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Valuation calculations: 101 worked examples

Real estate valuation is an art requiring skill,


judgment and experience. There is no
prescriptive way in which to value any
property: the approach is entirely down to the
valuer. Valuation calculations: 101 worked
examples demystifies the number crunching
and provides fresh ideas for new approaches.
(For hard copy of the second edition go to the
RICS Shop .)

These worked examples illustrate the many


different scenarios a valuer may encounter
and the different techniques that can be
employed. Each calculation is clearly set out,
and the jargon-free commentary highlights
points of interest and danger areas.

- Introduction to valuation calculations

- Traditional investment approach:


worked examples
- Single high street shop:
net initial yield
- Single industrial unit: net
initial yield
- Single industrial unit: net initial yield: weaker covenant
-Single industrial unit: tenant's break
-Single industrial unit: tenant's break with explicit costs
-Single high street shop: hardcore
-Single high street shop: hardcore weaker covenant
-Single high street shop: term and reversion
-Single high street shop: short unexpired lease
-Single industrial unit: short unexpired lease (1): internal repairing terms
-Single industrial unit: short unexpired lease (2)
-Existing vacant office block
-Partially occupied office block: equivalent yield
-High street shop with an outstanding rent review
-Parade of 5 shops with a vacant unit
-Parade of 5 shops with a vacant unit: running void with costs
-Office let to a single tenant with minimum uplifts
-Office let to a single tenant with minimum uplifts: weaker covenant
-Multi-let office block
-Multi-let office block with voids
-Multi-let office block with short unexpired leases
-Multi-let office block with short unexpired leases and poor reletting prospects
-Multi-let industrial estate on short-term leases (1)
-Multi-let industrial estate on short-term leases (2)
-Single industrial unit with reversion to land value
-Single industrial unit with vacant possession: income approach
-Single industrial unit with ancillary income
-Single industrial unit with vacant possession: comparable
-RPI inflating lease
-RPI inflating lease: with explicit reversion
-Hotel let on a turnover lease
-Hotel let on a turnover lease subject to a minimum rent

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- Leaseholds: worked examples


-
Single high street shop: long leasehold interest: single rate
-
Single high street shop: geared long leasehold interest
-
Single high street shop: freeholder's interest of a geared long leasehold interest
-
Industrial unit with short unexpired lease
-
Surrender and renewal (1)
-
Surrender and renewal (2): nil premium

- Over-rented property: worked examples


-
Over-rented high street shop
-
Over-rented high street shop with a poor covenant
-
Over-rented bank shop with a long lease
-
Over-rented bank with a tenant break option
-
Over-rented high street shop with a long lease: discounted cash flow approach
-
Substantially over-rented office: discounted cash flow approach
-
Substantially over-rented office with strong covenant: discounted cash flow approach

- Investment: cash flow approach: worked examples


-
Single high street shop: explicit cash flow: rising market
-
Single high street shop: explicit cash flow: falling market
-
Two high street shops: explicit cash flow: rising market
-
'Incubation' office let on short term leases
-
New 'incubation' office let on short-term leases: quarterly negative cashflows

- Ground leases: worked examples


-
Residential ground lease property: freeholder's interest
-
Residential ground lease property: premium for a new lease with more than 80-year
unexpired term
-
Residential ground lease property: premium for a new lease with less than 80-year
unexpired term
-
Ground lease commercial property
-
Ground lease commercial property: initial yield
-
Ground lease commercial property: short lease

- Profit rent: worked examples


- Office: lessee's interest
- Office: lessee's interest with restrictions
- Office: lessee's interest: cash flow approach: rising market
- Office: lessee's interest: cash flow approach: falling market

- Development valuations: worked examples


-
Development site for a single house: profit on gross development value
-
Development site for a single house: profit on cost
-
Development site for a single house: no planning permission
-
Acre of land for the development of an industrial unit
-
Existing office block for conversion to residential
-
Existing office block for conversion to residential: cash flow
-
Existing office block for conversion to residential without planning permission: cash flow
-
Existing office block subject to a short-term occupier with reversion to conversion to
residential without planning permission: cash flow
-
Valuation of a 24-acre development site (1)
-
Valuation of a 24-acre development site (2)
-
Small mixed-use development (1)
-
Small mixed-use development (2)
-
City-centre office development site
-
City-centre office development site, prelet to a strong covenant
-
City-centre office development site, prelet in part
-
Development site for 6 houses
-
Development site for 6 houses: cash flow approach
-
Development site for 6 houses: cash flow approach: phased approach
-
Development site with hope value

- Land: worked examples


-
Agricultural land with hope value (1)

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-Agricultural land with hope value (2)


-Sports ground
-Sports ground let to a university
- Profits valuations: worked examples
- Valuation of a 50-bedroom hotel
- Major city-centre hotel
- Managed workspace let to 50 occupiers
- Managed workspace let to 60 occupiers
- Student hall of residence
- Student hall of residence: income capitalisation
- Self storage property
- Mature self storage property
- Mature self storage property with risk of competition
- Surface car park in a town centre
- Multi-storey car park
- Multi-storey car park in disrepair
- An 18-hole golf course

- Depreciated replacement cost: worked examples


-
Newly-built primary school
-
Victorian primary school
-
Secondary school
-
Town centre fire station: 30 years old: instant build
-
Town centre fire station: brand new: instant build
-
Semi-rural fire station: instant build
-
Football stadium: purpose-built
-
Football stadium: over-specified
-
Swimming pool: 2 components
-
Swimming pool: 3 components
-
Old swimming pool: 2 components

- Synergistic value: worked examples


-Synergistic/marriage value
-Single high street shop: synergistic value
-Land: synergistic value of merging interests
-Land: synergistic value of 3 separate ownerships

- Resources
-
Valuer's crib sheet
-
Interactive valuation calculator
-
Red Book checklists
-
Stamp Duty Land Tax rates
-
Related terms

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Copyright 2016 isurv

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