Applied Valuation
Description
Scenario
You are close to completing your training with a UK-based real estate consultancy. The firm’s partners have recently been instructed by a new client who own a medium-sized investment portfolio in your region, and who require professional advice on a range of valuation matters.
Your line manager has recognised this instruction as offering suitable tasks to check your knowledge as part of preparation for your assessment of professional competence for membership of the Royal Institution of Chartered Surveyors.
The clients seek advice in respect of the following freehold investment properties in their portfolio:
20 High Street
The retail unit is let on a long leasehold with an unexpired term of 70 years, subject to a rent of 10% of the market rental value of the property. The long leaseholder has recently let the shop on a new 15-year lease, at a rent of £60,000 p.a. on full repairing and insuring (FRI) terms, and subject to five-yearly, upward-only rent reviews. Your client would like to gain possession of the shop for their own occupation and use.
A similar property let on similar terms has recently sold for an initial yield of 6% in the same area.
l Unit 6 Enterprise Industrial Estate
This industrial unit extends over 5,500 sq m and has two years to run on its existing lease at a current rent receivable of £250,000 per annum. The Enterprise Industrial Estate is located approximately 3 kms (5 miles) from the centre of a large regional town. The site is contaminated with non-migratory heavy metals from a disused adjacent engineering works, which is also in the ownership of your client. The client admits that the contamination is their responsibility and not that of the tenant. The tenant has indicated that he does not wish to renew the lease. A report supplied by your client suggests that the cost of the remediation works necessary to bring the site to a ‘suitable for use’ condition would be £350,000 and would take two years to complete. A similar uncontaminated property of 6,250sq m in a nearby, but poorer location recently sold for £3.25million at a yield rate of 10%.
Unit 10 Interchange Industrial Estate
This is a 1,500 sq m unit let with four years unexpired. Rent is £90,000 per annum with no further rent reviews. A similarly sized warehouse on the same road recently sold for £1.332 million at a yield of 9%. Interchange Industrial Estate is located at a main motorway interchange on the outskirts
of a large regional city. The tenant has approached your client indicating that they require more space due to their expanding business. They would like to extend the warehouse by a further 200sq m and this is expected to cost £150,000. Your clients are considering funding the works but would require a new long lease of 15 years.
A 3000 word report (in MS word format) is required (give or take 10% wordcount). Executive summary required, a minimum of 10 references in harvard format. please see attachment of the full details of the report.
