Valuation Level 2

Question 1

What legislation is in Dublin?

Answer 1

• Rental caps - restriction on increases the lower of 2% or inflation
• Council Tax - paid on student properties
• Tenancy length - legislation to offer shorter tenancy lengths

Question 2

Retail High Street Yields

Answer 2

Prime - 7%

Good secondary - 9%

Secondary - 12%

Question 3

What is the Global Guidance?

Answer 3

RICS Valuation: Global Standards, 2021
‘Red Book’
As of 31st Jan 2025

Question 4

What is the UK Guidance?

Answer 4

RICS Valuation – Global Standards: UK national supplement 2023

Question 5

According to VPGA 2 what additional info is required when reporting for secured lending purposes?

Answer 5

• Disclosure of previous involvement in terms of engagement
• Valuation method adopted and calculations
• Details of recent transactions on property
• Environmental considerations
• Suitability of the property for mortgage purposes
• SWOT analysis

Question 6

What is the guidance on Conflicts of Interest?

Answer 6

RICS Global Professional Standard - Conflicts of Interest 2017

Question 7

Were there any conflicts at Nottigham?

Answer 7

• previously valued in 2020, 2022 and 2023
• same lender
• did not consider conflict
• disclosed previous involvement

Question 8

Sandhills

Answer 8

Question 9

What was the building like?

Answer 9

• Built in 2020
• Steel framed
• Brick elevations
• flat room

Question 10

What example is ‘PBSA Valuation Nottingham’

Answer 10

Sandhills

Question 11

WHat emthod did you use to calculate the market rent?

Answer 11

Comparable method

Question 12

Why did you use the investment method and not the profits method?

Answer 12

1. Market standard to use Investment method
   There are challenges with the profits method:
   - defining profits for PBSA can be difficult
   - mgt fees, maintenance costs and vacancy can impact profitability
   - finding comps for comparable method can be difficult

Question 13

What is the guidance on comparable evidence?

Answer 13

RICS Professional Standard Comparable Evidence in Real Estate Valuation 2019

Question 14

What are the categories of comparable evidence?

Answer 14

Cat A – direct comparables, accurate, recent, asking prices (analysis)

Cat B – general market data to give guidance, historic and reports

Cat C – other asset classes, locations, background data interest rates

Question 15

Why did you take the passing rent into consideration?

Answer 15

• it is what the scheme is achieving
• to see how it compared to other schemes

Question 16

How did you know operational costs were in line with market?

Answer 16

• comps from other schemes
• bases such as age, studio mix, conversion
• internal system

Question 17

What were the purchasers costs?

Answer 17

6.78%

Question 18

Market Value and yield of Sandhills?

Answer 18

£35m (£106,000)
5%

Question 19

What are purchasers costs made up of?

Answer 19

stamp duty 5%
sales agents fees 1.2%
legal fees 0.6%

Question 20

What capitalisation rate did you use for Sandhills?

Answer 20

5.25%
(BIC: 5%)

Question 21

What is a typical benchmark for capital value per bed?

Answer 21

£80,000 - £180,000

Depends on spec, amenity, location

Question 22

Strengths of Sandhills

Answer 22

• strong macro location
• strong micro location
• high spec
• ensuite-led (affordable)
• strong occupancy

Question 23

Weaknesses of Sandhills

Answer 23

• lots of competition
• large development pipeline

Question 24

General property details

Answer 24

Flood risk: Low
EPC: B
Built: 2020
Storeys: 7/ 21m
Clad: Brick elevations
EWS1: A2

Question 25

High Street Retail Valuation

Answer 25

Bexleyheath - Lloyds

Question 26

What method was used?

Answer 26

Comparable

Question 27

What is a Zone A?

Answer 27

Most valuable part of a retail space.

Question 28

How would you value a retail unit?

Question 29

What was the location of the retail unit?

Answer 29

- strong tenant mix - strong pitch

Question 30

What is the Hierarchy of evidence for L&T?

Answer 30

OML RR and LR Independent expert determinations Arbitrator determinations Court determinations under L&T act 1954 Hearsay evidence Sale and leaseback Surrender and renewals Inter-company arrangements

Question 31

Describe the comps for the retail unit

Answer 31

- surplus comps - plenty LR and OML - strong historic take up limited office space comps

Question 32

What were the main points of comps?

Answer 32

Date of transaction Type of transaction (hierarchy) Type of review ie turnover, upwards/downwards Asset class Pitch Net Zone A rate Lease terms ie lease length, break clauses, break options

Question 33

How do you devalue?

Answer 33

rent free, amortised over the term certain NB for a lease renewal standard assumption is 3mrf for fot out - RF - 3 MONTHD

Question 34

What was the market rent of the retail unit and Zone A?

Answer 34

£140,000 £59.50 ZA

Question 35

What factors would impact value of a retail unit?

Answer 35

- Assumed term - Hard frontage - Return Frontage - Frontage to depth - Shape - Onerous lease terms - Alienation

Question 36

How would you deduce the Market Value of a retail unit?

Answer 36

Comparable method - Checks - Comparable method for MR and yield - NIY c.6%

Question 37

What price of remainder?

Answer 37

A/10

Question 38

If you were struggling with a valuation what would you consult?

Answer 38

1. Red Book and check which method would be best used VPS 3 - Valuation Approaches and Methods 2. Check ToE for valuation method adopted 3. If still unsure I would get guidance from my team to ensure I am competent