Submission - Technical Competencies Flashcards
1
Q
What is included in the investor update presentations?
A
Total investor contacted - Active, On-Hold & Declines
Investor status - Contact, Materials received, meeting, DD etc
Investor feedback
Potential and probability of investment
Geography of investors
2
Q
What data sources were used for the debt tracker?
A
The sources for the debt tracker were the transactions that were made public, collated on real capital analytics and internal market knowledge from live and completed transactions
3
Q
Give an example of when the debt tracker aided a transaction?
A
The debt tracker gave:
Number of transaction and volumes
A good indication of where pricing was for each asset class and the loan to values you could expect.
It identified the most active lenders and countries.
4
Q
What is the purpose of the RICS Valuation Global Standards/Red Book?
A
mandatory rules
Best practice guidelines
promote and support high standards in valuation worldwide
RICS Valuation - Global Standards (‘Red Book Global Standards’) contains mandatory rules, best practice guidance and related commentary for all members undertaking asset valuations.
The Red Book is issued by RICS as part of our commitment to promote and support high standards in valuation delivery worldwide. The publication details mandatory practices for RICS members undertaking valuation services. It also offers a useful reference resource for valuation users and other stakeholders.
5
Q
What are the exceptions to the Red Book?
A
- Internal Purposes
- Statutory Purposes - tax return
- Advice during negotiation and litigation
- Agency Purposes - anticipation of work
- Anticipation of giving evidence
6
Q
What is a DCF? Does it differ between asset classes?
A
Discounted Cash Flow
The process is the same across asset classes and sectors.
The inputs may vary.
Principally estimating your cash flow, incl entry and exit.
Identifying a discount rate, usually the hurdle rate of the investor, and discounting the cash flow in each period.
The sum of the discounted cash flow is you NPV.
If this is a positive sum then the investment surpasses desired returns and should be acquired and vice versa.
The purchase price + the npv is the investment value (worth)
7
Q
How does location, attribute, lease terms and covenant strength impact a valuation?
A
If you’re looking at Market Value for example.
You could have the same office building in Watford or central London. The central London office will command a higher market value to to the price people would be willing to pay for it. This could be because of the transport links, the proximity to other firms and clients, the ability to attract talent etc. Same applies to attributes.
Lease terms impact the value due to the valuation method - if there is a long term tenant in situ paying market rent then this building will be valued higher due to the certainty of the income stream. There will be no rent frees/voids in the near future to be taken into account. Same applies to covenant strength.
8
Q
Walk me through the valuation you undertook in central London?
A
Fund valuation - so it was an on-going mandate where the building is valued quarterly.
Ensured competence
Check the notes on the previous valuation, to see if there were any upcoming issues. This highlighted that one tenant had not yet committed to renewing.
With this information in mind and the existing tenancy schedule I carried out an inspection with a colleague. The inspection confirmed the buildings situation.
The client confirmed that the tenant who had yet to renew had renewed their lease - consequently the yield was tightened on that tenant and the new lease terms inputted.
This was a reversionary valuation. The value rose by £250k.
9
Q
How did you weight the comparables?
A
According to the RICS guidance on hierarchy of evidence. Categories A to C.
I collate all comparable in a schedule and then weight them accordingly.
A- Direct Comparables: Starting with recently transacted information of a similar property where facts are known towards asking prices in the market.
B- Market Data
C- Other sources
10
Q
What is the hierarchy of evidence?
A
Categories A to C
A is direct comparable - so recent transactions of similar properties where all information is known to asking prices
B is Market info - yields, indexes etc.
C is other sources - other real estate and locations
11
Q
What was the impact of the valuation on the fund?
A
The value of the building rose due to one of the tenants agreeing a lease renewal for 8 years with 8 months rent free and a 5 year break. The value rose by 5% or £250k
12
Q
Why were rent frees and void periods extended during the coronavirus?
A
Voids and Rent Frees had been extended due to COVID - from 12 to 18 months rent frees and voids as high as 21.
