Your client, a property investment and development company, is evaluating their portfolio and has identified two assets they are interested in acquiring. You have been instructed to provide them with valuation advice as follows:
ASSET 1 63 GOULDEN STREET
Provide your client with the freehold and leasehold valuations of a retail unit in an established location on the outskirts of a town just north of Manchester.
The property was let it to a florist six years ago on a ten year internal repairing and insuring lease. The lease provides for the rent to be reviewed after every five years on an upward only basis. The unit dimensions extend to 6.3m width by 17.8m depth on a net internal basis.
The tenant is currently paying a rent of £25,500 per annum. The current landlord has agreed to replace the roof covering in 2 years’ time at a cost of £6,500.
COMPARABLES
77 Goulden Street recently been let to a beauty salon on a nine year internal repairing lease with three yearly rent reviews at an annual rent of £29,000 annum. There is a break clause after six years. The AITZA of the property is 66.47m2.
48 Goulden Street, a single retail unit on the other side of the road, let four months ago to a pet therapy and dog grooming business. The property was let on FRI terms for five years at a rent of £23,625 and the unit measures 5.8m width by 19.8m depth.
The freehold interest in a small parade of four shops three miles away sold a year ago for £930,000. The net rent roll at the time of sale was £72,000 per annum.
30 marks
ASSET 2 FLOWERPOT NURSERY
A developer is interested in an opportunity to bid for the site of a former local garden centre. They have been provided with the following information.
The site currently has several glasshouses plus a small café and car-parking on a 3500m2 plot. There is planning permission to demolish the buildings and construct a car showroom and garage with a total GIA of 1750m2 plus a tarmacadam forecourt of 275m2. Your client has identified a local company interested in taking a lease on the completed unit at an anticipated net rent of £125 per m2 and an additional £3,000 per annum for the forecourt area.
Costs are as follows:
The showroom and garage will cost £1,100 per square metre GIA to build.
Site remediation and preparation costs will be £65,000.
The developer has a borrowing facility with a major bank at 8% per annum. Finance will be rolled-up until the end of the project.
Agent’s fees for the sale of the freehold are 1.0% of Gross Development Value (GDV).
The developer requires a profit of 18% of GDV.
The total development period is estimated at 18 months.
Calculate the amount your client should bid for the land making any other reasonable estimates of costs not listed above.
