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HD APC OCT 21 > SREC > Flashcards

SREC Flashcards

1
Q

What is the aim of SREC?

A

Working with the senior management of a company to understand their objectives, to realign and manage their property portfolio to meet these objectives

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2
Q

Why is property important to the success of a business?

A

Usually the second highest business expense behind staff.

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3
Q

What is capex and opex?

A

Capex is capital expenditure in a one off payment. Eg. Purchase / refurb.

Opex is operations expenditure, usually paid in regular instalments e.g. rent, utilities, rates

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4
Q

What are the various types of business structure?

A
  1. Sole trader
  2. Partnership
  3. Limited company
  4. Public limited company
  5. Limited liability company
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5
Q

What is a limited company?

A

Where the owners are responsible to the debt of the business, but this is limited to what they have invested in the business. Their personal assets are safe.

Pros:

  • limited liability
  • tax benefits

Cons:

  • annual audited accounts
  • greater regulation
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6
Q

What is a public limited company?

A

Where the company is listed on the London stock exchange so the public can buy shares in the company. Again, liability limited to what is invested in the company. Personal assets not at risk.

Pros:

  • limited liability
  • raise funds
  • tax benefits

Cons:

  • annual audited accounts
  • regulation
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7
Q

What is a limited liability partnership?

A

Partners have limited liability. Personal assets protected.

Pros:

  • easy to incorporate new members
  • partner benefits in raising finance, easy to set up and minimal reporting

Cons:

  • profits taxed as income
  • regular disclosure
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8
Q

What are common business objectives?

A
  1. Talent acquisition / retention
  2. Operational efficiency
  3. Growth
  4. ESG
  5. Rationalisation
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9
Q

How would you measure growth in a business?

A

Revenues, market share, earning before interest tax depreciation amortisation (EBITDA or profit)

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10
Q

What is ESG

A

Environmental, social and corporate governance. Three factors used to measure societal impacts of a business

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11
Q

What types of consultant are there?

A
  1. Internal - employed or working within the clients firm to instigate change
  2. Employed as an external consultant giving advice to implement business change
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12
Q

What are the pros and cons of an internal business consultant?

A

Pros:

  • understand culture
  • deeper knowledge
  • more influence

Cons:
- not objective

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13
Q

What are the pros and cons of an external consultant?

A

Pros:
- objective

Cons:

  • takes time to understand business
  • not integrated
  • costly
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14
Q

When undertaking portfolio evaluation and strategy, what are the key roles / responsibilities?

A
  • benchmarking
  • financial analysis
  • asset optimisation
  • acquisition / disposal strategy
  • freehold v leasehold analysis
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15
Q

What are KPIs? How do they differ from benchmarking?

A

Key performance indicators
- measure factors critical to success eg. Operational costs

Benchmarking = comparing performance against others to make targeted improvements.

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16
Q

How can you implement benchmarking?

A
  1. Provide method of measuring performance (KPIs)
  2. Provide method of benchmarking against competitors
  3. Allow analysis to identify areas for improvement and implement change
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17
Q

What are key factors to consider when implementing a relocation?

A
  • client objectives
  • SWOT analysis
  • PESTLE analysis
  • demographic studies
  • financial analysis
  • local amenities
  • Staff consultation
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18
Q

What are operational costs of a business?

A

OPEX:

  • rent
  • rates
  • service charge
  • insurance
  • Prof. Fees
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19
Q

In your Trowbridge example, you mention your client wanted to achieve business growth. What do you mean and how is this quantified?

A

Business growth in this case referred to expanding the office space to recruit new staff and attract new talent, whilst retaining existing staff. The metric for measuring this would be increasing the workload they could handle in the coming years resulting in increased revenues.

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20
Q

What was important to consider when using staff post codes for your analysis? (Trowbridge)

A

GDPR 2016 and Data protection Act 2018. This data was kept confidential, used only for this exercise and was deleted once the exercise was complete. The staff also retained their rights under GDPR and we made them aware of this at the start of the exercise.

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21
Q

What databases did you use? (Trowbridge)

A

Datscha, CoStar and CACI

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22
Q

Why did you review their annual report? What did this tell you? (Research task)

A

I reviewed the annual report as this provided a detailed insight into the businesses objectives, culture, property portfolio and opportunities where we could add value.

