Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

SB APC > Valuation & Loan Security examples > Flashcards

Valuation & Loan Security examples Flashcards

1
Q

What was the specification for the unit you valued in Wellingborough?

A
  • Steel portal frame and pitched roof
  • Part block part metal clad evelation
  • 1980’s construction
  • 73,000 sq ft unit
  • 9.45m eaves
  • 2 level access and 2 dock level doors
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What valuation considerations did you have for the Wellingborough unit?

A
  • Specification was older and inferior due to the lack of loading door for its use - discounted MR
  • WAULT of sub 3.5 years - greater risk
  • Reversionary by 15% - consider EY
  • Secondary location
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What was the methodology of the valuation for the Wellingborough unit?

A
  • CIT
  • Due diligence
  • Inspect
  • Collate evidence
  • Analyse
  • I used the comparable method of valuation to determine the market rent and cap rates. I compared the subject against recent transactions. Due to the unit having older specification and lack of loading doors I discounted from the more modern unit rents in the area accordingly.
  • I used the investment, term and reversion method to calculate the Market Value. I calculated this using the Argus software.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What issues with construction would you expect with the Wellingborough site?

A

Asbestos and cut edge corrosion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What was your advice to the client on Wellingborough?

A
  • The building was suitable for loan security due to the security of covenant however I did warn regarding the possible risk regarding the loan repayments if the tenant were to vacate.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

On what basis did you value the Bardon unit?

A

Market value and market rent for secured lending purposes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What was the specification of the Bardon unit?

A

Steel portal frame - pitched roof
41,000 sq ft
9m eaves
Hot air blowers
LED lights
1 level access and 3 dock level doors
Two storey office block to the front elevation
Secure yard
5% office content

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Why did you value on a vacant possession basis?

A

The unit was owner occupied and meant there is no lease in place and therefore the asset is not income producing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What was the SWOT anaylsis of the Bardon unit?

A

Strengths – Situated in an established commercial area and lack of availability within the immediate market
Weaknesses – secondary micro location
Opportunities – Sale and leaseback in order to redeploy capital elsewhere
Threats – Economic uncertainty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What was your methodology for valuing the Bardon unit?

A

CIT
Due diligence
Inspect
Collate evidence
Analyse

I used the comparable method of valuation to determine the market rent. Due to the older specification and inferior location compared to the comparables I applied a discount to the more modern comparable evidence.

I compared VP sales on a Capital Value basis to the subject and noted, the subject was of superior quality and similar secondary location. £95 - £100 per sq ft

I undertook a speculative investment valuation to cross check the comparable valuation. I assumed:

9 month void/50% market rent void costs/L&L costs and legal fees 15%

Comparable method to determine yield of 8.5%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What advice did you give to the lender regarding the Bardon unit?

A

The property was suitable for loan security and a sale of the asset would appeal to owner occupiers and regional investors/property companies due to the age, size and specification

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

on what basis did you measure Bardon?

A

GIA

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What was the construction and specification of the Retail Park in Wisbech?

A

Steel portal frame construction under a pitched roof
Part block part profile metal cladding
Made up of five units

Each unit were fit in accordance with the tenants’ corporate standards
Glazed frontages
Combination of suspended fluorescent strip lighting and LED lighting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

We’re the lease renewals done on a headline or net effective basis at Wisbech?

A

Headline

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How did the capitalisation rates differ and why did they differ at Wisbech?

A

The cap rates used depended on the particular tenant covenant and unexpired term as well as the condition of the unit.

Each unit were different sizes, with one unit being developed more recently than the rest. One tenant had an unstable covenant which I applied a higher yield to, to account for greater risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How did you calculate the special assumption at Wisbech?

A

There was no direct evidence of vacant retail parks so I undertook a speculative investment method approach. I assumed a 6-15 months void, 50% of market rent (void cost), 15% leasing letting and legal fees, 6 months rent free and a higher yield to account for greater risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What was the methodology for your Wisbech valuation?

A

CIT
Due diligence
Inspect
Collate evidence
Analyse

Comparable method of valuation was used to determine the market rent. Due to the lack of evidence within the wider Norfolk area I expanded the search area. The subject was considered to be in a secondary location to the evidence, so I discounted accordingly. Most pertinent evidence were the lease renewals on the park.

Used the comparable method to determine how the cap rate. I applied different yields to each unit depending on covenant strength, condition, and size.

The blended yield profile is then compared against the comparable evidence

To calculate the VP value there is no evidence of vacant retail parks so I undertook an investment method approach – assuming costs and a higher yield.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

For the Wisbech valuation what did you advise the lender?

A

I advised the client one tenant had a high risk covenant; however I advised the tenant made up a small percentage of the total income and the remaining occupiers were of national covenant quality and the park was suitable for loan security.

17
Q

What was the SWOT analysis for Wisbech?

A

Strengths – 100% occupied, popular local retail park
Weaknesses – WAULT sub 2 years / weak Carpetright covenant
Opportunities – regear and renew the existing leases
Threats – Tenant default / tenants vacating / Wider macroeconomic issues

18
Q

What was the specification and construction for the Banbury unit?

A

Steel portal frame beneath a pitched roof
EPC A
236,000 sq ft
Integral two storey office building
Concrete flooring
LED lighting
18 dock level and 4 level access loading doors
Eaves – 14.5m

19
Q

On what bases did you value the Banbury unit?