Extended due to the uncertainty regarding future tenancies.
If there was less than a year on the tenancy then the severe scenario would be put in place.
These were referred to at the next quarter date.
13
Q
Give an example of where these RFs and voids were pushed out and why?
A
City - Tenant lease was set to expire in 12 months and there was no tenant incoming.
Rent free was moved out to 18 and void 21 months as the comparable data had suggested
Value of that floor and building fell - After capitalizing the existing term the delay to the next lease being signed is now longer, the PV value of that income stream is now lower. The extension in the rent free means that the net effective rent will be lower and so the income stream is less.
14
Q
What valuation method did you use for the city office?
A
Investment
When there is income, capitalized at a yield attained from comparable evidence
term and reversion - draw
Capitalise the term for the existing lease - capitalise the reversion and pv
15
Q
How did you weight your comparables for the London valuation? What was your ERV and Yield?
A
According to the guidance note - comparable evidence in RE valuation 2019 aligned to 3 categories. Fortunately there was comparable evidence where all information was available and accurate internally that could be used in the local vicinity.
ERV = £50psf Yield = 4-5%
16
Q
What are the sources of debt in the market and how do these differ due to investment criteria?
A
Senior Lenders
Insurers
Debt Funds
Investment Banks
All have different investment criteria and consequently risk profiles. Senior lenders to ensure they can pay interest on depositor and insurers of claims.
Debt funds and investment banks target higher returns for investors.
17
Q
Why do people/firms use leverage?
A
To exacerbate returns - It also increases risk as it also exacerbates losses.
Generate the same profit with less initial equity injection. Increases your return on equity.
Whether it’s accretive is dependent on the price of debt.
18
Q
What is LTV, ICR and DSCR?
A
Loan to Value
Interest Coverage Ratio - Just interest payments
Debt Service Coverage Ratio - Interest and principal repayments
19
Q
What is a covenant? Why are these included?
A
Covenants are put in place by lenders in order to protect themselves. These financial stipulations give the borrower clear expectations for the loan contract and enable both parties to maintain the loan terms.
Ensures the solvency of the project - The borrower has enough income to sustain payments
20
Q
Why is the covenant strength of the borrower important?
A
Ultimately the borrower financial strength is important for the lender. If the project doesn’t go to plan, does the borrower have strong financial status to ensure repayment. It can also determine the pricing of the loan.
Track record is also important.
21
Q
How can you adjust for a weak borrower?
A
Lower LTV i.e. facility
Higher pricing - higher reward for increased risk
More restrictive covenants
Cash sweeps etc.
22
Q
What would encourage a lender to fund a project?
A
Covenant strength - Credit report
Track Record
Prior relationship
Strong project fundamentals
23
Q
What information did you require for the three retirement sites?
A
Debt requirements Asset descriptions and locations Development appraisals Demographics and market information track record timeline Development appraisal and specifications
24
Q
What was included in the marketing materials for the retirement site?
A
IM and financial model
Exec Summary Finance Request Asset overiview Sector overview financials
25
What was the opportunity in the retirement sector?
Infancy compared with Aus, NZ and US - Undersupply
UK 65+ Population expected to grow by 20% by 2027 - Increasing demand
UK 65+ have £1.6 trillion Equity in their homes
Rising expectations for high quality, hotel style accommodation across UK markets - retirement living is viewed more as a lifestyle choice rather than a ‘last resort’
26
Why was the track record of the management team important to the retirement project?
Track record is important as it provides the lender comfort due to the fact this process has been completed successfully before.
An experienced team is a much more attractive investment prospect than someone with no experience or track record.
27
What is an ltc?
loan to cost - used for developments
28
Why was a 65% ltc selected for the retirement living portfolio? What were the macro factors?
From previous transactions and market knowledge, this was the sweet spot that would include the majority of lenders given the desired pricing. Senior and debt funds.
