Identify a commercial investment property (i.e. one that is either let out [preferable] or one that is available to let) that is on the market for sale and which you consider might meet your client’s requirements (you might like to consider aspects such as what % of his wealth would go into a single investment). You are not restricted as to the type of commercial property you choose but in order to make sense of this brief preferably it is let but the term will either have a review of rent or a lease expiry within the next 10 year.
In relation to this property undertake a ‘desktop’ appraisal to arrive at an appropriate offer price for the property that you advise they makes. In order to do this you will have to:
a. Calculate the Market Rental for the property (whether or not it is let at this figure you will have to decide)
b. Calculate a capitalisation yield that is appropriate to the property
c. Assess a discount rate and likely rental growth to input into a DCF calculation
d. Prepare a table of evidence to back up your views on rent and market yield
e. Having done this ‘ground’ work investigation, prepare both a Market Valuation using conventional method and an Investment Worth valuation (using a DCF approach) on the assumption that your investor will hold the property for 10 years.
Your report will give reasons for the choice of your property against usual investment criteria and explain your calculations and will give full details as to the approach taken and why you have adjusted your evidence and adopted the discount rate you have etc.
(maximum: 1,500 words)
Criterion Marks attributed
Well-reasoned choice of property aimed at meeting client requirements 10
Good collation and presentation of comparable evidence for both rental value and yield 20
Well-argued use of the material gathered (i.e. adjustments to the comparables) to prepare a market valuation 30
Appropriate calculations accurately presented in DCF format using additional inputs 30
Firmly based Conclusions 10
To undertake this assignment students are directed to the standard investment books:
Baum, A. and Crosby, N (2007) Property Investment Appraisal Routledge
Blackledge, M (2009) Introducing Property Valuation Routledge
Isaac, D (2011) Property Valuation Techniques Palgrave – Macmillan