Loan Secuity Valution

Question 1

What’s the guidance for Loan Security Valuations in the Red Book? and the UK Supplement?

Answer 1

• VGPA 2 of Red Book 2022
• UK VPGA 10 (commercial)
• UK VPGA 11 (Resi)

Question 2

Conflicts of Interest for secured Lending?

Answer 2

• All involvements with the borrower have to be raised.
• 2 Years prior, but can be longer.
• Instructions should be declined if COI

Question 3

VPGA 2 Examples of COIs? (4)

Answer 3

• Long-standing relationship with borrower
• Gets an introduction fee
• Finical interest in the holding
• Valuer is retained to act on the disposal or letting.

Question 4

Additional Info in Bank reports?

Answer 4

• Disclose involvement with borrower in LOE.
• Methodology supported where appropriate with calculations if requested.
• Previous Transactions
• Environmental Consideration and reports
• Suitability of Loan
• Circumstances that could effect the price
  -AOM

Question 5

Agden Brook, Did you do anything extra when report with a Special Assumption?

Answer 5

Yes,
- Stated the difference in value the assumption did and why.

Question 6

RICS Guidance on Contamination?

Answer 6

Contamination, the Environment and Sustainability, 2010 (3rd Edition)

Question 7

3 Phases of Contamination?

Answer 7

1. Review History (Desktop Based)
2. Investigations with detail soil samples
3. Remediation Report

Question 8

What advice do you give for contamination?

Answer 8

1. Caveat report (Special assumption)
2. Refer to specialist advice
3. Deduct remediation costs from Value.

Question 9

Wrinehill Hall Farm, What values did you submit to the client?

Answer 9

• Market Value
• Market Value on the SP on a ‘no scheme world’
• Market Value on the SP of access across the strip.

Question 10

Wrinehill Hall Farm, what did you consider in the depriation of the remaining farm?

Answer 10

• Lack of land in proportion to cattle housed, didn’t meet NVZ
• Lack of assets not being required
• Houses proximity to railway.
• No legal access to severed land.

Question 11

Ravenhill, what did you include in your abnormalities?

Answer 11

• Services
• Landscaping
• Track Repair
• Re roofing (Checks with BS)

Question 12

Whats Contingency?

Answer 12

An indecent expense for risk

Question 13

Ravenhill, Why would a structural survey eliminate risk?

Answer 13

Gave more accurate to the figure needed to repair the roof.

Question 14

Redhall Farm, how did you incorporate the Option agreement?

Answer 14

• Investigated Planning
• No immediate development as it was in greenbelt and green space.
• Assumed that the option wasn’t going to be actioned given it was near the end of the timeframe.

Question 15

Standish Hall, How did you report a single figure?

Answer 15

• Gave an appropriate discount to the combination of all of their values.
• Cross-referenced this on a £/acre basis against other estate portfolios and arable farms that had a mixture of dwellings and investments.

Question 16

What is the Loan to value ratio?

Answer 16

Loan amount to security

Question 17

Ravenshall Farm, what else did you consider and highlight in your residual?

Answer 17

• Sensitivity testing (Scenario)
• Method of Sale for GDV
• Construction costs (BCIS)

Question 18

Additional considerations at the LOE Phase?

Answer 18

• Liability Cap

Question 19

How do you assess the Suitability of the Loan security?

Answer 19

• Does it meet the Loan Security Ratio
• SWOT analysis
• Factors considering Cash flow and liquidity

Question 20

Does a loan security value rely upon regulated purpose?

Answer 20

No
- not regulated by third parties

Question 21

Option vs Promotion agreement?

Answer 21

Option - develope gets given the right to apply for planning. Then can buy it at Market Value. Obligation to sell.

Promotion - both parties want best value, no obligation to sell and take it to the market after.

Question 22

Red Hall Farm, What did you look for in the Option agreement?

Answer 22

• Trigger
• Term
• Option Fee
• Price to be paid

Question 23

Red Hall Farm, what was the figures? dates? and calculation?

Answer 23

Option fee was = £2,500
Term was 5 years with 1 year remaining
Calculation was MV-OF.