COVID. Increase in perceived risk meant that the loan amounts were reduced and pricing increased to mitigate the external risks.
29
What are restrictive covenants? What were the restrictive covenants in the retirement living deal?
Pre-sale targets
Sales per month
Sales re-pay loan etc.
30
What makes up the total cost of a loan when presenting the indicative terms to a client?
Loan Amount
Fees - Upfront, interest, non utilisation and exit
amortisation
31
What currency was used in the data centre deal?
Euros - the American Firm had a European investment arm in place
32
What are some of the sector specialties in data centres?
Tier IV Gold
Mechanical – Shield, heating and air handling
Electrical – 100% uptime
Security
MW is NIA
Tenants fit-out space so sticky
charged on a per KW / Month - depends on consumption = €160 for 50kw per month
33
What is Capex? How big was the Capex loan in the data centre deal?
Capital Expenditure. An asset management technique used to boost capacity or quality of an asset to increase rent achievable o.€80m - 60% LTC
34
What is a debt yield? What was the issue with the debt yield in the data centre deal?
Debt yield is the noi/total debt
i.e. how many periods of income would it take to repay the debt
Prior to the extension and income generated the income would be low compared to the debt quantum
35
What was the IRR and EM for the retail park in Birmingham?
Input dependent
- yields, rents, forecasts, tenants
23. 6% / 2.4x / 54m
36
Why were covenants important in the retail park deal? How did you assess their credit worthiness? What did you include?
Covenants were important due to the sector issues. The retail market was underperforming and a number of high profile retailers were going out of business.
The credit profiles gave the lenders comfort around their finances and their ability to meet rent payments. The majority of the information was from credit reports and financial statements from companies house. Profit, Assets etc.
37
Why were shopping parks more defensive compared to other sections of the market?
▪ Out of town retail parks provide a unique shopping environment to the mutual benefit of
the consumer and retailer. Accessible, convenient and stress-free for the consumer, they are
also flexible and cost effective for retailers, with low construction and relatively low
occupancy costs
▪ Shopping parks, although off a smaller base, experienced 5% less store closures than Retail
and Leisure Parks in the retail sector
38
Why can a debt fund be more reactive? Why are they able to provide less restrictive covenants?
Smaller more dynamic businesses that are often willing to take on more risk to enhance returns.
They are often more active in the opportunistic and value add spaces where they have to act quick to ensure completion.
They can be more flexible than senior lenders as there is often less regulation and procedures - this allows them to be flexible and take advantage of opportunities.
39
Why did COVID impact the sale of the shopping park?
The markets paused to understand the impact that the coronavirus was going to have - The buyer offered a discounted price to the seller for the benefit of completing - the seller wanted to reassess the impact on value.
40
What is a revolving credit facility/ hunting licence?
A loan where a pool of capital is made available to the borrower to be accessed as per their requirements. They are only charged on the capital drawn. Good for companies with unexpected outflows or expensive purchases. For operating purposes.
Features: Cash sweep, max amount, potential commitment, reuseability
In this case it was a pool of capital available for potential acquisitions
41
Why was the track record and potential pipeline important for the Opportunistic fund?
The fund needed to prove to the lenders that they had experience and had been successful following a similar strategy in the past.
Pipeline was important as the lenders, especially when there is not foresight of the assets they are lending against, want to know the likely assets they will be lending against.
42
Why did you go ahead with the mandate if you didn't believe it would be achievable for the opportunistic fund?
It wasn't that it wasn't achievable, it was more setting the clients expectation.
They also wanted to create relationships with lenders moving forward.
We agree an engagement and carried this out. They were a impressive sponsor that had a bullet proof track record
43
Why are senior lenders able to offer lower prices?
Senior lenders and insurers for example require stable and long income to match their liabilities. Consequently they follow risk adverse funding structure. Usually low ltvs to mitigate risk. They also often impose tough covenants and restriction to ensure repayment and a lengthy process.
44
Why did the debt fund have higher LTPP and pricing in the opportunistic fund?
