Valuation Level 2 Flashcards
What legislation is in Dublin?
- Rental caps - restriction on increases the lower of 2% or inflation
- Council Tax - paid on student properties
- Tenancy length - legislation to offer shorter tenancy lengths
Retail High Street Yields
Prime - 7%
Good secondary - 9%
Secondary - 12%
What is the Global Guidance?
RICS Valuation: Global Standards, 2021
‘Red Book’
As of 31st Jan 2025
What is the UK Guidance?
RICS Valuation – Global Standards: UK national supplement 2023
According to VPGA 2 what additional info is required when reporting for secured lending purposes?
- Disclosure of previous involvement in terms of engagement
- Valuation method adopted and calculations
- Details of recent transactions on property
- Environmental considerations
- Suitability of the property for mortgage purposes
- SWOT analysis
What is the guidance on Conflicts of Interest?
RICS Global Professional Standard - Conflicts of Interest 2017
Were there any conflicts at Nottigham?
- previously valued in 2020, 2022 and 2023
- same lender
- did not consider conflict
- disclosed previous involvement
Sandhills
What was the building like?
- Built in 2020
- Steel framed
- Brick elevations
- flat room
What example is ‘PBSA Valuation Nottingham’
Sandhills
WHat emthod did you use to calculate the market rent?
Comparable method
Why did you use the investment method and not the profits method?
- Market standard to use Investment method
There are challenges with the profits method:
- defining profits for PBSA can be difficult
- mgt fees, maintenance costs and vacancy can impact profitability
- finding comps for comparable method can be difficult
What is the guidance on comparable evidence?
RICS Professional Standard Comparable Evidence in Real Estate Valuation 2019
What are the categories of comparable evidence?
Cat A – direct comparables, accurate, recent, asking prices (analysis)
Cat B – general market data to give guidance, historic and reports
Cat C – other asset classes, locations, background data interest rates
Why did you take the passing rent into consideration?
- it is what the scheme is achieving
- to see how it compared to other schemes
How did you know operational costs were in line with market?
- comps from other schemes
- bases such as age, studio mix, conversion
- internal system
What were the purchasers costs?
6.78%
Market Value and yield of Sandhills?
£35m (£106,000)
5%
What are purchasers costs made up of?
stamp duty 5%
sales agents fees 1.2%
legal fees 0.6%
What capitalisation rate did you use for Sandhills?
5.25%
(BIC: 5%)
What is a typical benchmark for capital value per bed?
£80,000 - £180,000
Depends on spec, amenity, location
Strengths of Sandhills
- strong macro location
- strong micro location
- high spec
- ensuite-led (affordable)
- strong occupancy
Weaknesses of Sandhills
- lots of competition
- large development pipeline
General property details
Flood risk: Low
EPC: B
Built: 2020
Storeys: 7/ 21m
Clad: Brick elevations
EWS1: A2
High Street Retail Valuation
Bexleyheath - Lloyds
What method was used?
Comparable
What is a Zone A?
Most valuable part of a retail space.
How would you value a retail unit?
What was the location of the retail unit?
- strong tenant mix
- strong pitch
What is the Hierarchy of evidence for L&T?
OML
RR and LR
Independent expert determinations
Arbitrator determinations
Court determinations under L&T act 1954
Hearsay evidence
Sale and leaseback
Surrender and renewals
Inter-company arrangements
Describe the comps for the retail unit
- surplus comps
- plenty LR and OML
- strong historic take up
limited office space comps
What were the main points of comps?
Date of transaction
Type of transaction (hierarchy)
Type of review ie turnover, upwards/downwards
Asset class
Pitch
Net Zone A rate
Lease terms ie lease length, break clauses, break options
How do you devalue?
rent free, amortised over the term certain
NB for a lease renewal standard assumption is 3mrf for fot out - RF - 3 MONTHD
What was the market rent of the retail unit and Zone A?
£140,000
£59.50 ZA
What factors would impact value of a retail unit?
- Assumed term
- Hard frontage
- Return Frontage
- Frontage to depth
- Shape
- Onerous lease terms
- Alienation
How would you deduce the Market Value of a retail unit?
Comparable method
- Checks
- Comparable method for MR and yield
- NIY c.6%
What price of remainder?
A/10
If you were struggling with a valuation what would you consult?
- Red Book and check which method would be best used
VPS 3 - Valuation Approaches and Methods - Check ToE for valuation method adopted
- If still unsure I would get guidance from my team to ensure I am competent
