Submission - Case Study Flashcards

Question

Is it listed?

Answer 1

Grade II listed building that was carefully refurbished. The Architect, Contractor and previous owners worked with the local Conservation Officer, Planners and Building Control to repair features within the building where possible, without disguising the modern interventions, which (while sensitive to their context) are clearly legible as new additions and which meet regulatory and planning requirements.

Answer 2

The classic Georgian building is the Classical country house, standing alone in its own landscaped park. 1700. Gracious classical proportions and symmetry as a general rule Architectural imitations of Classical Roman and Greek originals Symmetrical chimneys, Columns, Symmetrical window placement mirrored on both stories The original structure of Wildernesse House is predominantly load bearing masonry under a mix of timber trussed pitched slate roofs and flat lead roofs. The Mews Houses are of concrete frame construction with pitched timber roofs, with a mix of slate and three layer felt to the dormers.

Answer 3

The parking ratio is 1:1 (31 spaces), there is space for additional parking at the front of Wilderness House if required. Phase 1 & 2 benefits from amenity space including a the site wide restaurant, a gym, swimming pool, tennis court and wellness centre. The interior of the property is mostly to good specification, with original feature restored to a high quality and new modern appliances fit.

Answer 4

 Affluent location close to Sevenoaks town centre, within the desirable gated community of the Wildernesse Estate.  Excellent demographic profile with 20.4% of the population over 65 years (GB average 18.6%) and the 9.9% above the age of 75 years (GB average 8.7%).  All amenity accommodation has been built to a good specification ready for operation.  Accommodation at Phase 1 & 2 is of a high standard.  Planning permission already in place for Phase 3.

Answer 5

 Slow sales rates to date due to lack of marketing and building defect issues post completion.  Existing operational management has been overlooked in place of rectifying building defects.  Given the building has remained relatively unoccupied for some time, local residents may view the scheme negatively.

Answer 6

Overall the Property provides adequate security for prudent lending purposes based upon the values reported here in. Method, suitability of mortgage, conflicts past 2 years, special assumptions etc.

Answer 7

“The aggregate market value of the proposed development, assessed on the assumption that the development is complete at the date of valuation in the market conditions prevailing at that date”. RICS Guidance Note on the Valuation of Development Property 2019

Answer 8

LTGDV < 51%

Answer 9

Event premium formula is: DC x NY x P Where:  DC is the disposal consideration at date of disposal (quantum paid for the assignmentof a lease) note when this is less than market value the Landlord may chose for the disposal consideration to be treated as market value  NY is whole number of years rounded up, e.g. 1.1 years would be NY 2  P is 5% (0.05)

Answer 10

Service Charge: A service charge, which varies according to the size of your apartment, covers the cost of running the building, including communal utilities, staffing, etc. ``` Incl: Property Upkeep Security Hospitality and common parts Care ```

Answer 11

There are 240,000 people aged 65 years plus (20% growth) 40k+ houses over £1m in the local area

Answer 12

Whilst the senior housing market is very much linked to the fundamentals behind the standard residential market, the demand for suitable housing provision is not necessarily affected by the changes in the residential market. Indeed, the current COVID-19 pandemic has further highlighted the need for adequate housing for the more vulnerable and isolated within our communities. Although it is too soon to know for sure, we do expect the impact of lockdown to have a positive effect on the supply of senior housing with care in the long term across the UK.

Answer 13

The number of people across the UK aged over 65 years is projected to grow 20% in the next 5 years. Old age is no longer seen as a single, defined way of life as it was in the past, resulting in an increasing diversity among older people in terms of age, culture, wealth, ability and lifestyles. 0.5% of the UK’s population over 65 years currently live in a retirement community (including extra care housing, housing with care, assisted living, close care apartments and retirement villages). This is compared to 5.6% in the USA, 5.25% in Australia and 5.0% in New Zealand. It is also interesting to note that this growing senior population also represents the wealthiest demographic in terms of housing equity, with the over 65’s currently holding circa £1.2trn of the total of the UK housing equity. The retirement living sector is still in its infancy when compared against the US, Australia and New Zealand where retirement living is viewed more as a lifestyle choice rather than a ‘last resort’.

