High Street

Q1 10 High Street is a retail unit located within a busy city centre and let on a 10 year
lease with four years unexpired. The lease incorporates five yearly upwards only
rent reviews. The passing rent is £57,000 per annum on FRI terms. The property is
let to a tenant with a strong covenant. Similar retail units on High Street are currently
taking six months to re-let with a further rent free incentive of six months.
Seven years ago the tenant carried out improvements with the written consent of the
freeholder. The improvements cost £8,000, but would now cost £15,000.
The FRI Market Rent of the premises, inclusive of the improvements, would be
£62,000 per annum. Without the improvements the Market Rent is £60,000 per
annum. The Rateable Value is £57,000.
The tenant is seeking to surrender the existing lease and take a new 10 year FRI
lease with five yearly rent reviews.
(a) Undertake both freehold and leasehold valuations and advise the landlord on
the rent they should seek for the term of the new lease.
Refer to any appropriate statutory provisions in your answer.
(40 marks)
(b) Comment on areas of your valuation where a surveyor acting for the tenant
might differ from your point of view and discuss the valuation issues involved.
(10 marks)
(Total: 50 marks)
Q2 A 12 acre site, situated on the outskirts of a northern city is let to Sheaf plc (a property
development and management company) by way of a 150 year lease from 1961. As
part of the agreement, Sheaf plc was permitted to develop a large retail and leisure
complex extending to approximately 30,000 sq m. The fixed ground rent for the site
was agreed at £100,000 per annum.
The passing rent from the complex is £15,000,000 per annum net. There is a rent
review for all tenants in May 2023 when the rent is expected to increase to a Market
Rent of £17,500,000 per annum net.
As part of the leaseholder's estates strategy, they wish to negotiate to buy the freehold
title from the Local Authority (the freeholder).
You act as the surveyor for the Local Authority who have asked you to value the
freehold and leasehold interests and advise them on a realistic price they may accept
for the freehold.

Comment on the yields you have used throughout.
(Total: 50 marks)
Q3 A public sector body holds the following property assets and have asked you to
value these for inclusion in their 2020 company accounts:
Property Use NIA (Sq M)

1. Office investment Ground Floor Office and Ancillary 500
2. Hospice Ground Floor Medical and Care
   Services 1,050
   In addition to the table above, you have been provided with the following information.
3. Office investment
   Let to a limited company on FRI terms with five years unexpired. There are no
   outstanding rent reviews. The passing rent is £64,500 per annum. Comprises 25%
   of the total site area.
4. The Hospice
   Freehold owner occupied property, constructed in 2002 with a future life expectancy
   of 60 years. Comprises 75% of the total site area.
   The Site
   The properties stand on a 0.4 hectare site which has potential for residential
   development within the local plan.
   The Comparables
   You are aware that a single storey 600 sq m single storey office property has
   recently let in the nearby vicinity for £145 psm, by way of a new 15 year FRI lease,
   with five yearly rent reviews. The property took six months to let, with a further six
   months' rent free incentive.
   Current residential land values are in the region of £2,500,000 per hectare, whilst
   land zoned for office development is achieving sales at approximately £1,700,000
   per hectare.
   (a) With reference to the latest edition of the RICS Red Book, IAS, IFRS and
   public sector accounting standards, indicate how the properties would be
   classified and outline the appropriate basis of value and method of valuation.
   (15 marks)
   (b) Value the property assets for inclusion in the company's financial statement in
   accordance with the latest guidance.