquidation?

Answer 27

The original tenant Wallers Clothing Stores Limited appointed a liquidator for a voluntary wounding up

Question 28

What is voluntary winding up?

Answer 28

This is where you choose to liquidate your company

The company stops doing business and employing people

Question 29

This is where you choose to liquidate your company

Answer 29

Both private limited companies

Question 30

What is liquidation?

Answer 30

Where assets are sold to repay debt

Question 31

What occurred in the assignment?

Answer 31

Wallers Clothing Stores Limited assigned the lease to MP Menswear Limited in November 2020

MP Menswear Limited were a new start up ran by the same principle

There was no guarantee

There was a rent deposit of 3 months which equated to £15,625

Question 32

Did you run checks on the tenant?

Answer 32

I undertook a Dun&Bradstreet

I was also aware that the tenant had gone through a liquidation process the previous year

Question 33

How do you think that asset would transact in the current market?

Answer 33

So i think in comparison to when the valuation took place last year the effect of Covid-19 seems to have hopefully disappeared

Now there is the factors of inflationary pressures and weakening economic sentiment start to exert an influence on occupier confidence

Based upon this secondary location may face a reduction in demand and a downward pressure on rental levels

However, Golders Green retail pitch is still a well populated pitch with its primary offering being to the residents in the surrounding area rather than

Question 34

What did you include in the terms of engagement?

Question 35

What section of the Red Book deals with Terms of Engagement?

Question 36

What does Loan Sec vals come under in the Red Book?

Question 37

What are the additional requirements for Loan Security vals?

Question 38

Talk me through how you inspected the property?

Question 39

How did you measure the property?

Question 40

What do you include and exclude in NIA ?

Question 41

How would NIA v IPMS differ?

Question 42

What are the three catergories of comparable evidence under the RICS guidance?

Answer 42

Catergory A - Direct Comparables

Catergory B - General Market Data

Catergory C - Other sources

Question 43

What purchasers costs were deducted?

Answer 43

SDLT - Standard rates

Agents fees - 1%

Legal fees - 0.5%