Tell me about the construction of you’re building?
Pad Foundation (Slab foundation system under individual or groups of columns so the loads are spread evenly)
Part Brick, Part Glazed, Part Aluminium clad elevations
Part Flat / Part Pitched - Aluminium
What is the age of the building?
It was constructed 1979
I was provided this info by the client.
Double checked it give the change of use.
How do you calculate Net Effective Rent?
- determine the total gross rent for the lease term
- Deduct Landlord Contributions: RF or TI
- Divide net amount by term certain.
Why did you chose the M&S in reading to be the best comparable?
- Better transport connections
- Better parking ratio (1:164)
- Although term certain is shorter, an investor would benefit from the significantly overrented income for 9 years.
- Passing Rent = £38
- Market Rent = £26
Why didn’t you apply a yield closer to the Guildford comparable?
Larger lot size - limits buyer pool to institutional investors
(M&S is of a similar lot size and attracts other buyers e.g. High-net-worth individuals and family offices.)
Smaller residential catchment
What’s the difference between a true EY and an EY?
Error with Argue Enterprise:
- EY: Annual Rent in Arrears
- True EY: Quarterly Rent in Advance
Pros and Cons for RPI Linked Rent Reviews?
Pros:
- Guaranteed Growth over the term where as OMR don’t guaranteed it.
- Protects against inflation
Cons:
- Squeezes occupiers - they pass on costs to costumers
- Means stores get excessively overrented.
How does Elevated Cost of Debt affect this asset?
- Because yield is so low, debt will be hard to come by with a margin of debt.
- This is why family offices and HNI’s buy offices.
- The market is liquid, but appeals to different buyers
- Secondary is 6.5%-7% (they rarely transact).
You mentioned your property was of concrete construction, how did you know this?
I was provided with a building survey by the landlord.
What is a building survey?
A technical inspection of all accessible parts of a property, such as the roof, walls, floors, and services, to identify defects and potential risks
What other valuation method could you have used?
Explain it?
Layer and hardcore:
- Income divided horizontally
- Bottom slice = Market Rent (lower yield)
- Top Slice = Passing Rent (Higher yield)
What if some of your investment comparable were rack rented?
I would apply a higher EY to my subject property to reflect that added risk.
Would subletting impact the valuation of the comparable?
No - this is additional income to the tenant - the rent paid to the landlord remains the same.
What is your properties current rent / market rent?
Current Rent: £455,000
Market Rent: £428,000
What is the:
- years to break
- years to expiry
Years to break: 14.3
Years to expiry: 19.3
