Level 2 - Llandow

Question 1

Tell me about the property?

Answer 1

3 units totalling 100,000 sq ft
1 hanger unit - 1940s with barrel configuration, steel lined concrete, recently reclad
2 attached units - 2010s, steel portal frame, modern design
Eaves between 7 - 9M
Large site (16% coverage) with poor surface in part

Question 2

How did you determine covenant strength?

Answer 2

Assess financial creditworthiness for the bank
Commission Dun & Bradstreet report

Question 3

Why does covenant strength assist with loan security decisions?

Answer 3

Shows how reliable a borrower is
Assessment of risk for a lender

Question 4

What did the D&B report include?

Answer 4

Snapshot of company account and creditworthiness
Operational information
Company details
Payment history
D&B Score

Question 5

What is a D&B score?

Answer 5

Two digit score
Strength - - based on tangible net worth
Risk - derived from D&B failure score

Question 6

What is a good D&B score

Answer 6

5A 1

Question 7

What was the D&B sore?

Answer 7

N 4
Negative Net worth
Significant Risk

Question 8

How did you assess the covenant to be for loan security purposes?

Answer 8

I deemed this to be risky, and therefore reflected this in my yield profile which affected MV

Question 9

What was your MV?

Answer 9

£3,000,000

Question 10

How did you form your MV?

Answer 10

Assumed a MR based on comparable evidence
Yield of 10% based on comparbales and specification
Capitalised rent at 10%, assuming longer letting and void periods on the hanger unit
Void costsW

Question 11

What were the letting assumptions?

Answer 11

Hanger - 18 months letting period, 6 months rent free
Modern - 6 months letting period, 3 months rent free

Question 12

What was MR?

Answer 12

£2.95 overall
£2.50 Hanger
£4.50 Modern

Question 13

What adjustments did you make to form 10% yield?

Answer 13

Based on Comparables
hanger component
poor tenant covenant
non-modern specification of hanger
Location being sub-prime
Scrub land in part

Question 14

Tell me about your valuation in Llandow

Answer 14

Point 1 – I valued a old hanger unit and two modern units on a large site in south wales
Point 2 – I obtained a D&B report to understand the tenant covenant for MV, which proved to be a poor covenant
Point 3 – I reflected this greater risk in covenant in my yield section, demonstrating the greater premium required