Risk profile.
Their investors want higher returns.
To do this they are often willing to increase the loan amount, increasing risk, to achieve their pricing requirements.
45
What were the restrictive covenants imposed by the senior lenders on the opportunistic fund? How did they hinder the model and timings?
They wanted to sign off acquisitions - due to the space the fund were operating in, often sales were completed quickly and off market.
The approval processes that the senior lender wanted to put in place would have hindered this.
46
What was the impact on the funds expected returns from accepting the debt fund metric in the opportunistic fund?
Cost of debt was coming close to the IRR - the point at which the debt no longer becomes accretive to returns
47
What is the difference between a development appraisal and a RLV? Where would each tool be used?
GDV - TDC - LV = Profit Viability of a development
| GDV - TDC - Profit = RLV Price that should be paid for land to achieve a certain profit.
48
What does the RICS Financial Viability in Planning: conduct and reporting 2019 professional statement say?
14 Step Financial Viability assessment to establish profit and loss arising from development. Analyses outputs and inputs and matters of relevance. Gives judgement on profit.
1. Impartiality and Objectivity statement
2. Confirmation of instruction - absence of COIs
3. No contingent fee statement
4. Transparency of info
5. Confirmation on whether RICS member working on the area already
6. Justification of evidence
7. Benchmark land value & supporting evidence
8. FVA origination, review and negotiation
9. Sensitivities
10. Engagement of RICS members
11. non-technical summary
12. authors sign off
13. Inputs supplies by others
14. timeframe
49
Weakness of an RLV?
Lots of assumptions and very sensitive to changes in the profit requirement
50
What do you usually sensitize in a development appraisal?
yield
Rents/Values
Costs
Finance rate
51
What are some of the external factors that can impact a development appraisal?
Finance costs
Build Costs
Planning Costs
Contingencies
52
What use class does retirement living fall in?
C2 – Residential Institutions / C3 – Secure residential institutions
53
What is CIL and S106?
Community Infrastructure Levy
Charged by local authorities on a square metre basis - aligned to their charging schedules found online.
Charged on the increase in space from a redevelopment of buildings bigger than 100m2
Purpose is to allow the local authority to provide the required infrastructure to support development
Section 106 are flexible tariffs/requirements put on developments by the local authority - no compliance can mean no planning permission.
Three criteria:
1. In place to ensure the viability of the development
2. Directly related to development
3. fair and reasonable
e.g. Affordable housing or recreational facilities
54
What was the interest rate suggested on the senior living asset? Why?
5-6% - Due to the development risk taken on by the lender. There is currently no income generation. Price reflects the risk of the development
55
What was the sales price psft of the senior living asset in Kew? What did the healthcare specialists suggest? How did you sensitize this?
1250
1200
Sensitized the rent in £50 intervals to assess the impact on the key metrics profit and profit on cost
56
What was the original planning in the canada water scheme?
residential led scheme - valued at £150m
57
What is a contingency? What contingency did you use for the canada water scheme?
Downside risk protection from unknown causes associated with a project – amount that is held in reserve in case.
5%
58
How did the return change between the scheme and phases at Canada Water?
Scheme: 36% POC, 16% IRR, 1.7 EM
59
What was the use class at Canada water?
C2 - wanting to change to use class E that encompasses A B and D now
60
How did you run sensitivities on the residential scheme in London? What was the impact on the profit on cost for the appraisal?
Sensitized total construction cost - allowing the user to adjust the percentage intervals
Sensitized finance costs due to the movement in the debt markets
Fall in profits - could be balanced out by an increase in gdv
61
How did you apply a 60% LTC to the residential development appraisal in london?
Explicitly using the cashflow methodology
62
Why were there higher costs of materials for the appraisal?
Building material prices have soared over the last six months, along with many other products. The cost of raw materials such as timber, plastics and steel have particularly surged. Supply chain disruptions, due to the Covid-crisis, decreased the supply of building materials just as output remained resilient during the pandemic. This has resulted in shortages and price hikes.