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23
Q

What is organic growth? (Research task)

A

Growth achieve by increasing company output and enhancing sales internally by increasing process and efficiency

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24
Q

What do you mean by “increasing office quality” in your Brighton relocation example?

A

Their office space was dated , lacked sufficient parking and was split over three floors. This wasn’t conducive to their ways of working. They therefore wanted to move to a more conventional grade a office for staff welfare, which would also provide increased functionality in office productivity

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25
Q

In your Hayward’s Heath examples, when you say nothing met their requirements, what do you mean?

A

The biggest issue was nothing met their space needs on one single floor. There was also a lack of quality in the space available

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26
Q

In your Hayward’s Heath example, what did the two options have to meet the clients requirements?

A
  • 7.500 sq ft
  • 1 floor
  • within budget
  • grade a spec
  • accessible location / parking
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27
Q

In your Hayward’s Heath example, what was making the occupancy cost lower?

A

The service charge and rates were far lower.

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28
Q

What was the car parking ratio in Hayward’s Heath?

A

1:418 sq ft which broke back to 19 spaces.

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29
Q

In your Truro example what was included in your cash flow?

A

Rent, rates, service charge and insurance.

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30
Q

What was the reverse premium agreed in your Truro example? How did you calculate it?

A

£70,000.

I did an agency valuation on the clients demise and the landlords space above. I then undertook a valuation assuming both were held as one demise. This showed a £50k increase and I negotiated with the LL to achieve £70k

31
Q

What is the marriage value you mention in Truro?

A

The value gained from combining two independent assets. Assumed landlord could let whole building as office to prof services firm. Would increase value of asset significantly. Estimated £100k.

32
Q

How do you measure business performance for a client?

A
  • Understand their operational objectives
  • Understand Benchmarking of competitors
  • Set Benchmark
  • Use quarterly and annual KPIs
33
Q

Please give an additional example of when you have provided strategic real estate advice to a client.

A

Property boards:

  • Monthly updates to objectives
  • Disposals and acquisitions strategy
  • Case by case updates and recommendations
  • Proposed savings and alternative accommodation
34
Q

What process would you go through to provide strategic advice to a client?

A
  1. Meet with client to understand business objectives
  2. Review property portfolio, locations and salient details
  3. Establish benchmarking, benchmarks and KPIs with client
  4. Devise strategy, with supporting risk analysis and report to client.
  5. Implement strategy
  6. Review with KPIs
35
Q

What types of consultancy advice have you provided to your clients?

A
  • Relocation advice
  • Disposal advice
  • Workplace strategy
36
Q

What methods have you used to analyse data?

A
  • SWOT
  • PESTLE
  • Benchmarking
37
Q

What were your client’s objectives in your trowbridge example?

A

Business growth, staff retention, talent aquisition

38
Q

How did you analyse staff commute times (trowbridge)?

A

Formatted postcodes into Excel. Used CACI software to calculate travel times by car and public transport to each potential office location.

39
Q

What regulations did you consider when using confidential data in trowbridge?

A

GDPR 2016 / Data Protection Act 2018

40
Q

What did your analysis show in trowbridge?

A

Bath was the ideal middle ground

41
Q

How big was the office that your clients had in Trowbridge? What size and spec were they looking to move to.

A

Current was 15k sq. ft. and dated.

Were looking for 20k sq. ft. and grade A.

42
Q

What did the organisation’s annual report show in your research example?

A

Focus on regionalisation and faster deliveries

Focus on organic growth

43
Q

How would regionalisation help to deliver organic growth in your research example?

A

Dispose or vacate larger assets to save / raise money and reinvest in various smaller sites to boost delivery capabilities.

44
Q

How did your research help you tailor the pitch?

A

Clarified their objectives. Could give case by case examples of how we could assist in their portfolio. Got industrial team in to talk as well.

45
Q

What were your client’s requirements in their office relocation in Brighton?

A 
7k - 8k sq. ft. 
Grade A 
Single floor
Accessible
Minimise costs
46
Q

Why was Haywards Heath not suitable in your office relocation example?

A

Due to a lack of supply, it could not meet my clients requirements in terms of size, quality and a single floor plate.

47
Q

What was the car parking ratio of the office you recommended in Brighton for the office relocation?

