My Reports Flashcards
How have you reached an equivalent yield with regard to your VP sales used?
We derive a market rent, take away any non recoverable outgoings to reach a market income. We then make adjustments to the sale price of the property adjusting for any vacancy and letting, agents fees and any incentives. This will give us an adjusted sale price and we would divide the market income by this amount to reach our equivalent market yield.
What is the section 173 agreement in your retail property in relation to?
It relates to a planning permit for a nightclub within the parent development and talks about the need for carparking. The nightclub is no longer in use so this section 173 agreement no longer applies.
Talk me through your rental evidence used for your retail reports and the comparison of these to the subject property retail strip?
All are smaller properties on Glenferrie road. Some are spread north and south in what would be secondary location. The most comparable bit of evidence is one within the same shopping centre. The upper end is set by a shop opposite the entrance/exit to glenferrie station.
What are retail properties measured with?
API adopts IPMS but does not have one for GLAR retail so we use PCA
What are the major drivers for retail property?
Foot/vehicle traffic + vehicle exposure - location close to hubs like railway stations
What are the major drivers of industrial properties?
All about utility - clearance height, office to warehouse ratio, access, location relative to hubs and city
With your industrial how did you approach your income with your property being done on vacant possession?
Adopted market income and capped this. Made deductions for vacancy and letting up allowances
How have you derived an equivalent yield for your VP sales in your reports?
Derived market income, minus any non-recoverable outgoings. This gives us our market income. Take sale price and make adjustments to the price to allow for vacancy, letting up, agency fees and incentives (these are added to the price). This adjusted sale price is then divided by the market income to give equivalent market yield.
If your property was underlet for 2 years how would you treat this?
Get market income (market rent minus non-recoverables) and cap this with appropriate cap rate. We then find the NPV of the loss of income. This is then deducted in a below the line adjustment to give us our value.
Are all of your sales for industrial the same zoning? Does this make a difference to the value?
No they are not. There is a mixture (1x C2Z, 1x ACZ, 2x INZ3, rest are INZ1). As vacant land this may make a difference in value when assessing highest and best use. But for the majority of these the highest and best use is their current use as strata industrial premises. Similarly they all border residential zonings and therefore would be unlikely that the council allows any heavy manufacturing or uses as this may be detrimental to the nearby community.
How has Industrial market been since covid?
Has been strong - covid increased WFH - less need for larger offices in the city, probably pushed more demand towards warehouses that have sufficient office space. SImilarly, online stores and ecommerce have increased demand for warehousing for storage purposes.
What is a prime industrial warehouse?
Managers and valuers have told me its to do with being a good quality warehouse that is well located. This will mean it has appropriate fire safety equipment, good clearance height, roller door, access, good quality office and fitout etc.
How did you determine your letting up cost in your industrial?
Agents fees, usually with marketing a standard 15% of the first year of lease
A vacancy period where the property is on the market - depends on the market but usually about 3 months
Incentive - if there is any - industrial market very little
There is a covenant on Residential report, what is this in regards to?
Building conditions and envelope being in accordance with small lot housing code and approval from responsible authority.
There is an agreement section 173 on your retail report, what is this in regards to?
This section 173 agreement included a planning permit for the use of the land as a nightclub with some provisions from council. The Agreement has been stated to end when the subject lands use as a place of assembly (night club) ends. Was originally Room 680, no longer there
Your retail report has a heritage overlay. What does this
It relates to controls on solar energy systems on the property. It does not include anything like external paintwork or internal alterations.
What land rate and building rate did you adopt for your resi report?
$1,100 sqm land
$1,700 sqm building
What rent did you adopt for industrial and what per sqm land rate?
$160/sqm rent based on dated rental of old rental in development
$3,250 land
What rent did you adopt for retail and what per sqm rate?
Market rent was at $800 so we adopted the passing rent - which is equal to about $815 psqm
Land rate adopted was $13,250 per sqm based on burke road sale
Talk me through your sales for your retail property?
All sales were strata units. Was hard to find something of similar size and strata unit of comparable nature.
Burke Road - fairly comparable, better frontage, smaller strata, no carpark opposite, not as good anchor tenants (higher yield than this, but similar rate per sqm direct comparison)
1414 Toorak Road, Camberwell - larger GLAR, better frontage but inferior exposure and traffic overall (lower yield expected, higher per sqm)
769F Glenferrie Road - larger GLAR, less exposure and traffic but superior frontage, superior condition, higher yield expected. Slightly larger rate per sqm.
The rest are considered fairly secondary locations with lower yields expected for the subject.
What are your outgoings for your retail property and are they inline with market evidence?
My outgoings for my retail are about $8000 or closer to $10,000 if you include land tax. This works out to be $154 per sqm. Which is quite high but compared to something of a similar size we have considered it to be within market parameters. But we do acknowledge it is quite high.
What are your outgoings for your industrial property and are they in line with market evidence?
Our outgoings total close to $8000 for the industrial unit. This works out to be about roughly $30/sqm which we did consider to be within market parameters.
What is your residential property zoned? How does this compare tot he zonings of your evidence?
My property is zoned urban growth zone. This is often used for these fringe metros areas and is to manage the transition from non-urban land into urban land. The highest and best use for these sites is for residential use. All sales have the same zoning or are a comprehensive development zone. The comprehensive development zones do allow for slightly different uses but only for specific properties. The properties i have used in my sales are at their highest and best use currently and therefore we consider them similar.