63
What's the benefit of conducting a development appraisal on Excel? Why did they require a cashflow?
Preferred for phased developments.
Means you can be explicit regarding the cash flow showing precise timings.
Costs to be accurately reflected.
Can establish cashflow at a point in time.
Viability of phases.
Timing of max deficit
64
In the mixed use scheme was there any difference in how GDV was calculated between the sectors?
ERV capitalized
| PSF multiplied
65
Would you advise the inclusion of growth in a development appraisal?
It depends on the client.
We can easily add the functionality - growing the rents til pc and then capitalizing them.
At the same time it could be incorporated in the ARY.
66
How do you discount cashflows? What is the investment value of a project?
Build CFw incl. entry and exit values
Discount cashflow at discount rate
sum up for the NPV.
Purchase price plus your npv is your investment value.
67
What is an NPV? How is it calculated? What is a discount rate?
Sum of discounted cashflows - discounted at discount rate - hurdle rate, target return or risk free rate (GILTs) plus a premium
68
Why are sensitivities important?
Allow the user to understand the implication on key outputs should the inputs move
69
What is CBREs and general good practice for modelling?
1. Disclaimer - macro
2. Simple and elegant formula
3. no hardcoding
4. colour coding inputs and outputs
5. error checks and sensitivities
6. one formula per row in cashflows
70
How did you include the proposed developments and asset management in the fund model?
These were included on a separate tab.
The costs profiles were included were developments or refurbishments were happening.
The projected ERVs were then inputted, Void and RFs.
The model then override the existing property from the build period to letting and disposal.
71
What were the outputs from the fund model?
NPV, WAULT, Cash, Income return, Capital return, Total return, IRR
72
Give an example of the yield and growth forecasts for the fund model?
Yield and growth forecasts were decided internally by our client using their research team.
This depended on the sector of each individual asset – and the specific asset classes within those sectors
e.g. shopping centres was growing from 9%, WE offices was compressing from 4%
73
What is an error check? Why are these used?
Ensuring that the cashflows align to the output sheets for example – ensure no user errors
74
How did the development appraisal model allow for multiple sectors?
Input sections for each asset class: Primarily Resi and Commercial
Commercial – usually done by an ERV per square foot based on NIA with rent free and void periods including service charge and business rates
Residential is usually calculated on a price per unit or price per sq ft basis
75
What would be the usual impact of selling on PC rather than selling on hold?
Selling on hold would mean that the developer would benefit from the income stream generated from the property – however selling after PC would inevitably increase the rate of return due to the size of the exit being received earlier.
76
What outputs did the development appraisal model show? What would you typically show?
Developers Profit, Profit on Cost, Income Return, NPV
77
How was the debt financing mechanism added to the model for the senior living mandate? How would the facility be repaid?
Create the unlevered cashflow. You would then understand the drawdown of debt dependent on the LTV or LTC. The interest rate selected would be charge on this drawdown. The inclusion of fees and the amortization schedule was made optional. Adding the sum of the drawdown (positive), interest, fees, amortisation, and repayment onto the unlevered cashflow would give you your levered cashflow
Through a bullet payment on completion or through the pay down of sales
78
What was the impact of the debt on the senior living financing model? What would happen if you changed the LTC for example?
Exacerbated returns - Meant that the initial equity injection was smaller to achieve the same forecasted profit.
If the LTC was amended the equity injection would fall further. EM and MOIC would increase.
Preferable but it also increases risk - liabilities are higher.
79
What does rolled-up interest mean?
Development Finance where there is no income to pay interest.
Payments accumulate until the term of the loan or when there is income.
80
What was the break-even price for the senior living asset model? What was the headroom, what is preferable in this scenario?
£750
£1250 (£700 sf)
Obviously the larger the headroom the better, but in this case prices could fall by 40%
81
What are the requirements under surveying safely guidance note?
Sets out good practice for M&Fs for management of H&S.