Answer 14

The future of elderly accommodation in this country is likely to mirror that seen in other parts of the world. It is recognised that the elderly population is increasingly discerning and requires on site social facilities such as restaurant, bar, gymnasium, facilities for meetings and clubs, shop, hairdressing salon, therapy rooms, laundry, cash machine, post box and sometimes a swimming pool. The unifying factor is something of a ‘village’ atmosphere with grounds and communal facilities that are significantly beyond those in traditional flatted sheltered schemes.

Answer 15

Quality of comparison metric used to evaluate competitive schemes based on location, amenities , healthcare provision and overall quality of the development. The comparable evidence for real estate valuations 2019 guidance note Also three sales within the site gave an indication

Answer 16

£9m worked out using a DCF Expected churn rate - recycling of units 20% fee

Answer 17

There is a growing demand and supply imbalance in the UK, driven by an ageing population and structural undersupply. The number of people aged 65+ living in the UK currently equates to c.12m, and is expected to grow by 20% by 2027 Homeowner equity in Britain among people aged over 65 has been estimated to total £1.6 trillion (Airey, 2018) There is a chronic undersupply of housing with care across the UK Mature retirement housing markets such as the US, Australia and New Zealand, where over 5 per cent of over 65s live in housing with care

Answer 18

``` Elysian is a best in class vertically integrated retirement living investor, developer and operator of specialist independent / assisted living, catering to the unmet demand within the growing UK affluent elderly population ``` 15+ team with in house investment management, planning, development, operations and sales expertise

Answer 19

South East of London, off junction 5 of the M25 30 min train into london

Answer 20

Sevenoaks was in the top list for theSunday Times ‘Best Place to Live in The UK 2019’. The site is situated c.1.5 mile from the High Street and Sevenoaks train station 240k +65 within a 60 min drive - 41k w/ house>£1m

Answer 21

Sevenoaks was in the top list for theSunday Times ‘Best Place to Live in The UK 2019’. The site is situated c.1.5 mile from the High Street and Sevenoaks train station 240k +65 within a 60 min drive - 41k w/ house>£1m

Answer 22

Existing contractor to amend all snagging - Elysian have set aside £70k per apartment for upgrades etc. Elysian believe the sales period will stretch between 18 and 24 months, which is conservative at Elysian believe the sales period will stretch between 18 and 24 months, which is conservative at 1.2 to 1.5 per month (vs. 3 4 per month on other projects) Elysian have been conservative at 30% sold at PC (with a built occupied scheme in the run up before PC of the Phase 3), and 2 sales per month thereafter, for a total of 21 months

Answer 23

84, 3 of which have been sold. £712 psf £600k - £2m £500 - £1m

Answer 24

CBRE and the Client Due to the pandemic, most communication was virtual - this meant that regular call were scheduled to maintain clear and concise working arrangements

Answer 25

Retirement living is an senior living option that allows residents ownership, independence, amenities with the option or access to care when required. Care homes usually follow a rental/payment model and the residence usually require a high level of care. This was obviously very difficult to protect during the pandemic due to the more moderate accommodation and health requirements. The pandemic arguably increased the attractiveness of retirement living as although independence is maintained in accessible needs based housing, that allow tenants to isolate if required, it also provides a community atmosphere to reduce the impact of isolation.

Answer 26

Specific to debt - but applicable to the entire sector. a drop in transaction due to the uncertainty and therefore increase in perceived risk. In the debt market, this increase in perceived risk led to many lenders de-risking their loan offers by reducing the loan amount based on the assets value - across the board a 10% hit was felt. The do this because if the loan was to fail, there is a higher chance that they would recover their loan amount on repossession. Also pricing increase as the lenders wanted to be rewarded for undertaking more risk in the market - this was roughly 150bps Obviously lenders in this market were rewarded for supporting successful projects as pricing was higher for de-risked schemes.

Answer 27

Due to the macro factors at play, some of the senior lenders such as the commercial banks and insurers put in place a market wide pause on new loan generation, so that they could understand the risk posed by the pandemic. These lenders target long-term stable income and usually price this cheaply due to the apparent low risk associated. Consequently, the smaller market was populated by debt funds. These are funds who generate returns by investing in debt products. They usually have higher required returns and therefore take on more risk and set higher prices. They can also be more flexible with regards to process and covenants compared to more senior lenders to offer capital quickly.

Answer 28

Debt funds who were prominent in the market usually have a more specific investment criteria. For example, sectors or investment/development financing. Consequently, usually they are more educated and more aligned to the market for their investment strategy. Usually this means they understand the risk, have evidence to back this up and can price funding efficiently. However, due to the nature of this development with the combination it became clear that the lenders were not keen on splitting the title. A club deal was proposed but meant the investment facility would be charged at the same, higher price as the development portion. Consequently the lender proposing a weighted financing of the two was providing more attractive pricing.

Answer 29

"Snagging" is a necessary process of identifying issues with your new build property. Snagging issues range from leaks, heating faults, un-level ceilings, floors and walls, damaged units, missing insulation, poor joinery and structural issues.

Answer 30

There is usually a warranty in place on the contractor to fix any snagging issues in the development - The contractor for the previous owner went into administration. They appointed a contractor to finalize the snagging issues. This was in the process of being completed.

Answer 31

water ingress is when water infiltrates a property. This term can also be used to describe the penetrating damp that can permeate some properties. Common signs that you have water ingress is the development of mould and damp patches on walls and floors. water damage to the ceiling of 2 ground floor corridors (repairs have been undertaken to the relevant roof area, redecoration required).

Answer 32

Didn't align to the usual Elysium standards and the expectations of a discerning upmarket consumer for the price points. Potentially reflected in the lack of sales. Set aside £70k per apartment to update: appliances, fittings, furniture, bathroom, fitting lifts costed, design

Answer 33

The product differs from a usual residential product and so local estate agents may have been underselling the opportunity. Lifestyle purchase at its heart, driven by the added services and benefits not the property on its own Multi-faceted offer including healthcare, community, food & beverage Complex lease, regulated sales & marketing environment Thorough discovery process required, understanding of the multiple needs of the customer Wider catchment means very local knowledge is less relevant Few, if any, full service retirement offerings use estate agents for anything other than referrals

Answer 34

The comparable evidence was given a quality of comparison metric. Working with the Healthcare team, I created a tool used to evaluate competitive schemes based on location, amenities, healthcare provision and overall quality of the development. Used the hierarchy of evidence from Comparable evidence in real estate valuation 2019. meant that the units already sold could be used. Ultimately, this is a market that is in its infancy and there is a dearth of comparables. Consequently, the sector and market fundamentals were important. Elysian's track record pointed to homes over £1m in the vicinity as being an important statistic. The potential growth in the sector also helped educate the lender. Fortunately, this was a target space for the lender which made the negotiations run smoothly.

Answer 35

Dispute resolution purposes Can always clear up any misunderstanding through clear TOE and scope Understand original client request and allows them to ensure you complete the work to satisfactory standard.

Answer 36

Covid - unusual, wanted to make the client comfortable, keep them updated and provided a great service despite the issues.

Answer 37

Due to the exclusivity period, it was based on the clients assumptions that were cautious to reiterate the quality of the scheme. I cash flowed the predicted sales plan based on the GDV of the units. I cash flowed the construction costs, professional fees, contingencies, land costs etc. according to the drawdown schedule supplied. I then added the debt mechanism. The debt assumptions could be altered by the lenders in terms of loan amount, LTC, margin, entry and exit fees, non utilization etc. The calculations were based on the cost drawdowns. The repayment method could be altered using a drop down. Repayment through sales, or rolled up into a final bullet payment at the term of the loan. I included covenant checks that could be altered by the lenders such as LTGDV on running basis.

Answer 38

Agency purposes External inspection of the local area, the site area, the exterior of the property from the top down and the infrastructure. Images helped with the IM production and lender conversations

Answer 39

Meant I could be open and honest with the client upfront about pricing expectations and probability of success. I knew where pricing was and which lenders remained active despite the pandemic. I also knew what the lenders would want to see in the IM to make the process as efficient as possible.

Answer 40

Side by side Loan amount, term, margin, fees, covenants, warranties, etc. Total fees, total facility amount Commentary regarding any restrictive covenants etc. Side by side allows the borrower to instantly compare the options and make a swift educated decision on the best option.

Answer 41

Despite working on multiple retirement living projects, I wanted to ensure that our client received the best service. Our service focusses on the debt component and lender relationships. However, it was important to be able to educate the lenders on the sector and have an understanding of the sector, its strengths, weaknesses and the opportunity. Due to the fact that I work on multiple sectors, it was interesting to get an idea of the specific market knowledge that may be required should I specialise in the future

Answer 42

Whilst the sector remains in its infancy, the comparable evidence will remain low. Focusing on residential comparable, although helpful for context, doesn't take into account the multitude of extra offerings. Consequently, the focus should be on the sector, the asset and the market forecasts to get the lender comfortable.

Answer 43

Preference for one lender due to the more streamlined legal process. Consequently, I would understand the lenders price inelasticity to smooth, clear transaction compared with achieving the best pricing.

Answer 44

Very well. The biggest evidence of this was in the re-engagement for the client on their future pipeline. This also meant that we were able to approach lenders with a significant understanding of the class, the borrower.

Answer 45

They were able to provide market context in the form of research, prices and comparable evidence They were able to cross check the clients assumptions We were able to include them in lender discussions so that the lenders could get comfortable with the sector

Answer 46

Gave the lenders an indication of the terms expected to be submitted Facility size Term Purpose - Acquisition, capex Repayment - bullet, sales etc. Margin Arrangement Exit Non Utilization

Answer 47

This is ultimately who the lender is entrusting with the funding. Although the asset provides security, the operator ultimately ensures that repayment is made. Given the lender comfort around the sponsors track record, management and experience gives the lender comfort that they know what they are doing, they've done it before and will likely continue this success. It's the reason senior lenders only lent to existing clients during the pandemic.

Answer 48

