SOE - Valuation Bishops Stortford

Question 1

Your valuation of the leisure property in Bishops Stortford on the basis of fair value - please can you define what fair value is and when it would be used?

Answer 1

The price that would be received to sell an asset or paid to transfer liability in an orderly transaction between market participants at the measurement date in the current market conditions.

Fair value is used when the valuation purpose is for financial statements which is what this particular instruction was.

Question 2

BS

That is a large leisure property was it let to one tenant?

Answer 2

This was let to two leisure tenants one on a 15 year lease and the other on a 20 year lease

The leases expired in 2035 & 2036 with rent review in 2025 & 2026

The current rent was between £16.50-£25.50 psf

Total rent roll £122,000 equating to £13.45

ASK TEA ON

Question 3

What was the MV of BS?

Answer 3

£1,875,000

Equating to £185 psf

NIY 6.01% RY 6.31% NEY 6.50%

Question 4

What was the ERV of BS?

Answer 4

Total ERV for the property was £128,000

£14.11 psf across the total property

I took the view based on the comparable evidence that the property was under rented.

Question 5

What was the unexpired term?

Answer 5

Overall the weighted unexpired term was 14.23 years

Split as 14.74 and 13.50 between the two tenants

Question 6

What was your view on the BS market at the valuation date?

Answer 6

At the valuation date my discussions with local agents was that the market had been improving following the Covid lockdowns.

The town itself was an affluent area with good restaurant offerings

Question 7

What did you include within the TOE?

Answer 7

1. Identification of valuer and status
2. Identification of client
3. Valuation date
4. Basis of value
5. Purpose of valuation
6. Address of asset

Question 8

Why was an inspection not undertaken?

Answer 8

As this was a revaluation and the property had been previously inspected earlier in the year by myself and my supervisor

I was satisfied there had been no material changes to the physical attributes of the property since the last valuation

No material changes - same tenants were in occupation

I stated this was an assumption clearly in the terms of engagement

Question 9

Why did you used the Investment method?

Answer 9

I used the Investment Method as the property was let and income producing

I had deemed that the property was under-rented and as a result I applied the Term and Reversion Method

Question 10

What factors did you consider when valuing the property?

Answer 10

Covenant Strength - both were let to National Occupiers

Long security of income

General market activity

Covid-19

Quality of the location

Question 11

What were the inputs?

Question 12

Was the property overented or underrented?

Answer 12

Under rented

Question 13

Please can you take me through step by step the instruction?

Answer 13

Received instruction
Checked competence
Verified there were no personal of COI
Issued signed terms of engagement to the client
Received signed TOE back
Review information from previous valuation with regards to the inspection
Due diligence
Market research for comparables
Discussions with local agents
Valuation
Draft report
Review by another surveyor
Finalise valuation report
Report to client

Question 14

What was the date of the valuation?

Answer 14

31 December 2021

Question 15

What sources did you use to find comparable evidence?

Answer 15

Internal and External Databases eg. CoStar

Question 16

You said you verified this information why was this important?

Answer 16

To ensure the validity of the values of the data which was collected

Question 17

Talk my through the analysis and valuation of this example?