A

1:416 sq. ft. (19 spaces)

48
Q

What were the costs of the office you recommended in Brighton?

A

Rent £240k (£30.00 per sq. ft)
Rates £6.30 per sq. ft.
SC £6.40 per sq. ft.

49
Q

What range of terms / incentives did you present in your office relocation?

A

5 yr fixed term W/ 6 months rent free

5 yr w/ 3rd yr break W/ 4 months rent free

50
Q

How did your advice help the client meet their objectives in your office relocation in Brighton?

A

Superior office space on one floor
Accessible
Minimal cost increase

51
Q

Please explain your cash flow in your Truro example

A

I calculated the cost of the rent, rates, SC and insurance until the end of the lease term to calculate the total liability of the lease.

52
Q

What was the term of the lease in Truro?

A

99 years from 1974 so 52 years

53
Q

What was the annual cost of the lease to your client in Truro?

A

£100k pa.
£40k pa. rent
£60k pa. rates

54
Q

On was basis was assignment / subletting permitted in Truro?

A

Of the whole with landlord’s consent, not to be unreasonably withheld.

55
Q

What was the recommended reverse premium in Truro?

A

Initially it was £130,000 pa. however with the impact of the COVID-19 pandemic, the eventually settled at £70,000 pa.

56
Q

How did you calculate the reverse premium in Truro?

A

I calculated the marriage value buy valuing my clients demise and the landlords demise, then contrasting this with the value of the whole building. I also took into account the slow lettings market and high rateable value of the property.

57
Q

Why is real estate key to business performance?

A

Second highest cost. Also key to operational efficiency.

58
Q

How do you measure performance?

A

Benchmarking, KPIs, regular meetings with client.

59
Q

What are some common KPIs you have measured?

A

Occupancy rates, Staff headcounts, Revenue growth, Property costs

60
Q

What is the difference between an operational and an investment portfolio?

A

Operational means the property is critical to the output of the business. Investment means the property is the output of the business.

61
Q

What are some of the key issues in strategic real estate consultancy?

A

Rationalisation, culture, changing ways of working, ESG, Freehold vs leasehold.

62
Q

Apart from commute time analysis, what else did you consider in Trowbridge?

A

Quality of office space, configuration of office space, talent attraction.

63
Q

Do you think you can fully understand a companies corporate objectives based on their annual report?

A

No, but I believe it can give you a good indication. Better to have some information rather than none at all.

64
Q

How did you present office options to your client for the relocation?

A

Excel spread sheet with each option on a new tab providing evidence collected from agents / databases.

65
Q

What was included in your Haywards Heath office relocation report advice?

A

Not Haywards Heath. Two properties in particular. Negotiations. Yes they listened.

66
Q

Talk to me about the cash flow you carried out in Truro? What did it factor in?

A

Rent, rates, service charge, insurance. Also factored in discounting as the lease had in excess of 50 years remaining. Spoke to building consultancy and they recommended factoring in 1% depreciation each year.

67
Q

What was your depreciated liability in Truro?

A

Just under £4m

68
Q

How did you calculate the reverse premium payable in Truro?

A

Considered the benefit the landlord could gain by merging the two units but also accounted for the slow lettings market and high rateable value.

69
Q

What was the starting point of your negotiations in Truro?

A

Approached the landlord to consider surrender. When they positively engaged, we negotiated over a figure.

70
Q

Apart from your submissions, talk me through another piece of reasoned advice that you have given to a client?

A

Property boards. Objectives rationalisation. Presented in slide show deck with Q&A.

71
Q

What office specification was your client looking for in your Trowbridge example?

A

They were in a dated grade A / B office. They were looking for a newer, larger grade A office.

72
Q

What locations were you considering as alternatives?

A

Noting in Trowbridge. Bath and Bristol the only viable alternatives.

73
Q

What is ESG? Tell me a little bit about it.

A

Environmental, Social and Corporate governance.

Environmental considers energy usage, waste, pollution, resources etc.

Social considers corporate values in relation to charities, communities, working conditions, employee welfare, employee listening

Governance considers matters like transparent accounting, stakeholder involvement, ethical practice.

74
Q

What must major corporates do when holding surplus property?

A

Make an estimate of the liability and record it on the balance sheet under IFRS 16.

HD APC OCT 21 (18 decks)

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