Property Valuation

ARBE 6362 Advanced Property Valuation - 2019

Assignment 1

You are required to complete a full valuation report of an office building at

Parramatta NSW. The report should be prepared in accordance with accepted

valuation practice for commercial properties and in accordance with the

Valuation Standing Instructions form the Australian Banking & Finance

Industry.

• See attached Standing Instructions Valuations for Mortgage Purposes to

Lenders.

• See API Guidelines for heading & disclaimers used in providing Mortgage

Valuations for Lenders.

• Whilst this is an exercise in providing a market value the assignment is

more about the set out of report that would be suitable to a lender using

the guidelines. The end value will vary from valuer to valuer but should

only be with the ranges of around 10%.

• Marks will be awarded for correct set out and heading, disclaimers used

as well will be deducted if not provided.

• When writing reports ensure that it is easy on the reader of the report to

review. Tables & Graphs can be used!

The property address is:

42 Phillip Street, Parramatta, NSW, 2150

The legal description is:

Lot 12 in Deposited Plan 790350 being the whole of the land within Folio

Identifier 12/790350 (A copy of the Deposited Plan and the Folio Identifier is

attached, and these documents should be adopted for the purposes of your

report)

The valuation report has been requested by your client, Corporate Property

Pty Limited, who is contemplating purchasing the property. If successful, the

company will finance the purchase with the Unity Bank of Australia and

requires the valuation to be endorsed to that Bank.

The date of valuation is 1 April 2019 and assume you inspected the property on

that date.

Because this is an exercise and you are not able to inspect the property, some

reasonable assumptions will be needed in your report. Note that the property

designated as 42 Phillip Street for the purposes of this assignment is not the

actual building on that land and therefore photographs are not required.

However, a brief description of the location and surrounding development is

required as well as a description of a 4-storey office building. The age, design

and condition of the building is for the student to decide and acknowledging

that those aspects will have an impact on the value of the building however for

the purposes of the exercise you can assume it is a reasonably modern building

approx. 10 years old. (Your report should note that a recent inspection of the

air conditioning plant by a mechanical engineering firm has disclosed that a

chiller will need to be replaced. This has been scheduled for August 2019 at a

cost of $350,000).

A factual market commentary on the Parramatta office market for 2019 is to

be included in your report.

The property is leased to 3 tenants in accordance with the attached tenancy

schedule which has been supplied by the property manager. (Note that the

lease to Westpac Bank on title is no longer operative as the option was not

exercised and the Bank vacated. The current leases have not been registered

on title at this time).

All leases are on a net basis and where there are market reviews, these are

every 2 years.

The top floor is currently vacant however heads of agreement have been

entered into with Telstra Corporation for a ten-year term commencing 1 July

2019. Naming rights to the building have been granted to Telstra for an

additional $35,000pa. An incentive has been granted to Telstra in that there

will be a rent-free period for the first 2 months of the lease.

The building has no parking.

• A schedule of outgoings provided by the property manager is attached.

• Also attached are schedules of comparable rentals and sales to which

you may refer for the purposes of your valuation. It is not necessary to

seek out other sales or rentals. You can make reasonable assumptions

regarding the rentals and sales to support your conclusions.

Prepare your report under all appropriate headings, descriptions and

qualifications as if it was to be submitted to a bank by your client.

You will need to analyse the rentals and sales provided and apply the results,

as you consider appropriate, to the subject property and include these in your

rationale in determining value.

Your primary approach to the valuation is capitalisation of income. A DCF is

NOTrequired however another check valuation method should be included.

Attachments

A. Deposited Plan 790350 E. Sales Evidence

B. Folio Identifier 12/790350 F. Leasing Evidence

C. Tenancy Schedule

D. Outgoings