Commercial Practice 2018

5PROPRMN001W
Commercial Practice 2018
a) Identify one office building in Liverpool, Leeds, Manchester, or Birmingham
which has a floor area between 1,000 sq. m.- 6,000 sq 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 SBRR in 2017/8 and estimate the rates payable (including reliefs) in
2018/9 and 2019/20. 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
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 12 years ago on a 15 year FRI lease at a rent
which is now 15% more than the ERV. i.e. you are assuming that the lease
expires in 3 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%.
Please clearly explain the steps you have taken in each case. You can make
any assumptions which you deem are appropriate but you must clearly state
all assumptions which you make.