My Submission Flashcards
What is the importance of the Red Book Global Standards and when is it effective from?
- Effective from 31st Jan 2022.
- To promote and support high standards when undertaking a valuation globally. The standard details mandatory practices for RICS members. It also offers a useful reference resource that relates to best practise.
What is required under VPS3?
This is in relation to Valuation Reports and covers what should be included within a report.
The report must clearly and accurately set out the conclusions of the valuation as well as being in layman terms so that it can be easily understood.
What are the five methods of valuation?
- Investment Method
-Comparable method
-Contractors Cost/DRC Method
-Profits methods
-Residual Method
What is the purpose of each method?
Investment: When there is an income stream to value
Comparable:
Contractors/DRC: Considered the method of last resort where there are no comparable (For example a public building) approach is based on two components (the depreciated cost of the building and the value of the land). Figures for both of these components will be obtained from comparable evidence.
Profits Method: Where the value depends on the business trading (for example a pub)
Residual: Where you are valuing land
What is the difference between market value and investment value?
Market Value:
1.) The ESTIMATED amount an asset should exchange for on the VALUATION DATE
2.) between a WILLING BUYER and a willing seller in an ARM’S LENGTH transaction
3.) after PROPER MARKETING where the parties had each acted
PRUDENTLY AND WITHOUT COMPULSION.
Investment Value:
The value of an asset to a particular investor (perhaps they own a property next door)
What is fair value?
- The RICS consider this definition to be generally consistent with market value.
- The price that would be received at the measurement date and is usually for financial purposes.
What are the main drivers that have an impact on property value?
- Location
- Lease term
- Building condition
- economic conditions
- Covenant strength
What does the RICS Professional Standards and guidance, Global Comparable Evidence in Real Estate Valuation (1st Edn 2019) set out?
It has four main purposes:
* to outline the PRINCIPLES OF THE USE of comparable evidence
* to ENCOURAGE CONSISTENCY in the use of comparable evidence globally
* to ADDRESS ISSUES OF AVAILABILITY and use of comparable evidence, especially in challenging market conditions and
* to CO NSIDER POTENTIAL SOURCES of comparable evidence and their relative importance
What is VPS 2?
Outlines how inspections and investigations should be carried out to the extent necessary to produce a valuation that is fit for purpose and that a proper record should be kept (such as all comparable evidence).
What is comparable evidence?
Information or evidence found during the valuation process to support the valuation of another, similar asset.
- When assessing the price to pay for an asset, you would normally look to the price achieved for similar assets in the market and make an offer accordingly.
What makes a good comparable?
- Same location
- Very similar or exact to the asset being valued.
- Recent transaction
- Verifiable with local agent
- similar size
- tenure
- construction
- efficiency of building (sustainability)
When might a comparable not provide evidence of the assets current market value?
When there is a special purchaser:
A purchaser that may be willing to pay more than the market value (for instance they own the adjoining property).
What are the 3 approaches to real estate valuation?
- Market approach: Adopts the principle that the value of one property may be derived by comparing it directly with similar property transactions.
- Income approach: Used to value real estate that produces an income for the investor.
- Cost approach: DRC approach is used to value real estate that does not usually sell on the open market (for example public buildings) and for which comparable evidence doesn’t exist.
What makes a good office comparable?
- Location,
-Building quality - LAYOUT
-FACILITIES - service charge cost and aging plant
- building efficiency and sustainability credentials
What makes a good industrial comparable?
- Accessibility to transport links has a major impact on value.
- building design
-size - Age and condition
What makes a good retail comparable?
-Location (divided into prime, secondary and tertiary) precise location will be a key factor.
- for shopping centres (size, location, accessibility, parking ratio, tenant quality and mix and building quality.)
-
What is the construction of WWX?
Roof: Factor finished metal and single ply membrane.
Elevations are a combination of standing seam and rainscreen cladding and a steel frame.
What was the purpose of the COVID 2022 act?
Purpose was to protect business tenancies against the forfeiture of their lease due to unpaid rents which accrued between 20th March 2020 - 12th April 2021 for non-essential retail and leisure (date differed depending on sector.
Business tenancies then had until Sep 2022 to make a referral to an arbitrator, if tenants failed to do this they were no longer protected by the act. Tenants that did make a referral continued to be protected by the act.
What are the penalties for non compliance with MEES?
- Less than 3 months, a landlord may receive a fine of £5,000, or 10% of the property’s rateable value (up to a maximum of £50,000)
- Longer than 3 months can trigger a fine of either £10,000 or 20% of the rateable value of the property, up to £150,000. Whichever is higher.
Who is responsible for enforcing MEES?
The Council
What is regulation 27 in relation to MEES?
Regulation 27 of the MEES Regulations provides that, from 1 April 2023, a landlord of a non-domestic private rented property may not continue to let a property with an EPC rating below band E unless a valid exemption is registered (this has been the case since April 2020 for domestic properties).
