Tell me about German Industrial portfolio you valued for Financial Modelling competency
- 3 freehold properties around Berlin
- val date 30 September 2022
- all on long leases to Kuhn and Nagel, time left on leases between 10 and 15 years
- triple net leases
- all between 20 and 30k sqm
- built between 2015 and 2020
- discount rates at val date between 4.25% and 5.00%
- exit cap rates between 3.40% and 3.70%
- I would expect discount rates to move about 80-100 bps today and exit cap rates about 50-60 bps
- market rents mezz around €2.50 per sqm per month, warehouse €4.50 per sqm per month
What is triple net lease?
Tenant responsible for opex + insurance + taxes + CAM. Landlord responsible for capex and management
What is the difference between triple net and FRI?
Triple net puts more financial responsibility on tenant. in FRI, tenants is typically not responsible for taxes and CAM. NNN - tenant assumes the bulk of costs
Tell me about DCF model review of Italian Industrial Portfolio?
- 2 assets in Milan area
- both let to DHL
- reviewed that the inputs match the information provided by AM team (property size, lease terms are correctly captures, capex is modelled)
- reviewed valuation assumptions such as growth rates, discount rate and terminal cap rate are reasonable
Tell me about City of London inspection (level 2)
- 60 London Wall
- Freshly refurbished building
- went from top to bottom
- made detailed notes and photos
- some floors were vacant
Tell me about Mixed-use inspection in London (level 2)
- Bellsize Park
- Ground floor retail, Budgens
- Three floors of residential above, some flat were sold so inspected a sample of remaining flats
Tell me about City of London Inspection (level 3)
- One of the London Wall offices
- Recently vacated, purchased as a part of the value add strategy
- Cracks on the ground floor - straight line, about 2mm wide - initial suspicion was that this happened due to the plasterboard defect, however I have advised client to ask structural surveyor for an opinion
- did not recommend structural engineer as I have consulted my supervisor on the spot and there were no indications of movement (crack was not wide, it was not vertical or diagonal, was in the middle of the wall and not next to the door frame or window frame)
What is Class A, Class B and Class C office?
Class A:
- prime central location
- often plug and play
- feature on-site facilities such as showers, bike storage, gym, end of the trip facilities
- ESG matters more now
Class B:
- While class A are built to impress, class B is more functional
- You get some on site facilities
- Quality of the improvements are usually lower
Class C:
- often sold for value add strategies, so they can be moved to B or above
Tell me about Industrial inspection in Park Royal (London)
- c. 30,000 sq ft (incl. c. 3,000 sq ft office and 10,000 sq ft mezz space)
- Eaves height 8.9 m
- Site coverage ratio about 70% (average 40% but higher in London) (total building area/total land area)
- 2 loading doors
- mezz split over two levels, first level limited ceiling height, second level higher space
- single entrance/exit. Location is desirable but specification is very tailored
- If valued, lower market rent was placed on the mezz space and longer letting void
Tell me about Industrial valuation in Reading for loan security?
- c. 40,000 sq ft vacant industrial building
- eaves height c. 8.0m
- site coverage c. 70%
- 2 loading doors
- no mezz space
- val date September 2022
- Built in around 2000
- instructed to determine Market Value and Market Rent
- Cap val determined at c. £290 per sqm using Market Approach
- Market Rent £15 per sq ft pa
- Cross checked using DCF, as we had access to IC memo
Tell me about retail unit valuation in North London for loan security?
- c. 1,000 sq ft
- valued Feb 2023
- Highgate
- 20 year lease from 2023, rent review every 5 years
- rent c. £40 per sq ft pa, supported by comps as well as by the lease itself
- assumed rack rented, valued at c. 600k, yield at 6.5%. Would not expect changes now
Tell me about Mixed-Use valuation is Southwark?
- two storey, ground floor let to Tesco with c. 10 years remaining on the lease and first floor let to accountancy practice with 5 years left on the lease
- Tesco rent review every 5 years, capped at 10% (open market rent review)
- c. 8,000 sq ft in total (4k tesco, 4k office)
- Tesco rent c. £40 per sq ft, accounting practice rent c. £35 per sq ft pa
- applied c. 6.00% on Tesco lease, and 10.00% on office
- cross checked by DCF as we had IC memo with uw assumptions
Tell me about City of London valuation for Valuation level 2?
- One of the London Wall offices
- Similar covenant strength tenans - mixture of wealth managers and financial advisors
- Val date Q1 2022
- NIY c. 5.10%, valued at c. 20m
Tell me about City of London valuation for Valuation level 3?
- 60 London Wall
- Q4 2022
- c. 350k sq ft
- Good ESG, BREEAM Outstanding, EPC B
- 15 year lease to investment company, 34 month rent free, open marker rent review every 5 years
- Average rent 60, market rent 65
- Slightly awkward floor plates, with top floors featuring smaller floors
- Yield at 4.5%, would be about 5.00-5.10% now
Tell me about industrial valuation in the Netherlands?
- Single let asset in Eindhoven, close to the airport
- Q3 2022
- c. 20,000 sqm, with small office of c. 550 sqm
- Built in 2020, let to DHL on 10 year lease with 10 year extension
- Comps showed rents 50-65 per sqm, adopted 70 per sqm
- DCF, dr 3.80%, exit cap 3.70% -> now it would be 200-250 bps higher
