a) Identify one office building in London (or a town/city of your choice in England) which has a floor area between 1,000sq m.- 5,000sq m. For the purpose of this coursework the actual lease(s) is (are) irrelevant and you are to assume that the whole property is let to a single company.
b) Describe the property including stating the floor area of the premises, and commenting on the location, description and specification of the building.
c) Identify comparable evidence from on line databases, agents, professional press and/or other sources and calculate an Estimated Rental Value for the building and a suitable All Risks Market Yield. Clearly show and explain how you have arrived at your Market rental value and ARY.
d) Identify the Rateable Value of the building and calculate the rates payable (including reliefs) in 2020/21 and 2021/2022. Clearly discuss how the Rateable Value has been calculated and annotate the calculations to demonstrate whether the hereditament is subject to transition relief (phasing).
e) Hypothetical Scenario 1 – Assume that the property has just been let at 10% below your estimated rental value to a tenant with a reasonable covenant strength. Prepare a valuation report for the freehold interest in the property for the purposes of a purchase. This report should follow the provisions of RICS Global Standards Valuation and provide a reasoned valuation. It should include the relevant information in accordance with the professional standards.
f) Hypothetical Scenario 2 – Assume that your building was let to a tenant with a reasonable covenant strength 15 years ago on a 20 year FRI lease at a rent which is now 10% more than the ERV. i.e. you are assuming that the lease expires in 5 years and that the property is currently over-rented.
i. Calculate the Market Value of the freehold interest for loan security purposes.
ii. Assume that you act for the landlord and that the tenant has requested a new lease for 10 years at the market rent and with a rent free period. Prepare a Discounted Cash Flow to show the NPV of the current income and outgoings and the NPV of the proposed lease. The proposed lease should incorporate a rent free period which produces a higher NPV than the existing lease. Assume a discount rate of 9%.