What are the MEES proposals
From April 2025, all EPC’s to be a C (regardless of new lease or trigger event) it was originally proposed that from April 2027 a C but this has been pushed back to April 2028. Proposal is B by 2030
Who carries out an EPC?
An accredited Domestic Energy Assessor (DEA
What are the government planning in 2025 in relation to MEES?
To assist businesses in enhancing the energy efficiency of their assets, the government plans to introduce a grants scheme. Representatives from the Department for Energy Security and Net Zero (DESNZ) have indicated that this scheme is expected to roll out in 2025 in England and Wales. Funding can be put towards investing in new machinery and equipment, improving manufacturing processes, and other features such as insulation and lighting.
Mill Court, Cambridge
- Construction
£ psf SC
£ psf Rent
CAT A office fit out
2,039 sqf
The difference between CAT A and CAT B fit out?
- Cat A fit out(basic empty space): Tenant will want to do own fit out. A basic operational fit out that provides you with a finished, empty space that is ready for you to move into.
- Cat B fit out (tenant is ready to go) office is designed to create a functional workplace complete with planting, flooring and furniture.
What works did the refurb consist of at Mill Court?
CAT A Office Fit Out
- New VRF comfort cooling systems serving the office accommodation on each floor.
- New LED lighting across all floors.
- New PVCu 3-part compartment trucking with new small power throughout.
- New floor coverings and suspended ceiling finishes throughout.
- Fully decorated.
- Newly decorated windows and doors.
- EV charging stations.
- Rooftop PV system.
- Accessible parking.
- Sheffield bike stands.
- Parking ratio (1:255 sq ft).
What would you do if you couldn’t find good comparable evidence
- Expand the search area: Look at a wider range of evidence, including regional or national trends and transactions
- Use a price per square meter: This can be a good method of comparable evidence when there aren’t direct comparable nearby
- Use local knowledge: Adjust figures based on local knowledge (ask agents)
- Use the contractors method: This method can be used for valuing unusual or specialist properties.
Use the profits method: This method is used for properties whose value comes from the trading potential of the business they’re designed for
Vals L2 Holloway Road example
1. What was the sqf
2. What was the construction?
3. What was the yield?
4. What was the market value?
5. What was the market rent?
6. What London market did this come under?
7. What is included in purchasers costs?
- 2,186 sqf
2. - Equivalent yield of 8% (reversionary yield of 9.05% to reflect additional risk WHY?
- Capital value and market value?? £775,000 after purchasers cost.
- £83,600 pa
- Northern Fringe and is regarded as a non-core office location within central London, given its lack of office stock. Most stock available in the area was converted warehouse-style properties and there was a limited purpose for new build stock.
- Legal fees (0.5%), stamp duty (3.66%), agents fees (1%) 5%?
Why did you use the investment method?
There was a lack of comparable evidence for vacant office space as most office space is let. I therefore found comparable evidence for let properties and made suitable adjustments to the yield to account for the property being void.
How would you analyse your comparable evidence?
- Find appropriate comparable evidence similar to the one in question, considering factors like location, size, type, age, and amenities.
- Collect rental rates, lease terms, and occupancy rates for the comparable properties. Sources may include real estate websites, local listings, and property management companies.
- Adjust for Differences: Consider adjustments for any significant differences between the subject property and the comparable. This could include differences in square footage, condition, or additional amenities.
- Calculate Average Rent: Determine the average rental rates of the comparables, taking into account any adjustments made.
- Evaluate Market Trends: Look at broader market trends, such as changes in demand or supply in the area, to understand how they may affect rental rates.
- Consider Timeframes: Analyze the timeframe of the comparable rentals. Recent leases are generally more relevant than older ones, especially in a rapidly changing market.
- Summarise Findings: Create a report summarizing your findings, including the methodology used, data collected, and final rental value recommendation.
Case Study Q: What would you do differently as part of this project?
- I would have ensured earlier stakeholder engagement and I would have ensured more frequent meetings with the centre manager.
- Utilise technology: use data analytics to track service usage trends and tenant satisfaction, which can inform future budgeting decisions and service offerings.
- Peer consultation: Engage with peers or industry experts earlier in the process for advice on proposed apportionment and service charge management
What is the purpose of the RICS property Measurement standard 2018?
The standard is now dormant.
- The mandatory standard provides an understanding of the application of the professional standard and technical definitions.
- Following the publication of IMPS: All Buildings, this document is in the process of being updated.
What is included in NIA for retail?
-If tenant has fit out, try to estimate actual build width by removing a ceiling tile, or getting behind partitioning. Inspect basement or first floor to see actual build width.
Take sufficient measurements in order to calculate ITZA (every 6.1 metres)
