SREC - KT Qs

Question 1

You say you have provided stategic real estate consultancy advice in a variety of contexts. Can you give some examples of what you mean?

Or, what examples have you used?

Answer 1

Scoring Matrix to assist with an acquisition (e.g. Relevance Intl)

Portfolio review (e.g. NSPCC)

Stay vs. Go analysis (e.g. Alzheimers)

Managing underutilised space (e.g. Old Hampstead Town Hall)

Question 2

When else might a Strategic Real Estate consultant be required?

(When might strategic advice be provided to a client)

Answer 2

Stay vs Go analysis

Portfolio review

Managing occupational requirements (if they need less or more space)

Cost reduction exercise

Revised management policy (there’s been a change at board level)

Their current office is no longer fit for purpose

Location change (difficulty recruiting talent)

To comply with sustainability inititives.

Question 3

What is the role of a Strategic Real Estate Consultant?

Answer 3

Working with senior management to ensure an organisation’s real estate portfolio aligns with its business strategy and objectives (both current and future).

Question 4

Why is Strategic Real Estate important?

Answer 4

Strategic Real Estate will identify liabilities, strengths, weaknesses, opportunities and threats across a property portfolio.

Property is usually the second highest business expense behind staff.

The SRE consultant often works closely with wider professionals, and avising non-cognate professionals (often at senior level) such as an organisation’s board members.

Question 5

Why do charities in particular rely on Strategic Property advice?

Answer 5

Because a chairties Trustees / Board HAVE to make decisions based on a strong business case supported by data collection / data management. (e.g. a commute analysis when considering a relocation).

Also, strategic advice is required by a charity with the Charities Act (2022) when selling, leasing or otherwise disposing of charity land or property - to demonstrate the charity is obtaining “best value” for the asset.

Question 6

What would be your starting point when analysing a businesses performance or objectives?

What factors are you considering?

Answer 6

I research and analyse the nature of the client’s organisation - to include:

Market research on the company, their sector and current portfolio

Analysis of financial information

Organisational structure (whether they have any property services in house or outsourced)

Understanding their entire property portfolio (Freehold vs Leasehold tenure, where is their portfolio located, asset class, values).

Who are the key stakeholders in the business (Find out the decision makers and board approval process).

Relevant external and internal drivers (PESTLE / SWOT analysis).

Question 7

What are some analysis techniques to analyse strategic real estate data?

Answer 7

SWOT analysis

PESTLE analysis

Scoring Matrix

Cash Flow Analysis

Question 8

Talk me through your office acquisition - scoring matrix example?

Talk me through the process you followed?

Answer 8

I created a scoring matrix to assist a Marketing Agency with an office acquisition in Soho.

Firstly, I met with the Strategy Director to understand their objectives and key drivers behind their move.

The client placed high importance on being located in central Soho, medium importance on having bike racks/showers in the building, and a bonus if the floor was ready fitted.

I collated these factors into a table and the scoring matrix was used during the inspections, where I ranked each property against the respective objective.

After the inspections, I presented the client with the ranked results, so they could clearly see which properties best suited their strategic goals.

Question 9

What is a scoring matrix?

Answer 9

A scoring matrix is a data management technique used to analyse various options based on a set of pre-determined criteria.

Each critera has a ‘weight’ that reflects its priority, and each option is given a score that indicates how well it meets the criteria.

Question 10

What factor was weighted the highest?

Answer 10

Highest = Location (Proximity to Dean Street in Soho)

Medium = Bike Racks / Showers

Low = If floorplate fully fitted

Question 11

How was your advice presented to the client?

Answer 11

I ranked each result based on the scoring matrix and colour co-ordinated so the client could clearly see which properties best suited their strategic goals.

Question 12

Talk me through your Office Acquisition - Portfolio Review example?

Answer 12

I reviewed the occupational requirements of a charity client across their national property portfolio.

Firstly, I met with the Head of Property to understand ther objectives and key drivers.

As a result of the pandemic, the client wanted to increase the provision of flexible (serviced) offices across a greater geographical spread, as part of a new business model of hybrid working.

I produced a schedule of serviced office providers across specific locations (Edinburgh, Aberdeen, Ipswich, Luton, Shoreditch) that could be delivered within the clients timeframe.

This was supported by a location viability study (assessing key amentity in the location), property market analysis and cash flow modelling.

Question 13

Who was your client in this example?

Answer 13

A well-healed national charity in the UK.

Question 14

What was their key objective for the strategy?

Answer 14

As a result of the pandemic, the client wanted to increase the provision of flexible (serviced) offices across a greater geographical spread, as part of a new business model of hybrid working.

