The Assessment
This assessment will allow you to understand and demonstrate the different forms of
implicit and explicit valuation methods and how to apply them with Excel. Your Excel
work will need to be fully annotated to demonstrate your understanding of the
valuation principles and industry-wide valuation principles. You will also need to
carry out research into the UK economy and the London office market and provide
an independent professional opinion on the opportunities and threats for the UK and
London office investment based on the details set out below.
This work should be set out as a professional report comprising 2,000 words with the
Excel and annotations attached as an appendix. Your report should include a title
page, a contents page, and an Executive Summary. These sections and appendices
are excluded from the word count. Tables are also excluded from the word count.
To give your report a professional look and enhance your work you are encouraged
to use maps, graphs, tables photos, and other images that are relevant.
Each week you will be sign-posted to where you should be with your research and
writing up this assessment. This will provide you with guidance and help your time
management to produce a piece of work to your best capabilities and on time.
In addition to the brief below a video discussing this assessment can accessed by
clicking on the link below.
Assessment detail.
Please also read the following brief which this assessment is based on: –
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The Client’s Brief
Your company has recently been appointed by a Far Eastern-based investor
to provide valuation advice and a commentary on the prospects of their
investments in terms of capital value (ie depreciation, stabilising, or
appreciating) over the next 10 years after which the client will sell. This advice
is for the client’s internal purposes only and will not be relied upon by a third
party. This report therefore does not have to follow the RICS Red Book.
You have been allocated the freehold office investment in Buckingham Place
Road, London SW1W and the following tasks as part of this instruction.
1. Youneedtoprovideinwritingawell-researchedoverviewoftheUK
economy with information gathered from independent credible sources,
such as the Financial Times (which can be accessed online from the
Library) and the Office for National Statistics (ONS).
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YouarerequiredtodiscusstheprospectsoftheUKeconomyoverthe
short (1 year) to medium (2-5 years) term based on your research and the
potential impact on commercial property investment.
(Note: -1. and 2. above will improve your research-based skills and
understanding of macroeconomics. Maximum 500 words).
ProvideadetailedoverviewoftheLondonofficeinvestmentmarketbased
on research from companies operating in that market, such as Savills,
Deloitte, and Knight Frank, as well as RICS, (isurv) EGi and CoStar (which
can be accessed online from the library).
DetailthefutureopportunitiesandthreatstotheLondonWestEndoffice
investment market based on your research.
(Note: – 3. and 4. above will improve your research-based skills and
understanding of micro-economics. Maximum 500 words).
Researchcurrentrentalvaluesandinvestmentyieldswhichwillbesetout
in a table and based on this comparable evidence provide clear
justification for your opinion on the Buckingham Place Road office’s
market rent (ERV) and all-risk yield (ARY). Sources of information can be
obtained from research reports from the main London agents as well as
RICS, EGi and Co-Star.
(Note: – this will reinforce your skills of gathering and analysing relevant
comparable evidence to arrive at an appropriate opinion of value. Setting
out your justification will provide transparency for your client and leave a
paper trail in case of a query later. Maximum 500 words).
ProducemarketvaluesinExcelontheBuckinghamPalaceRoadoffice
investment on the following bases: –
Rackrented.
Termandreversion.
Hardcore/layer method.
Short-cutDCF.
FullDCFwithagrowthrateprovided.
Full DCF with Gordons Growth Model.
Your workings should be fully annotated and be set out in Excel attached
as an Appendix. You will need to include your calculations and separate
sheets showing your formula. All calculations will come from the formula
that you have inputted.
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7. Includeatableinthemainbodyofthereportsettingoutthemarketvalues
calculated on the above bases (from point 6) with a recommendation on
the appropriate valuation method to be adopted for this investment.
(Note: – 6. and 7. above will reinforce your knowledge of the different types
of implicit and explicit valuations and provide you with greater confidence
to perform these calculations. Maximum 300 words).
8. Provideaconclusionandrecommendationtoaproposed10-year
investment hold period.
(Note – this will provide you with the skill of drawing together all of your
research and knowledge set out in your report to leave the client with a
clear summary and recommendations expected of a professional.
Maximum 200 words).
Here are the details of the investment property you will be reporting on
A six-storey freehold office investment in Buckingham Palace Road, London
SW1W.
Built in the 1980s but comprehensively refurbished to a Grade A
specification three years ago.
EPC rating Grade A.
IPMS2 60,000 sq.ft with an 85% efficiency to IPMS3.
Passing rent £47.00 per sq.ft set 3 years ago.
Let to a triple-A covenant for a 25-year term with 5 yearly upwards only
rent reviews three years ago.
FRI lease terms and there are no landlord, tenant, or mutual break
options.
Purchaser’s costs are 6.75%.
Sales costs are 2.4% for agent and legal fees.
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Coursework 1 will assess the following learning outcomes of this module: –
1. Apply valuation principles and concepts to undertake a wide range of commercial
property valuations for specific purposes in specific settings, whilst having regard to
relevant and appropriate professional guidance, which will be introduced.
2. Identify and appreciate which valuation method may be more applicable in a
particular setting.
4. Analyse, synthesise, and evaluate more complex rental evidence and apply the
same to the valuation process.
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5. Use appropriate communication to a professional standard of practice to
confidently, clearly, and competently on property matters.
6. Competently research for information associated with the property market, in a
specific UK and European setting.
7. Communicate effectively and professionally in all expected formats to influence
change, enhancing the prospects of assumed client appreciation and recognition.
This will include the ability to reflect on the content of what has been delivered in this
process, in the context of the individual’s personal knowledge and therefore
opportunities of enhancement through personal development.
In addition to the modules’ recommended textbooks, links to assist further research
are below. Additional reading will be added each week onto the module page and
clearly identified in class.
CBRE Research
Colliers Research
Cushman & Wakefield Research
Deloitte London Crane Survey Summer 2023
Knight Frank’s Commercial Property Monthly Yield Guide
Office for National Statistics (ONS) website for UK economic data
Savills: Market in Minutes: West End office Market Watch June 2023
