Valuation (L2) Flashcards
How did you source and analyse your evidence?
I used CBRE internal database and EGI Radius to find comparable evidence. My main focus was sales of similar properties with VP. I analysed these sales on a rate per sq ft basis to compare.
You crossed checked on an investment basis, could you explain what your inputs to were to your valuaiton?
I used circle software for this. I had to assume the property was vacant and available for let on the open market. I assumed (based on evidence) that the property would achieve £6.00 psf and would let for a period of 5 years with an incentive of 3 months. I used an equivalent yield to capitalise this. I assumed there would be a void of 9 months, so I had to factor in rates liability for 3 months. I also factored in agents fees, legal fees and any LBTT due.
How did you adjust the yield to reflect the fact the property was vacant?
Given that the property was vacant, I had to reflect the risk in the yield by using an equivalent yield.
What is the definition of investment value?
The value of an asset to a particular owner or prospective owner for individual objectives
When would you use the investment method?
Valuing an income producing property.
To determine the market value of a property from its potential to generate future income.
What PII cover was in place for this instruction?
This is confidential, but CBRE’s standard PII cover for new valuation instructions is normally the lower of 25% of MV or £20m.
Can you tell me about the long leases Scotland act?
Long Leases Scotland Act 2012.
Leases that had an initial term of more than 175 years,
and had more than 175 years to run from November 2015,
and had an annual rent of £100 or less
were converted to heritable.
(EG it doesn’t apply to my case study property)
With regards to long leaseholds, what if the unexpired term was only 30 years?
It is not something that I have personally dealt with before but I understand that:
The shorter the llh, and higher the llh rent, then the greater the risk. You would apply a higher yield, meaning there would be a lower value, and less interest in it.
What is included within purchasers costs?
Legal fees (0.5% of pp)
Agent fees (1% of pp)
LBTT (depends on price, 0%, 1% or 5%)
how do you take into account ‘market uncertainty’ in valuations?
Market uncertainty cannot be quantified, as it is normally unexpected and outwith your control.
You would caveat a valuation by saying it is valued ‘as at the valuation date’.
If the market is particularly volatile then you may suggest that valuations are carried out more regularly.
The RICS has guidance on it within VPGA10.
You mentioned that you checked for flood risk, how did you do this?
What types of flood risk are there?
How would you value a property if there was flood risk?
I checked this on the SEPA website, which shows the probability of flooding over a number of years.
Types of flood risk - river, coastal, surface.
If I identified flood risk, I would ask for more information from client, mention it in my report. But for the purpose of the valuation I would continue on the assumption it was insured.
Your retail example, did you apply any end allowances?
Not in this case, but I understand you may apply an allowance for return frontage, up to 10% but dependent on evidence.
Talk me through the retail unit on Argyle Street?
A retail unit that was let to a national occupier, with good quality fit out. There was an upper floor, so zoned at a different rate (it was used for stock).
Argyle Street is not a prime retail location, so the ITZA rent was £85.
Thinking to retail valuations, how would you deal with an over rented property?
Overrented properties are valued using the hardcore / layer method.
Apply a core yield to the market rent, the apply a froth yield to the level above market (this yield will be higher, as there is more risk). Generally a froth yields is 100 bps higher than core yield.
What is the current prime industrial land value?
£250k per acre
