Valuations

Question 1

What are three typical features of a late 19th century office property

Answer 1

1) masonry
2) arched
3) decorative elements (turret)

Question 2

What is the valuation impact of a building being listed or in a conservation area?

Answer 2

Greater restrictions and costs

Question 3

What is one thing you may need if a property was in a flood risk zone?

Answer 3

A flood risk survey

Question 4

What is the market normal specifications for a property in Soho?

Answer 4

Suspended ceilings and raised floors

Question 5

Where the walls inside Great Marlborough Street, structural

Answer 5

Yes, they were so you would include in net initial area

Question 6

How which model zones on AE

Answer 6

Split them up in the area schedule and attach weightings

Question 7

Would you ever use different cap rates per floor?

Answer 7

No

Question 8

What is IVS 105?

Answer 8

It outlines the three approaches cost, market and income

Question 9

What is the impact of a higher base rates on investors?

Answer 9

They may target higher yielding assets

Question 10

What are typical loans for a real estate investor

Answer 10

Five years

UK swap rates plus a small lending margin

Question 11

What does without compulsion mean in market value?

Answer 11

Neither of the parties were forced into the transaction

Question 12

What are three things that the Valuation Registration Scheme (VRS) says clients should be able to expect?

Answer 12

1) Transparency
2) Expertise
3) Compliance with IVS

Question 13

What is VPS 5

Answer 13

Methods - you should consider the asset & purpose of the valuation

Question 14

What is VPS 3?

Answer 14

Reports -

Clarity on conclusions

Dealing with everything in ToE

Meet IVS reporting standards.

Question 15

What are 3 things included in PS 2?

Answer 15

1) Objectivity

2) Expertise

3) Previous Involvement

Question 16

What is the current base rates and inflation rate?

Answer 16

4.5% and 2.5%

Question 17

What are three examples of special assumptions

Answer 17

1) Assuming that’s a property is vacant when it is actually fully let

2) assuming that planning has been accepted when it actually has not yet

3) assuming that building works have been completed when they actually have not yet

Question 18

What does PS stand for?

Answer 18

Professional standards

Question 19

What does VPS stand for?

Answer 19

Valuation, technical and performance standards

Question 20

What does VPGA stand for?

Answer 20

Valuation practice guidance applications

Question 21

What is the case law for permissible margin of error?

Answer 21

KS Lincoln vs CBRE

Question 22

Where would you find flood risk?

Answer 22

On the government portal

Question 23

In basic terms, what is a yield?

Answer 23

It is a measure of investment return expressed as a percentage of capital invested

Question 24

What is an all the risks yield?

Answer 24

Remunerative rate of return for fully let property let at market rent, reflecting all the risks attached

Question 25

What are the stamp duty tranches?

Answer 25

Up to 150K - Nill 150k to 250K - 2% Above 250K - 5%

Question 26

What is an alternative to credit safe?

Answer 26

Dun & Bradstreet

Question 27

Why is the date important for comparables?

Answer 27

It reflects the most current market conditions and trends

Question 28

How much storage dealt with when zoning

Answer 28

Storage would typically be in the basement rather than the trading ground floor and the basement is treated as 1/10

Question 29

What is a five statutory considerations for a valuation?

Answer 29

1) EPC 2) Planning applications 3) Business rates 4) flood risk 5) Conservation area

Question 30

What is a disadvantage of credit safe?

Answer 30

It requires payment

Question 31

Why is equivalent better than layer and hardcore?

Answer 31

Equivalent yield is how the property would be appraised in the market

Question 32

When would leasehold property not be suitable for loan security?

Answer 32

65 to 70 years left

Question 33

What are three examples of things found in a report on title

Answer 33

1) leasehold vs freehold 2) rights of way or easements 3) restrictive covenants (e.g., obligation to maintain facilities that doesn’t benefit the property directly)

Question 34

Would you expect discounts or premium for space inside one building?

Answer 34

Can go either way May I pay a premium for privacy, but would depend on there being a sufficient number of interested buyers in the market

Question 35

Why send a draft report?

Answer 35

It’s about client care You provide the opportunity to review everything You can change the value, but only if supported by evidence

Question 36

What are some DCF inputs?

Answer 36

Rental Growth Void period Discount rate

Question 37

How is the discount rate selected?

Answer 37

UK gilt plus appropriate risk premium

Question 38

When you target an equivalent yield what should you also sense check

Answer 38

NIY and Reversionary Yield

Question 39

What are typical LTVs for a commercial loan?

Answer 39

50 to 60%

Question 40

What are fair value and market value generally the same in terms of?

Answer 40

Methodology

Question 41

When were the property be classified as virtual freehold?

Answer 41

If there was originally over 900 years on the lease

Question 42

How many further cuts to the base rates expected this year and where would that take it to?

Answer 42

Three 3.5%

Question 43

Who is the liability cap and PII excess agreed between

Answer 43

Liability cap - JLL + client Excess - JLL + insurer

Question 44

What does an ungeared IRR mean?

Answer 44

No debt

Question 45

Apart from financial reporting and secured lending, what are the valuation purposes?

Answer 45

Shares (like British Land REIT)

Question 46

What is something you would consider for an industrial valuation?

Answer 46

Motorway access

Question 47

When may refinancing happen?

Answer 47

When original loan has come to an end to borrow it still within preferred holding period

Question 48

What is a 5-year SONIA swap rate and what are they currently “?

Answer 48

Markets interpretation of expected interest rates over next 5 years. 3.75%

Question 49

If there is a shortfall between ground rent liabilities and income for the borrower, what would the bank need to be assured of

Answer 49

Adequate funds to cover this

Question 50

How could you find more evidence upon review?

Answer 50

Unless JLL was tracking the deal, new deals may have not become public immediately

Question 51

Why did you not use DCF?

Answer 51

Straightforward and plenty of evidence Investors would not appraise that asset using DCF

Question 52

When do you incorporate letting fees?

Answer 52

At every new lease Before the rent free

Question 53

Were there any special assumptions for Mayfair and St James’s L3 retail?

Answer 53

Only Vacant Possession Value (VPV)

Question 54

How much of an adjustment in layer and hardcore

Answer 54

Varies. Could be 3%

Question 55

When could the report on title be from?

Answer 55

The last time the property sold

Question 56

What would a classic conflict be in accounts valuation?

Answer 56

If valued for loan security within one year of accounts valuation Pressure to support ban valuation

Question 57

With terms of engagement, what did you draft?

Answer 57

Those aspects within my boundary of competence Overseen by my supervisor Legal aspects overseen by legal and compliance

Question 58

How do we get to PV from future income streams?

Answer 58

Discounting through the yields

Question 59

How would valuation be done if you didn’t have AE?

Answer 59

Excel

Question 60

Where would you ideally get refurb costs from?

Answer 60

The client as more likely to be accurate

Question 61

Difference between development appraisal and residual

Answer 61

Developers profit vs land value