``` Depends on sector Detrimental for retail Positive for last mile logistics Unknown for offices Fall in transactional data ```

Answer 49

Elysian wanted a flexible structure, dependent on whether they were achieving the business plan - Final bullet payment on maturity. The lender wanted 100% repayment from unit sales. In negotiations this was agreed at 50% - this would revert to 100% should their be deviation from the business plan or tripping of covenants.

Answer 50

The sponsor is required to provide additional equity pursuant to a cost overrun guarantee, which is a standard security in real estate development financing. Typically this cost guarantee is limited to between five and 10 percent of the total project costs

Answer 51

Warranties may be used to provide assurance from one party to another that goods and/or services will meet certain expectations, e.g. fit for purpose, being free from defects, complying with statutory and other regulations and specifications. A warranty can be either express (i.e. written) or implied.

Answer 52

Followed the CBRE best practice Colour coding Error Checks & Sensitivities run through a macro to ensure file size remained convenient Amended the model to allow the lenders flexibility to analyze their returns

Answer 53

When a consumer is not impacted by price changes

Answer 54

Yes, there was a TPO (Tree Protection Order) enforcced by sevenoaks. All trees in Conservation Areas (if they are over 7.5cm diameter, measured at 1.5m high on the stem/trunk) are also protected. the majority of the east portion of the site is a conservation area

Answer 55

Where a material uncertainty clause is used, its purpose is to ensure that any client relying upon that specific valuation report understands that it has been prepared under extraordinary circumstances. The RICS have clarified as follows: “The term is not meant to suggest that the valuation cannot be relied upon; rather, it is used in order to be clear and transparent with all parties, in a professional manner that – in the current extraordinary circumstances – less certainty can be attached to the valuation than would otherwise be the case.