You have been instructed by ABC Investments who have just acquired a portfolio of real estate and have asked you to provide a series of valuations and/or valuation advice for each property within the portfolio.
Each property is detailed below and you should provide a valuation calculation (as required) with supporting detail for each property. Please note that a valuation report is NOT required.
Property 1
The freehold interest in a block of six flats. The flats are let on 125 year leases from the 1st January 1978. The ground rents are £100.00 per annum. The owner of Flat 1 has asked for a leasehold extension. Calculate the premium that would be payable for the proposed extension. Similar flats under long leases are selling for £250,000.
Property 2
The freehold interest in two detached houses which are let under long ground leases (both have 400 years unexpired). One of the occupiers has requested to purchase the freehold interest although the property is in a relatively poor condition. The ground rents are £60.00 per annum for each house. Calculate the sum required to sell the freehold interest. A similar detached property has just sold for £450,000.
Property 3
A parade of retail units let under a series of leases as follows:
Unit A (Ground Floor only) – Has a frontage of 6m and a depth of 18 metres. Let on a 6 year FRI lease from the 1st December 2018 with a rent review at the third anniversary. The current rent is £12,000pa
Unit B (Ground Floor only) – Has a frontage of 7m and a depth of 20 metres. Let on a 9 year internal repairing lease from the 8th May 2011 with three year reviews. The current rent is £13,500pa
Unit C (Ground Floor only) – Has a frontage of 8m and a depth of 22 metres. Let on 12 years FRI lease from the 12th December 2018 with four year rent reviews. The current rent is £29,000pa
Unit D (Three storey) – Has a frontage of 8m and a depth of 22 metres with basement sales and a first floor office. An FRI lease was granted on the 1st October 2019 for a term of 10 years with a rent review at year 5. There is also a landlord only break clause at years 3 and 6. The current rent is £32,000
Unit E (Ground floor only and in separate ownership) comprises a 7m frontage and 20m depth has just let for £23,100pa on FRI terms.
Unit F (in separate ownership) are used for offices and were let back in October 2020 on FRI terms at a rate of £200/sqm
Unit G (in separate ownership) has a frontage of 7m and a depth of 16m and has just let and been sold to an investor for £262,500
Calculate the Market Rent and Value of each individual unit.
Property 4
Four industrial units:
Unit W – comprises 150sq m and let on FRI terms for 5 years with 2 years to lease renewal. The current rent passing is £34,000pa
Unit X – comprises 150sq m. Currently vacant.
Unit Y – comprises 175sq m let on FRI terms for 15 years with five yearly reviews from 1st January 2016 at a commencing rent of £20,000pa. There are fixed reviews in 2021 to £25,000pa and 2026 to £28,000pa
Unit Z – comprises 200sq m and recently let on FRI terms for £35,000pa.
A similar unit in separate ownership comprising 150sq m has just sold for £328,125.
Calculate the Market Value of each individual unit.
Property 5
A commercial unit let as a workshop for 5 years on internal repairing terms. The freeholder has obligations as follows:
Year 1 – Gross Rent – £4,000 (half rent)
Year 2 – Gross Rent – £8,000 (boiler replacement costing £3,500)
Year 3 – Gross Rent – £8,000 (roof works costing £4,000)
Year 4 – Gross Rent – £8,000 (electrical works – exterior £6,000)
Year 5 – Gross Rent – £8,000
The all risks yield is said to be 12%
Calculate the Net Present Value of the income streams.
Property 6
An office let on a 10 year lease on FRI terms at a Market Rent of £20,000pa. The tenant wishes to pay a lower rent and has offered to pay a premium of £35,000.
Calculate the annual rent to be paid. An identical property has just sold for £500,000.
Property 7
A warehouse with a trade counter occupied on a 6 year FRI lease with 3 years unexpired at £75,000pa. The tenant wishes to surrender the existing lease in favour of a new 8 year lease with a rent review at year 4. The Market Rent on FRI terms is £115,000pa. Assume an all risks yield at 8%.
Calculate the rent to be paid under the new lease as well as the Market Value once the new lease is granted
Property 8
A head leasehold interest in supermarket. The rent paid to the freeholder under FRI terms is £185,000pa. The Market Rent is said to be £225,000pa. The lease term is 35 years with 7 year reviews granted on the 12th December 2005 with The all risks yield for this type of investment is said to be 6%. The property is sub-let to Tesburys (a leading retailer). They wish to purchase the head leasehold interest and your client would like to make an offer to purchase the freehold interest.
Undertake the two calculations.
Property 9
Value the freehold, leasehold and sub-leasehold interests in an industrial building based upon the following information:
Lease granted on FRI terms the 1st June 2015 for 20 years at a rent of £75,000pa
Sub-Lease granted on FRI terms the 1st June 2019 for 15 years less one day at a rent of £90,000pa
Recent evidence suggests that the Market Rent is £105,000pa
The freehold investment yield is said to 6.0%
Property 10
A Sports Complex comprising: Sports Hall with 5 x indoor courts built in 1980 with café (let on a 3 year lease to a catering company), Outdoor 4G football pitch, separate changing rooms built in 1995 with European grant money, four outbuildings used for storage built in 1980 and a pay and display car park which serves the Sports Hall and town centre.
Your client wishes to know how this would be valued for Accounting purposes.