DEFINITIONS

Question 1

Assumption

Answer 1

A supposition taken to be true. It involves facts, conditions or situations affecting the subject of, or approach to, a valuation that, by agreement, do not need to be verified by the valuer as part of the valuation process.

Question 2

Market Rent

Answer 2

The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and willing lessee on appropriate lease terms in an arm’s-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion

Question 3

Market Value

Answer 3

The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion

Question 4

FRI leases

Answer 4

A Fully Repairing and Insuring (FRI) lease is a lease where the tenant bears responsibility for the maintenance and repair of the property.

Question 5

IFRS

Answer 5

IFRS are the International Financial Reporting Standards as adopted by the United Kingdom.

Question 6

Loan to Value (LTV)

Answer 6

Loan to value (LTV) is the ratio of principal value of gross debt less cash, short term deposits and liquid investments to the aggregate value of properties and investments, excluding non-controlling interests.

Question 7

Net Initial Yield (NIY)

Answer 7

It represents the estimated annual income from a property, expressed as a percentage of its purchase price or market value. NIY is the net operating income (NOI) divided by the gross property value.

Question 8

Rack rented

Answer 8

Rack rented is the term used to describe when the contracted rent is in line with the estimated rental value, implying nil reversion.

Question 9

Marriage Value

Answer 9

the extra value created by combining two or more separate property interests, where the combined value is greater than the sum of their individual values

Question 10

Special assumption

Answer 10

An assumption that either assumes facts that differ from the actual facts existing at the valuation date or that would not be made by a typical market participant in a transaction on the valuation date.

Question 11

Special Purchaser

Answer 11

A particular buyer for whom a particular asset has a special value because of advantages arising from its ownership that would not be available to other buyers in a market.

Question 12

Fair Value

Answer 12

‘The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.’

Question 13

External Valuer

Answer 13

An RICS external valuer is a valuer who has no material links to the client or the asset being valued, ensuring independence and objectivity.

Question 14

Gross Initial Yield

Answer 14

Gross initial yield is the total annual rental income divided by the property’s value, before any costs are deducted

Question 15

REO

Answer 15

This is a concept where the valuer assumes that the market participants are competent operators, acting in an efficient manner, of a business conducted on the premises. It involves estimating the trading potential rather than adopting the actual level of trade under the existing ownership, and it excludes personal goodwill.