MG - Valuation

Question 1

What are the 5 methods of valuation?

Answer 1

1. Comparable
2. Investment
3. Residual
4. Profits
5. Contractors (DRC)

Question 2

What is an equivalent yield?

Question 3

What is a gross yield

Question 4

What is the ARY?

Question 5

Which guidance note can you refer to for determining hierarchy of comparable evidence ?

Answer 5

RICS professional standard for comparable evidence in valuation

Question 6

What is the hierarcy of comparable evidence?

Answer 6

Cat A - direct and similar transactions
CATB - published information that is public ally available but need to verify it
Cat c - inflation rates, market trends, historic evidence and asking prices

Question 7

What’s another lease apart from FRI and what would you have to do differently?

Answer 7

IRI LEASE

would have to treat this differently in a valuation as the landlord will have to pick up the external repairs

Question 8

How did you value the industrial unit in telford?

Answer 8

UNDERSTAND WHAT YOU DID WITH THE YIELDS!

Question 9

Was the break clause the next lease event?

Answer 9

Yes - two years from the valuation date

Question 10

At what other points in the lease can you increase to MR?

Answer 10

Open market rent review

Question 11

Why did you value to the break?

Answer 11

Assume worst cvase scenaro - break was in 2 yrs team, then void periods, rent free, costs e.g. business rates - after this assume let at market rent

Question 12

When valuing the industrial unit in telford what voids and rent free periods did you assume?

Answer 12

6 months void??

Question 13

how does the length of time until the break clause affect the reversionary yield?

Answer 13

Reversionary yield is calculated as:
Reversionary Yield
=Market Rent/ Current Market Value

But the building does not actually earn market rent until the break date, so the market value is heavily influenced by how far away that date is.

The length of time to a break clause (time to break) significantly impacts a property’s reversionary yield by introducing uncertainty into the expected income stream, affecting both the risk profile and the valuation of the reversionary interest. A shorter time to break usually increases the perceived risk, leading to a higher yield (lower valuation) compared to a lease with a long, secure, uninterrupted term.

Question 14

What are the risks of assuming it will be let at MR?

Answer 14

Tenant may not be able to afford new rent

Question 15

was it a ll or a tenant break clause? / why does this affect your approach?

Question 16

what yield did you apply?

Question 17

what does YP ACTUALLY MEAN? - UNI NOTES?

Question 18

WHAT ARE PRIME YIELDS IN BHAM

Question 19

i

Question 20

What is the hierarchy of comparable evidence?

Answer 20

1. direct market comps - e.g. completed open market transactions that are similar to your property in terms of location , situation, size
2. General market data e.g. indices or commercial databases that give trends into the market
3. other sources - interest rates, stock market movements that might give an indication