Due Diligence

Question 1

EPC Ratings?

Answer 1

B - D

Mostly D

Question 2

You conducted the statutory due diligence, are there any other things you considered?

Answer 2

Contamination - Requested a desktop Siteguard Report from Groundsure which concluded that the property represented acceptable banking security from an environmental risk perspective. I stated in the report that my inspection was limited and I could not give assurances.

Question 3

Did you provide your client with advice as to covenant strength?

Answer 3

Reported that whilst I am not qualified to advise on the financial position of the tenants, the investment market would likely perceive them to present a very low risk of default

Question 4

How would you check covenant status without Creditsafe?

Answer 4

Net profit = 3 x annual rent for 3 consecutive years

OR

Assets = 5 x annual rent

Question 5

What would you have done if the EPCs were non-compliant?

Answer 5

Spoken to ESG valuation specialists at my firm who would have provided me with costings to upgrade to legal requirement of ‘E’. Included in Cap Ex.

Question 6

How did you know it was a low flood risk area?

Answer 6

The Environment Agency’s Flood Risk Map

Question 7

What does ‘low risk’ of flooding mean?

Answer 7

0.1% chance per annum of flooding from surface water and rivers and the sea

Question 8

What are the other levels of flood risk?

Answer 8

Very low (<0.1%), low, medium, high

Question 9

How do you calculate the business rates liability?

Answer 9

Multiplied the rateable value of each unit by the Uniform Business Rates Standard Multiplier of 0.512

Question 10

What is the rateable value?

Answer 10

Determined by the VOA (Valuation Office Agency) = how much it would cost to rent the property per annum on a hypothetical lease

Question 11

What would the impact on value have been if the property had been listed or situated in a conservation area?

Answer 11

I would have needed to consider whether there was any capex needing to be factored in due to requirements to keep things in a certain condition

Question 12

What was the planning use class that the property had consent for?

Answer 12

B8

Question 13

What are the different use classes?

Answer 13

E = shops, offices
B = industrial
C = residential
Sui generis = no class specified

Question 14

How would outstanding planning applications impact the value of the property?

Answer 14

Depends - if there were consented redevelopment of the property then I might have needed to undertake a residual appraisal to establish whether this would have been the highest and best use

Question 15

What does freehold mean?

Answer 15

The freeholder of a property owns it outright, including the land its built on

Question 16

What does leasehold mean? How is it different to freehold?

Answer 16

Leasehold = right to occupy the land and any property situated on it for an agreed period of time and subject to the freeholder’s requirements

Question 17

What is the Report on Title?

Answer 17

Report prepared by a solicitor that summarises all important points to know about the legal title of the property

Question 18

How did you know that the Property was held Freehold?

Answer 18

Did not receive the Certifcate of Title - however were informed by Client that it was held Freehold

Question 19

What onerous restrictions might there have been?

Answer 19

Leasehold, Right of way, Substations

Question 20

What is the Land Registry?

Answer 20

Government body which registers the ownership of land and property in England and Wales