What is included in a ToE for LSV which isnt for others?
Conflict of interests on the borrower, lender and property.
Any previous involvement with the borrower or property in the last 2 years needs to be disclosed.
Basis of value - MV - special assumptions (difference between2)
Reporting requirements - risk, loan sec, comment on market, esg, recent trasanctions)
Whats the difference between loan security and accounting purposes?
Loan security has a basis of value of MV at val date
Comments on suitability for loan security.
Comments on risks, disclosure of involvement, ESG.
Enhanced CoI checks / previous involvment
what are risks that can impact the suitability for loan security?
Flood risks,
Contamination,
Covenant strength.
What is the Red Book definition of Market Value?
The estimated amount for which an asset or liability should exchange:
- on the valuation date
- between a willing buyer and willing seller.
- in an arms length transaction.
- after proper marketing.
- where both parties has acted knowledgably, prudently and without compulsion.
What is the difference between MV and FV?
The Red Book states that there is no difference between MV and FV in terms of valuation figure.
But MV is on the val date and FV is on the measurement date.
The purpose of FV is for accounting purposes too.
What is an assumption?
Reasonable for the valuer to accept something to be true which does not need further investigation
What is a special assumption?
A supposition which is taken to be true and fact even thought it is not at the valuation date.
What does VPGA 2 state about special assumptions?
Special assumptions need to be agreed with the client and in the ToE.
Where there is a special assumption a comment needs to be made on the material difference between the report figure with and without the special assumption.
what is a loan security valuation?
independent assessment of property’s market value to determine if provides sufficient collateral for lender
purpose of vacant possession valuation?
provides worse case position if tenant defaults or vacates, how loan can be recovered if no income. Shows underlying asset value.
Is there a time where you would use a confirmation of instruction letter over ToE?
I am aware that a confirmation of instruction is permission to work on a specific building.
Do ur firm values property not suitable for loan security
I personally havent come across this. But yes my firm would as u wouldnt find this out until after accepting the instruction and conducting DD/ doing inspection etc.
So when I have completed the report and commenting on its suitability, that is when I would state it wouldnt be suitable. I would only know this after completing my val
What are SWOT on neasdon, romford?
Strengths:
- good unexpired term (6 years)
- good covenant
- good location
- spec good
Weakness:
- eaves height 6m, which is below institutional spec.
- EPC C - MEES compliance?
Opp:
- relet at lease expiry and extend rent.
- capture reversion at RR
Threat:
- Macro-economic conditions, such as inflation and high borrowing costs on investor and occupier demand
- high unemployment rates
- pressure from competing units and developments impacting rents
- MEES changes
SWOT for heathrow?
Strengths:
- good covenant
- good location
Weakness:
- need capex for refurb
- short unexpired term
Opp:
- re let at MR at expiry
- complete refurb
Threat:
- vacancy costs when void
- Macro-economic conditions, such as inflation and high borrowing costs on investor and occupier demand
- high unemployment rates
- pressure from competing units and developments impacting rents
- MEES changes
SWOT for Fleet?
S:
- good location near motorway
- good covenant
- long unexpired term
- good spec
W:
relatively low office content, which may not suit some occupiers
O:
- limited as just let
T:
- Macro-economic conditions, such as inflation and high borrowing costs on investor and occupier demand
- high unemployment rates
- pressure from competing units and developments impacting rents
what impacts suitability?
location, covenant strenfth, condition, spec, unexpired term, flood risk
were u provided with the loan terms?
if u had, would u have done anything different?
I had requested them, I always request them, but was not provided with them in this example at the banks discression. This was caveated in the report. I understand that a LTV ratio is around 60%.
Loan document would include:
- term
- the parties
- interest rate
- LTV ratio
We generally dont get given, if am provided, then i would make reference. if know loan terms - need to state this.
Didnt have full sight of loan terms which is common, but was made aware the LTV ratio was 55%.
Although it wont impact opinion on MV as valuing as independent party, good to have aware of.
Red Book - clause 4.4 states the valuer should request details of the terms of lending
What would you have done if the borrower had asked you to only report a value on special assumption of VP?
Specal assumption is to be reported with the basis of value, which is MV.
Cant only report on SA
Need to state difference between two figures
Why is it important to advise lenders on risk?
risk of borrower not paying loan and default. Reporting requirement.