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Key areas:
Safe person
Legal considerations - such as advice on asbestos
Health, well being and mental health
FS
Templates provided
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82
Why is recording findings important on inspections?
So that they can be referred to if there is write up required on return to the office - reports
So that others can see the notes and make a judgement on the property
For dispute resolution, proof that the inspection was carried out and issues identified.
83
What are the different inspections that you've carried out? What's the difference/purpose?
Agency, Valuation and property managment
84
Talk me through the inspection of the office in strand? What were the market dynamics?
```
Obviously followed the usual protocol in -
A desk top risk assessment
understanding my travel requirements
location
timings
Right equipment
ensuring it was recorded in my diary.
Surveying safely GN 2019. Appropriate clothing, safe to inspect etc
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85
What was the estimation of refurb costs? What would this do?
On the original office space £80 for refurb to make it grade A - raised floors, lighting, air con etc.
86
What did you notice on your external and internal inspection of the strand office?
Roof down, defects, cracking, site coverage, parking, infrastructure, site boundary
Layout, repair, services, statutory compliance, compliance with lease obligations
87
What type of inspection did you undertake on the senior living asset?
Agency
88
What makes a good area for a senior living site? What do you look for?
Homes above £1m, older population, access to the high street, open areas
89
Why was accessibility important to look for on the Senior living inspection?
Built environment should be inclusive and not discriminate based on the characteristic defined by the equality act - Age is one
90
How did you ensure the specification? What was this?
Ensure that the specification agreed to the marketing materials we had distributed. This included all kitchen appliances in situ, alarms in apartments, wet room showers, hand rails where applicable and a multitude of communal areas for the residents.
91
What was the marketing programme for a senior living provider?
Was in the national newspapers, local boards and personal door to door targeting.
Garden Parties as well
92
What frontage did the old bank have?
Hard frontage - this usually impacts the ability to use the zoning technique used in residential valuations
93
What was the decrease in value for the (bank) building? What was the impact on the fund?
The decrease in value came from the realization that the ground floor would no longer generate rent.
The ground floor was already heavily discounted compared to the rest of the building so the impacts on value was minimal.
However, the price fell by £50k.
94
What is asbestos?
hazardous material previously used in old building materials such a cement and insulation.
tiny toxic fibres that can lodge in the lungs and cause serious health issues.
4m props in the UK and 500 die a year from asbestos related exposure.
Brown, Blue (85) and White (99)
Falls on the duty holder to manage
95
Who was the duty holder in this scenario?
Property manager that had been put in place by the landlord
96
What is regulation 4? Are there any other regulations?
This regulation covers the duty to manage asbestos in non-domestic premises.
It requires duty holders to identify the location and condition of asbestos in nondomestic premises and to manage the risk to prevent harm to anyone who
works on the building or to building occupants.
Yes, for example regulation 5 is the identification of asbestos
97
Is there any regulation on Asbestos?
The Control of Asbestos Regulations 2012 - Obligations of duty holder, survey to make material assessment, non-licensed work need to notify HSE and needs to be recorded
Guidance Note - Asbestos, legal requirement & best practice 2021
- Common asbestos containing materials
- how to commission a survey
- suggested content of asbestos management plan
98
What type of survey did you suggest for the asbestos?
1. Management - locate, assess & advise on management during normal occupation
2. Refurb/demo - required for demo/refurb - samples of suspect materials taken and analyzed, recommendations made
99
What was the outcome of the Asbestos advice?
A refurb/demolition survey was to be carried out by a licensed contractor under the HSE guidelines.
100
Was there an existing asbestos register?
Yes - made available to everyone entering the building.
Highlights the location of suspected materials that may contain asbestos.
101
What was included in the asbestos management plan?
details of how the location and condition of known or presumed ACMs are recorded
priorities for action
decisions about management options, including rationales
a timetable for action
monitoring arrangements
employees and their responsibilities
training arrangements for employees and contractors
plan of implementation for new procedures, including those for external contractors
the mechanisms for passing on information about the location and condition of ACMs to those who need it
102
What are the penalties for Asbestos mismanagement?
