L2 Valuation Flashcards
Why was the accounts valuation a desktop?
My team had valued the portfolio last year with inspections
- The client wanted to save on costs
- Agreed and signed off in the Terms of Engagement
What are the limitations of a Desktop valuation?
I cannot be as certain to the condition of the stock at valuation date
What was the basis of value? (DT Accounts val)
Market Value
Discount to Vacant Possession
What is a discount to Vacant possession?
It is a discount to the market value of the property to allow for bulk buying of the portfolio
How did you establish the Market Values & Market Rent?
Using the comparable method
- RICS Guidance note Comparable evidence in (REV) 2019
- Backing up Values with local agent calls
- Reference to previous valuation and Indexing
What is the hierarchy of evidence?
It establishes the relative weight you should apply to each comparable piece of evidence so that you can establish an accurate market value
Can you detail the Hierarchy of evidence please?
Category A (Direct Comparables)
- Identical property (full data available)
- Similar properties (Full data available)
- Similar properties (Some data available)
- Asking Prices
Category B (General Market Data)
- Historic data
- Information from published sources
- Indices (House Price Index)
Category C (Other sources)
- Transactions of other real estate types
- Interest rates
What did your draft report contain? (DT Accounts Val)
- Reliance
- Purpose of Valuation
- Basis of Valuation
- Date
- The properties
- Fire safety
- Valuation Process
- Opinion of value
Was this a Red Book Report? (DT Accounts Val)
Yes it was in line with RICS Valuation Global Standards and the RICS Valuation Global Standards UK National Supplement
How did you establish an appropriate discount to VP?
1) Split the portfolio in to its individual clusters
2) Established that larger cluster would have a larger discount
3) established through comparable analysis appropriate yield rates for the stock
4) Assessed the Yields the properties would receive after applying the discount
What was the make up of the portfolio? (DT Accounts Val)
100 properties based in the South West
Formed either individual units or small cluster with the largest cluster being 24 units
All based in Towns or small villages, no completely rural units
What was your opinion of Value? (DT Accounts Val)
Market Value - £19,720,000
Market Value Vacant Possession - £22,301,000
What is the difference between a Development Appraisal and a Valuation?
An Appraisal is trying to investigate the viability of a proposed project
- Given client figures (Construction costs)
- Viability with certain assumptions does the project actually work for the client asking price
A Valuation would just give you a value of the site with the proposed use as a development
- uses market inputs
How did you establish the GDV?
1) Received and reviewed the property information from the client
2) Established comparable evidence of new build developments with similar property types within a 1.5 mile radius
3) Called local agents and site sales team to get an understanding of the market and sales rates
4) Establish from both comparables and agent calls the likely base values for each property type
5) Establish what premiums will be added to each property to determine end value
6) Add the end values of each property to establish the GDV
How did you determine the different Premiums for the GDV?
By looking at the comparable evidence collected and through calls with agents I was able to determine appropriate premiums
What were the different premiums?
Sq Ft increase - £
Aspect
Parking
Outside space
Floor level
Why have you used BCIS?
What are the Risk with BCIS?
Why have you used a contingency fee of 15%?
The site when I inspected was completely overgrown, I could not determine what was on the ground and if any foundations from previous structures still existed at the site
It was also in a city location which was profusely industrial and as such might have contaminates in the ground
Due to both this and the fact construction cots are ever increasing I felt a contingency fee of 15% was appropriate to account for the unknown
How did you calculate the CIL rate?
How did you conduct sensitivity analysis?
I ran a model to see what would happen if construction overran
- This would affect the borrowing rate of the client and cost a significant amount more
- I could then establish the viability through certain time period extensions
What was the Local CIL Rate for the area?
£10 per sq meter
What was the Mayoral CIL?
£20 per sq meter
What was the make up of the development? (Dagenham Docks)
28 one and two bedroom flats
Total size of 1793 sq meters
You state that the land was over grown and contributed to your 15% contingency, are any costs considered else where in your valuation?
I had to establish build costs on a per sq m basis
Did you spot any knot weed?
I did not spot any knott weed however my investigation was not through
What is the difference between EUV-SH & MV-T?
EUV-SH is restricted to be let at social rent into perpetuity
MV-T is restricted by the Registered Providers obligations only