Question 15

How did you gather the serviced office availability?

Answer 15

I contacted serviced office providers directly via their website and confirmed availability via a phone call to establish availability.

However, it was crucial I did not disclose the name of the business I was acting for and kept all client information confidential.

Question 16

Why did you need to support the business case for expansion?

Answer 16

Being a charity, the Trustees could not make decisions purely on opinion and needed data evidence to support the decision.

(Evidence-based).

Question 17

Did you need a Charities Act (2022) report for this work?

Answer 17

No you don’t need Charities Act report for acquisition - only for selling, leasing or transferring charity land or property.

Question 18

How was your advice presented to the client?

Answer 18

I presented a detailed availability schedule for their review in the specified locations.

I produced supplementary loction viability analysis and cash flow modelling.

Question 19

What are the main risks in this sector (i.e serviced offices)?

Answer 19

The overall cost is greater than a traditional lease

Difficult to create a sense of identity or culture

Question 20

Talk me through your Stay vs. Go example?

(Level 3)

Answer 20

I provided strategic advice to a charity client on their current office in Fenchurch Street ahead of a forthcoming lease expiry.

Firstly, I met with their Strategy Director to understand their objectives and key drivers.

The key objective was to establish if their current floor was suitable from an operational perspective - whilst also assessing the market to see if there were better alternative options from a financial perspective.

I then identified alternative options and created a shortlist based on cost, quality and location, before inspecting with senior management team.

I requested the clients current outgoings and produced “Stay vs Go” cash flows comparing the current premises to the shortlisted options.

This resulted in identifying a building 5-minutes from their current office that was not VAT elected, which represented a healthy cost saving on rent and service charge.

Question 21

When was their lease expiring?

Answer 21

January 2025

Question 22

You’ve wrote here you advised obtaining provisional terms for a lease renewal from the Landlord’s agent.

Talk to me about this - how would you go about doing this (assuming a lease with INSIDE the act)?

Answer 22

(Section 26 = Tenants wishes to renew).

Section 26 under the Landlord & Tenant Act (1954).

Must be no MORE than 12 months, no less than 6 months BEFORE expiry.

Must state proposal for new lease terms (e.g. new proposed rent).

If LL wishes to oppose, they have 2 months to serve a couner notice specifying grounds for opposition.

(Remember section 26 is a TENANT notice requesting a new tenancy)

Question 23

Looking at your Stay vs. Go advice given to a charity - how did you calculate the total outgoings for the properties involved?

Answer 23

I requested current outgoings from the client and ran a cash flow for the term to include:

Rent
Business Rates
Service Charge
The size of the floor

(any break clauses / remaing rent free period).

Question 24

You also calculated capital costs - how did you do that and what were they?

Answer 24

These were the one-time expense of relocating to alternative premises.

Fit out costs (at circa £100 psf having consulted the PM team)

Move and IT costs

Refresh / reufrbishment works (if they were to stay at current office).

Dilapidations assessment

Question 25

What is the difference between OpEx and CapEx?

Answer 25

Capital Costs (CapEx) = The one-time expense of relocating to another premises - e.g. fit out costs, move & IT costs, dilapidations (on current space), refresh/refurb works (if they are to stay.

Operational Expenditure (OpEx) = The operations expenditure, usually paid in regular instalments e.g. rent, utilities, business rates.

Question 26

You did a cash flow - did you discount this cash flow back to today or not?

Why did you do that?

Answer 26

I did apply a discount rate (aka IRR to reflect the levels of risk).

I selected an appropriate discount rate of 4% to produce a Net Present Value (NPV).

The NPV = the sum of the DCF.

(I discounted the cash flow to produce an NPV to determine if the lease will be worthwile in the long run).

(If the NPV is positive, the investment has exceeded the target IRR / discount rate).

Question 27

How did you decide on the target rate in the DCF?

Answer 27

Pick an appropriate discount rate equal to the minmum acceptable rate of return.

Question 28

What were the outcomes of the Independent review of investment Valuations by Peter Pereira Gray?

Answer 28

13 wide ranging recommendations that will be implemented in due course. These include:

• DCF as a main model when using investment valuations
• Developing a time specific, rotation process for valuers
• Establishing a valuation regulatory quality assurance panel
• Valuation Compliance Officer within firms

Question 29

What was your advice to the client following this?

What was your advice to the client in your Stay vs. Go example?

Answer 29

I advised the client undertake a Workplace Study to confirm the suitability of their current space from an operational perspective.