H&S Act 2008
£20,000 fine and 12 months
Higher court there are no limits
103
What are a duty holder statutory requirements on asbestos?
Location and condition
make, and keep up-to-date, a record of the location and condition of the asbestos- containing materials - or materials which are presumed to contain asbestos
assess the risk of anyone being exposed to fibres from the materials identified
prepare a plan that sets out in detail how the risks from these materials will be managed
take the necessary steps to put the plan into action
periodically review and monitor the plan
provide information on the location and condition of the materials to anyone who is liable to work on or disturb them
104
What role does RE play in an investment portfolio? What are the attractions and benefits?
Diversification benefits
| Long and stable income compared to other asset classes.
105
What are the methods used to enhance return and income security?
Asset management:
Lease re-gearing
Refurb
Tenant management
106
Who are the investors in the market? What do you mean by driven by their risk profiles?
Private Equity, Pension Funds, REITS, overseas investors.
Have different objectives and therefore risk profiles.
Pension funds are seeking to long term stable income to ensure that pension plans can be sustained.
Hedge funds are looking at high risk opportunities to make money quickly for investors.
107
What are some of the KPIs used by investors? What is IRR, WAULT and Vacancy rate?
IRR, WAULT, Return etc.
108
What is a benchmark?
A point of reference or comparison. Allows you to gage how your investment is performing compared to the industry or perhaps internally.
109
What benchmark did you use? How do you benchmark?
MSCI all property due to the make-up of the fund
Could also break it down to see how each sector was performing as well.
110
What are some more widely known benchmarks?
MSCI and IPD
111
How was the capital recycled? What do you mean imitate future pipeline acquisitions?
Any new subscriptions and income generation above our 10% cash target was reinvested.
This was done by setting up dummy sectors/assets that would be theoretically purchased by the fund and generate a return editable by the user.
Obviously this is not an exact science, but went some way to replicating the business plan of our client.
You could also add potential pipeline and could then see the portfolio composition driven by this strategy
112
Talk me through the investment appraisal?
Depends on investment horizon.
Cashflow the investment. Using the preferred purchase price or market price.
You can then forecast the cashflows, taken into account any lease events, any growth assumptions and finally an exit value.
Usually over 5-10 years. You are then able to generate your IRR, EM, income growth, capital growth, WAULT etc.
This can then be added to the fund model to understand the impact on the fund metrics
113
Why was no offer made on the office for the fund?
Because their portfolio was already heavily weighted to offices and the on-going pandemic was increasing the ability to wfh - until it the outcome of the pandemic was realized they wanted to take advantage of some of the sectors performing better and diversify.
114
What was the WAULT of the fund prior to the inclusion of the potential asset?
4.5 years
115
What was some of the key information in the London valuation you carried out?
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Fully Let
Freehold
WAULT = 4.3
8000 sq ft.
EPC rating C
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116
What was the structure and fit out of your London valuation?
Steel frame construction clad in Portland stone and asphalt roof.
Reception and Common Parts recently refurbished.
LG and 4 upper floors
Steel and concrete frame
Grade A - LED lighting, Air Con, Lift, Suspended Ceiling, Natural Daylight
117
• Could you pick a property and tell me how you dealt with voids in income in calculation?
City - Tenant lease was set to expire in 6 months and there was no tenant incoming.
Rent free was moved out to 18 and void 21 months as the comparable data had suggested
Value of that floor and building fell - After capitalizing the existing term the delay to the next lease being signed is now longer, the PV value of that income stream is no lower. The extension in the rent free means that the net effective rent will be lower and so the income stream is less.
118
• How did come up with capital value for rental profile in your investment valuation?
Used the term and reversion method.
119
• Did you use split yields or same yield in your investment value? What’s that yield called?
