This coursework comprises of 2 Questions. Please answer both. Both questions carry equal marks. Q.1 According to DTZ (2015) Global invested stock reached a new record level of USD13.6tn in 2014, a 5% increase on a year ago. Explain why property investment is currently attractive as an asset class both currently and in fundamental terms. What do you consider to be the case to dis-invest now? Word limit: 1,000 words Q.2 a) Prepare a capital valuation of the freehold of the following office building. Albion House an office block constructed some 30 years ago on Ground and 3 upper floors and has a Net Internal Area (NIA) of 1,000 square metres, evenly arranged over all 4 floors. There is an inadequate lift and the property would benefit from refurbishment. It is located in the Central Business District of a major provincial city. It is let on a single tenancy to Black and Partners, a well-established firm of accountants, on a 15 year lease on FRI lease with an unexpired term of 3 years at an annual rent of £250,000 p.a. You have assembled the following comparable information: Beswick Court, is a much smaller building (500 square metres NIA) but in a slightly stronger located. It is older and has a poorer layout and facilities. It is let on a lease that was grented 5 years ago without review at a rent of £220 per squate metre. It was sold recently on an initial yield of 5.2%. Capital House, which is located close by but is much more modern in construction and in better condition and has an area of 2,000 square metres. It is let on a 10 year lease and the rent has just been reviewed to £375 per metre square Destiny Duildings is an almost brand new building of some 3,000 square metres that is currently available for letting on individual 500 square metre suites at rents of £450 per metre square on 5 year leases plus service changes estimated to be in the order ot £70 per square metre. Eagle House, a ‘listed’ (historic) building in extremely good condition but of inconvenient layout and having a floor area of approximately closeby was relet for a 3 year term one year ago at a rent of £300 per square metre. It sold immediately upon reletting at a yield of 6% initial yield. Nb: in order to undertake this valuation you will have to make a number of assumptions and the quality of the answer will largely depend on how you rationalise your ‘adjustments’ to both yield and rent. b) assuming Albion House sells at your valuation figure calculate the initial yield and reversionary yield that the purchaser is likely to receive. Part a) carries 40 marks and part b) 10 marks Word limit: 1,000 words
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