I advised they review alternative office options to see if there were better alternatives from a financial perspective. I prepared a schedule for Senior Management Team and recommended physical viewings to assist with decision making.

I advised they could meet with similar charity clients who have re-located post-Covid to hear of their experience.

I advised there was an alternative option 5-minutes from their current office that was not VAT elected, which represented a big cost saving on rent and service charge.

Question 30

You also advised that a relocation should be planned for in the event of a contingency measure - what do you mean by this?

Answer 30

Because their lease was not protected (Outside the Landlord & Tenant Act 1954).

(Their LEX was not until 2025 but as it was ‘Outside’ the act is was imperative addresses a renewal while they still have enough time before expiry to move to new premises).

Question 31

What are the implications for the tenant for not being protected by the L&T Act (1954)?

Answer 31

They are not protected and have no rights to remain in occupation at the end of the lease.

The tenant will need to vacate the property or have completed a new lease by the end of the term.

A new lease can still be negotiated if both parties are willing, but recommend these negotiations take place well in advance of the lease expiry date.

Question 32

What are some reasons why a lease may be contracted outside the Landlord & Tenant Act (1954)?

Answer 32

If the Head Lease requires any subletting to be outside of the act.

If the Landlord wants to reoccupy the property in due course.

If the Landlord wishes to redevelop the property at the end of the lease.

If the Landlord wants future flexibility.

Question 33

What would be the procedure to contract Outside of the Act?

Explain the process of CONTRACTING OUTSIDE of S.24-28 of the L&T Act (1954)

Answer 33

Section 38 - HEALTH WARNING.

Section 38A of the Act sets out the procedure that MUST be followed to contract Outside of the act.

1. The Landlord MUST serve a HEALTH WARNING notice on the prospective tenant, explaining that the lease will not be protected. This is known as a health warning (advises tenant to seek professional advice).
2. The proposed tenant must then make a DECLARATION in response, confirming they have recieved the notice and understand the consequences of contracting out. The type of declaration depends on the timing:

1) SIMPLE DECLARATION = Given when the parties have recieved the warning notice at least 14 days or more prior to committing to the lease.

2) STATUTORY DECLARATION = Given when the parties have recieved the warning notice less than 14 days prior to committing to the lease. Statutory declaration MUST be obtained + requires an independent solicitor for oath.

Question 34

Talk me through your Office Disposal example in Hampstead?

Answer 34

I provided strategic advice to the long leseholder of an old town hall in Hampstead.

Firstly, I met with the Strategy Director to establish their objectives and key drivers.

The building was unique, configured into various recording studio halls and office rooms. The client’s main objective was to secure short term income, whilst retaining flexibility to expand and contract when they need.

With multiple small suites available, I advised it would be beneficial to advertise these on short-term licences.

To do this, I recommended bespoke marketing targeting the educational, music and arts sectors.

The result was a win-win for the client who achieved their objective of generating income, whilst crucially retaining the flexibility to expand and contract as required by their busienss needs.

Question 35

What is the difference between a lease and a licence?

Answer 35

As set out in the famous case of Street vs Mountford (1985):

As lease provides 3 key things:

Exclusive Occupation
Payment of Rent
Duration for a specified term certain

A lease cannot be terminated until the next lease event. A lease can be terminated at any time.

A lease can be assigned, whereas a licence cannot.

Street vs. Mountford (1985) “If it looks like a lease then it probably is…”

Question 36

So what is a licence?

Answer 36

A personal arrangement between licensor and licensee.

There is no legal interest in the property - it is merely a personal right to occupy that can be terminted by either party.

Question 37

Why did your client, the Long Leaseholder, need flexibility to expand and contract by their own business needs. Why was this important to them?

Answer 37

Because they regularly host rehersals for West End theatre shows and need flexibility to use the rooms depending on this.

Question 38

What is a Tenancy at Will?

Answer 38

A form of licence created by written agreement for an unspecified time in which the Landlord may evict the tenant at any time.

No legal interest in the property.

A Tenancy at Will is even more flexible than licences as they may be terminated at any time by either party. Whereas licences generally require a short notice period.

Question 39

What is a Limited Liability Partnership?

Answer 39

Limited Liability Partnership = Where Partners have limited liability.

Each partner’s liabilities are limited to the amount they put into the business.

If means that if the partnership fails, the partners personal assets are protected as they are only liable for what they put in.

(In contrast, with a Partnership structure all partners have unlimited liability).

Benefits: Flexible, ease to incorporate new members, incentive for equity partners.

Cons: Profits are taxed as income, regular disclosure.