A

Market value, market rent and Market Value on the special assumption of vacant possession

20
Q

What was the methodology of valuing the Banbury unit?

A

CIT
Due diligence
Inspect
Collate evidence
Analyse

Comparable method of valuation, this was to the higher range of the evidence due to the strong location, modern specification and EPC A rating.

I determined the asset was reversionary.

Comparable method of valuation, the best evidence was in a superior location and had a longer WAULT and therefore I discounted back accordingly.

I adopted the Term and reversion method to determine Market Value.

Due to the lack of evidence available I undertook a valuation calculation adopting void costs, void period, letting and legal fees and a higher capitalisation rate to account for the risk.

21
Q

For the Banbury unit how did you determine the tenant had unstable results?

A

Conducted a D&B report. Score was N3 which suggested negative net growth.

22
Q

What does an N3 score mean?

A

Negative net growth with slighty great than average risk.

23
What advice did you give the lender regarding the Banbury unit?
I provided SWOT analysis suggesting that the client could realise their reversion if the tenant was to vacate on expiry
24
What was the SWOT analysis for Banbury?
Strengths – Strong distribution location on an established commercial location / Modern unit Weaknesses – WAULT of 2.5 years / unstable financial results Opportunities – Regear the lease with the current tenant Threats – Wider macroeconomic issues / increased competition in Banbury / tenant vacating on expiry
25
What was the specification for the Retail warehouse?
Eaves 10m 91 car parking spaces LED lighting Secure loading yard to the rear The tenant had also fitted the unit out in accordance with their company wide specification
26
What yield did you use when capitalising the rent and why?
Net initial yield due to the fact it is rack rented
27
For the Towcester unit, did you have any issues reaching the exteriors of the walls due to the tenant fitout in situ?
No but I am aware you can use tools such as a thin ruler which can slide between the tenant fitout and measure to the external wall
28
Talk us through the valuation of the retail warehouse.
- CIT - Due diligence - Inspect - Collate evidence - Analyse - The property was considered to be rack rented after comparing the recent regear to market evidence. - I considered the net initial yield when comparing against the comparable investment evidence. - I used Argus Enterprise to determine the value taking the passing rent and capital value.
29
Talk us through the SWOT analysis for Towcester
Strength: Freehold and let to a strong national covenant for 10 years Weaknesses: Secondary location and limited catchment area Opportunity: lack of opportunities due to the unexpired term of 10 years Threats: Economic uncertainty
30
For your Kettering valuation, how many units were there and on what basis did you value?
Five units and I valued the Fair value and market rent for accounting purposes
31
What was the SWOT for kettering?
Strengths – Modern units with institutional specifications and reversionary Weaknesses – Secondary location to Northampton and a Break option in 2026 for one tenant Opportunities – Sell the investment if cash is required Threats – Economic uncertainty
32
For kettering could you talk us through the valuation methodology you undertook?
CIT Due diligence Inspected each unit individually Collated evidence Analyse After using the comparable evidence and determining the most recent letting on the park was inline with market rent, I discounted back accordingly depending on the size of each asset. I also determined the park was reversionary. I applied different yields to each units depending on covenant strength, term certain and overall risk attached. Using argus I was able to determine a blended rent for all five buildings which allowed me to compare against comparable evidence and adjust accordingly.
33
What was the specification for the office you valued in Birmingham City Centre?
Raised access flooring Suspended ceilings LED lighting Double glazing Inset AC units Gym / café / parking / shower and changing facilities
34
What was the SWOT for the office valuation?
Strengths – Let to strong covenants throughout the building Weaknesses – Second hand M&E within the building as well as vacant suites Opportunities – Reversionary Threats – Lack of investor appetite for the office market, particularly regionally
35
For the office valuation what was the method you undertook?
CIT Due diligence Inspected Collated evidence Analyse I used the comparable method to determine the recent lease re-gears were in line with market rents and provided the best evidence for the building. I used the comparable method to determine the range of capitalisation rate to apply. I applied different yields to each tenant depending on covenant strength, term certain and specification. I then compared the blended yield profile against the comparable evidence.
36
What advice dud you provide to the client relating to the Office valuation?
Provided advice on market rent and the fact the asset was reversionary. I advised the client the building was in a good state of repair and commensurate with its age.
37
What was the specification of the Fradley Unit?
12.5m eaves Sprinkler system, Air conditioning, translucent roof lights 10% of roof LED lighting 36 dock level and 6 level access doors 50 kN/sqm loading BREEAM very good and EPC A Site coverage 46% - standard
38
What use class was the Fradley unit?
Class B8
39
What is the term and reversion method and why was it used for the Fradley asset?
This was used due to the building being reversionary and underrented. Therefore I applied a 6% yield to the term until the lease break and then applied a 7% yield to the reversion, which was valued into perpetuity
40
What advice dud you provide to the client regarding the Fradley valuation?
I advised the unit was reversionary and the client could realise this reversion if they looked to surrender the lease.
41
What was the SWOT for the Fradley asset?
Strengths – Let to strong covenants, modern specification Weaknesses – The tenant has wished to exercise the break clause in 7 years Opportunities – Reversionary, assets of this type in this location are minimal so there is opportunity to surrender to lease and realise the reversion. Threats – Void period once the tenant leaves and wider macroeconomic issues

SB APC (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions