Level 2 - Office Valuation Trade St Cardiff

Question 1

Tell me about the Property?

Answer 1

Multi let office in Cardiff
Just outside core market
Turned to offices in 2016
Office on ground and 3 upper floors
Each floor let to different tenant
4,000 sq ft
steel frame with brick elevations and glazed frontage
flat roof
Modern building with LED, double glazing communal areas and suspended ceilings, perimeter trunking

Question 2

What was the purpose of valuation?

Answer 2

Loan security purposes

Question 3

Why was VP a special assumption?

Answer 3

Lender required to know value if all tenants vacated
Special assumption because it is not true as fully let

Question 4

How did you form your VP Value?

Answer 4

Investment Method - Hardcore approach
Hypothetical income based on MR (comparables) that investor would deem if fully let
Assumed 5 year term, 3 months RF and 6 months void
Void costs
Capitalised income at 9.75% (investment comps) and additional risk of vacant
£750,000

Question 4

How did MV differ from VP?

Answer 4

MV = £825,000
VP = £750,000
Difference was the absence of income steam

Question 5

Why did you choose those yields?

Answer 5

Based on comparable evidence
Adjustments for location, specification, tenant covenants, WAULT
Economic climate
Assumptions on re-letting and costs

Question 5

How did you confirm no conflicts?

Answer 5

C&W internal conflict checking database
Personal conflicts

Question 5

What would you have done if there was a conflcit?

Answer 5

Consider nature of conflict
check with colleagues involvement with property / client
If not interference then proceed
Check if conflict can be managed for benefit of client
Decline if cannot manage conflict

Question 5

What did you confirm before commencing instruction?

Answer 5

C - Competence
I - Independence - no conflict
T - Terms of engagement confirmed

Question 6

What would you have done if there was a conflict?

Answer 6

Considered nature
Conflict management systems - ethical and information
Benefit of the client

Question 7

How did you confirm Terms of Enagement?

Answer 7

Set out terms based on Red Book Guidance - 18 points
Confirmed in writing with client, noting any conflicts

Question 8

What was MR?

Answer 8

£17.50 - £19.00 depending on suite

Question 9

What was your basis of valuation?

Answer 9

MR
MV
MV with VP

Question 10

How did you set out your fee?

Answer 10

Dependent on level of service
Level of seniority undertaking the valuation
Time to undertake the Valuation

Question 11

What is VPS 4?

Answer 11

Bases of Value

Question 12

What is MR?

Answer 12

Estimated amount for which an interest in real property should be leased
- On the valuation date
- Between a willing lessor and lessee
- On appropriate lease terms
- Arms length
- After proper marketing
- Where parties acted knowledgably, prudently and without compulsion

Question 13

What is MV?

Answer 13

Estimated amount for which an asset or liability should be exchanged
○ On the valuation date
○ Between a willing buyer and seller
○ Arms length
○ After proper marketing
- Where parties acted knowledgably, prudently and without compulsion

Question 14

What is the IVS?

Answer 14

International Valuation Standards

Question 15

What are General and Asset Standards in IVS?

Answer 15

General - Terms of engagement, approaches and bases, method of valuation and reporting
Asset - requirements for Specific types of assets such as real property and development

Question 16

How does IVS differ from Red Book?

Answer 16

IVS is core part of red book
IVS drawn up by IVS C (Council) - RICS is a part of IVS
International set of standards used in a number of countries, asset types

Question 17

Tell me about your valuation in Trade St, Cardiff?

Answer 17

Point 1 – Valued an office in Cardiff, reporting on MR, MV and VP as a special assumption
Point 2 – I ensured there were no conflicts, agreed the fee and reporting timescales.
Point 3 – I detailed this, along with the definitions of value from VPS 4, within my Terms of Engagement and received signed agreement prior to commencing instruction

Question 18

What was Capital Rate?

Answer 18

£173 psf

Question 19

What was the yield?

Answer 19

9.75%

Question 20

Size of the property?

Answer 20

4,500 sq ft

Question 21

What were your comparable range for MR?

Answer 21

£17 - £19

Question 22

What were your comparable range for MV Cap Rate?

Answer 22

£125 - £190