Split - Equivalent yield
120
Was rent predicted to go up after relet void? If gone down would have done same approach?
o What would have done then?
o If goes up, is that the end of the valuation?
No hardcore and layer approach
121
• What’s the key infrastructure point in data centres?
Mechanical – Shield, heating and air handling
Electrical – 100% uptime
Security
MW is NIA
Tenants fit-out space so sticky
charged on a per KW / Month - depends on consumption = €160 for 50kw per month
122
• If I look in the HSE guidance on managing asbestos what do’s that say?
Duty holders obligation to manage asbestos
Need to have a register in place for anyone that may disturb the asbestos
Carry out a survey specific to requirements
Licensed contractor for any work
❒ Find
❒ Condition
❒ Presume
❒ Identify If you are planning to have maintenance or refurbishment of the building carried out or the material
is in poor condition, you may wish to arrange for the material to be sampled and identified by a specialist
❒ Record
❒ Assess
❒ Plan
123
• What happens if you breach regulation 4.
H&S Act 2008
£20,000 fine and 12 months
Higher court there are no limits
124
What is a CRM system? How does it help with what you do?
Customer relationship management.
In this example, we use it predominantly to maintain investor dialogue is up to date and to keep track of mandates.
It allows anyone in the team to understand an investors thoughts without having to speak to them directly.
It also allows us to collate investor information for our clients
It also acts as a dispute resolver due to the fact all conversations and emails are retained.
125
• Why would lenders request sales to be paid down?
Security on repayment, this is a type of amortisation structure – also ensures that it’s not spent elsewhere before they are reimbursed.
126
What was the asbestos score of the building?
Material Assessment Score
Priority Assessment Score
presumed asbestos material is in good condition, use a score of 1 for both material and priority - 8
127
What parts of the building were on the register?
roof voids, wall cavities - presumed to contain asbestos
128
What was your advice on the shopping park in Birmingham?
I advised the client on two key issues:
- Potential lenders and pricing
- What to include in the IM regarding covenants and on the retail sector
- Which lenders would be preferable to approach
129
What was your advice on the UK opportunistic fund?
I advised the client on the market dynamics
I advised the client on the lenders that we would need to approach
I advised the client on the pricing indicated and its impact on their fund returns
130
What was your advice on the residential scheme development in london?
Advised the client on the financing costs
Advised the client on market issues and the inclusion of sensitivities to understand the potential impacts
I advised on profit on cost
131
What was your advice on the mixed use scheme in London?
I advised on an appropriate finance rate
I advised on the contingency costs
I advised on the viability of the project based on profit on cost
132
What was your advice on the bespoke development appraisal model?
I advised on the methods of calculating GDV
I advised on the outputs that could be shown
I advised on the layout, format and locking of the workbook
I advised the client that sell on hold or a sell on PC could be included
133
What was your advise on the senior living model?
I advised on the impact of different LTVs and equity injections
I advised on the repayment structures to include
I advised on the viability of the development and the headroom
134
What advise did you give after the inspection on the office building in London?
I advised that the vacated first floor would, with capital expenditure achieve the ERV
I advised that the vaults would achieve no rental income
135
What was your advice on the office building in the city that had asbestos stickers?
I advised the owner on their duty to manage according to regulation 4 of the asbestos regulation legislation produced by the hse in 2012
I advised that a refurb/demolition survey should be undertaken to understand whether the building contained asbestos prior to works being carried out
136
What Benchmark did you use?
MSCI/AREF UK Quarterly Property Fund Index
Quarterly returns as measured in the MSCI UK Quarterly Property Index, the largest UK direct real estate sample gave returns of 4.1% for September 2021.
lndustrial was the best performing sector with a 3-month return of 7.5%. Residential sector recorded 2.9% returns. Other sector recorded 2.6% returns. Office sector recorded returns of 1.5%. Hotel sector recorded returns of 2.2% and Retail sector recorded returns of 3.7% . Income return was stable in line with the previous quarter at 1.1%.