What zoning is your retail property?
Commercial 1 Zone
Did you check the Owner’s Corporation for your retail/industrial report?
We looked at the lot entitlement and liability and the strata fees. But unfortunately at the time of valuation we were only given part of the contract that did not include the recent owners corp minutes etc. But I understand that is a very important part to look at.
You have a heritage overlay on your retail property, what does that relate to?
I checked through the heritage overlay and it only mentions restricting use in relation to solar powered systems. I checked the heritage council database and its listed as significant but not individually significant. So there would be restrictions if it was to be developed/demolished but that isnt an issue with the strata property.
There is a DDO15 on your retail property, what does that relate to?
It relates to the Glenferrie Activity Centre planning. Specifically for my property it is to enhance pedestrian environments. It also sets out building heights and setbacks for some developments.
You have a parking overlay on your retail property, what does that relate to?
It is to manage parking within the precinct. It can be used to set out requirements.
Your residential property has a Development contributions overlay, a growth area infrastructure contribution and a Melbourne strategic assessment overlay. What impact do all of these have?
They are all to do with contributions to council and specific assessments that need to be made and relate more to when the property was being developed. We believe they no longer impact the properties value or marketability
There is a covenant on your residential report, what does that relate to?
It relates to the dwelling being constructed within the small lot housing code and the construction being approved by the council. Some of these cease to have an effect after occupancy permit is issued or one year after. I believe the one restriction that remains in use is being within the specified building envelope.
How did you treat the outgoings of your evidence and your property in comparison to those?
We were unable to get all of the outgoings for our evidence. But being at the VGV we have access to the council data and can work out estimates on statutory outgoings. So we compared on this basis and they were within market parameters.
Your retail/industrial properties are strata properties. Did you use only strata evidence?
Where i could i did. All of my industrial evidence is strata. All of my retail sales evidence is strata, but the rentals are not. I dont consider it to have as much effect as a rental and cared more about getting a more accurate rental so not all of them were.
What are the terms for your retail lease?
3 year lease with 3 year option.
Incentive was 3 months.
Reviews are 3%
Make good clause
currently $42,436 a year
What are the terms of your industrial lease?
Currently passing $37,824 (we assessed at $45,000)
it was a 3+3 with CPI.
It is now in overholding
We assessed the property as vacant possession as the tenant was looking to leave
Best sales for residential and why?
All of them were in such a tight range. 18 Jonesfield closest in terms of land and building areas.
Vacant land sales lower in Craigieburn set upper limit, and ones closer to my property are more comparable.
Best rentals for retail and why?
The one in the same centre is the closest. One opposite Glenferrie station sets upper limit. Others spread throughout glenferrie road set lower limits.
Best sales for industrial and why?
One sale from same development, helped give an idea of yield. And set upper limit rate per sqm. Sales in heatherdale road and ringwood helped set lower part of yield. Nunawading set the upper limits.
Best rentals for industrial and why?
Two rentals in the same development (one smaller)
What document did you reference to find out about the use of your industrial property and whether it was potentially contaminating?
Australian Real Property Guide for Contaminants
Can also refer to gudiance papers from API in relation to contamination
What are some critical assumptions in all of your reports?
No conflict of interest
All fixtures and fittings of a permanent nature would be sold with the property
Reliance on titles/POS or documents given to us
Reliance on our measuring tools
Assessment done on the basis of no contamination (when we believe it so)
Valuation being current at the date of valuation only
Reliance on agents and online listings for information, which has been verified where possible
Any additional information we have relied upon in writing our report/making our assessment - assuming it isnt under RLA for example
How has Hawthorn retail market been?
After speaking with local agents, vacancy periods for leases ranges but is sitting around the 90 day mark (3 months). Yields are between 5-6% and above. Lower for freehold, strata towards higher end. There isn’t a lot of stock on the market. Agreed that vacancy rates would be around 6.5%.
One sale recently was around 4% and was a head scratcher, whilst others have been sitting on market for some time at 5% yield.
Where did you look for your heritage overlay on your retail property to find out more?
Looked into the overlay itself and also did a check on the Victorian Heritage Database
In your industrial property a few of the rates per sqm and yields don’t really align? Why is this?
Yep, some of the yields on vacant possession sales dont necessarily add up as well and some of the per sqm rates on investment sales dont really add up. We have seperated these and we take more consideration of each for its purpose of how the market would approach it.
Vacant possession - owner occupier market - more to do with sum or money and $/sqm
Investment sales - more to do with the yield they would achieve.
If looking into my sales all of them make sense for there specific purpose when comapring
For your retail report do your sales have the same overlays?
No not all of them, many of them have similar design and development/parking overlays. And a couple of them also have heritage overlays but not all of them.
For your industrial report do your sales have the same overlays?
My subject doesnt have any overlays. Most of the sales do not either. However some have special building overlays and some have development contribution overlays. None that have a massive material impact on value.
What is your discount rate?
8%
When you have vacant possession property or sales and are analysing for an equivalent yield, what is included in that calculation?
The vacancy period (gross rent - so includes outgoings in this)
Marketing and agency fees - 15%
Any incentives offered
