valuation of: queen mary modular maternity units, west … · richard ayres mrics, rics registered...

Prepared by: Richard Moir MRICS, RICS Registered Valuer © copyright reserved 2017 Gerald Eve LLP GE 21/35

Valuation of:

Queen Mary Modular Maternity Units, West Middlesex Hospital, Isleworth TW7 6AF

On behalf of: CWPLUS

Valuation Date: 27 October 2017

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October 2017 GE21/35 A13986 Gerald Eve LLP

F.A.O. James Varley 72 Welbeck Street London W1G 0AY

CWPLUS 4 Verney House, 1b Hollywood Road, London SW10 9HS

Tel: 020 7493 3338

www.geraldeve.com

27 October 2017 Our Reference: RAMM/A13986 Dear Sir Property: Queen Mary Modular Maternity Units, West Middlesex Hospital, Isleworth, TW7 6AF

Terms of Engagement In accordance with your instruction, as set out in your email of 29 September 2017 and our Terms of Engagement dated 27 October 2017, a copy of which is attached at Appendix v, we have pleasure in reporting as follows.

Scope of Instruction We have inspected and completed our investigations into the freehold property to be acquired as an investment in the furtherance of your charitable objects and have pleasure in providing this valuation report. We understand that the purpose of this valuation report is to assist you in forming a decision on your proposed acquisition of the modular buildings.

You will need advice on the extent of the asset you would be acquiring. We assume that it would just be the modular buildings themselves but it could extend to an interest in the land (which may give rise to disposal procedures by the Foundation Trust) and the services connections, etc. This may be simplified if you have an unequivocal financial/lease guarantee to the full capital and interest repayments from the Foundation Trust with no obligations on CWPLUS to remove the buildings at the end of the 8 years or otherwise deal with them.

In preparing this report, we confirm that Gerald Eve LLP are acting as External Valuers and we are not aware of any conflict of interest in this respect. We also confirm that our maximum liability for all advice and services provided in connection with this project both before and after the date of this letter shall not in aggregate exceed £5,000,000 (five million pounds).

Bases of Valuation and Valuation Assumptions Our report and valuation have been carried out in accordance with the Valuation – Global Standards 2017 of the Royal Institution of Chartered Surveyors (RICS). We refer in this report to those Global Standards and the national standards and guidance set out in RICS Valuation – Professional Standards UK January 2014 (revised April 2015) [collectively “the Standards”]. Definitions of the valuation bases adopted together with the various assumptions made when undertaking our valuation are set out in the Terms and Conditions of the report at Appendix vi hereto.

Limitation Our valuation is totally dependent on the accuracy of the information which has been supplied to us and upon the assumptions set out herein. If they prove to be incorrect or inadequate, the accuracy of the valuation may be affected.

In accordance with the recommendations of the RICS we require that neither the whole nor any part of our report nor any reference thereto be included in any published document, circular or statement, nor published in any way without our prior written approval of the form or context in which it is to appear. In accordance with the Standards we are also required to draw your attention to the possibility that this valuation may be investigated by the RICS for the purposes of the administration of the Institution’s conduct and disciplinary regulations.

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The valuation report is provided for the stated purpose and solely for your use, and your professional advisers, and neither the undersigned nor Gerald Eve LLP accept any responsibility whatsoever to any other person.

Investigations A full inspection of the subject property was undertaken by Richard Moir on 11 October 2017. The valuation reported herein is subject to the assumption that no material changes to either the subject property or its immediate locality have taken place between our inspection and the valuation date.

The valuation date for the valuation reported herein is the date of this report.

This report has been prepared by Richard Moir and checked by Richard Ayres MRICS, both of whom are RICS Registered Valuers. We also confirm that the individuals carrying out this valuation have the appropriate knowledge, skills and experience to undertake the valuation competently.

We trust that this report is satisfactory for your current requirements, but, if we can be of further assistance, please do not hesitate to contact us.

Yours faithfully

Richard Moir MRICS, RICS Registered Valuer Partner

Richard Ayres MRICS, RICS Registered Valuer Partner

For and on behalf of Gerald Eve LLP For and on behalf of Gerald Eve LLP

020 7333 6281 020 7333 6321

07771 812 249 07827 353 886

[email protected] [email protected]

Gerald Eve LLP is a limited liability partnership registered in England and Wales (registered number OC339470) and is regulat ed by the RICS. The term partner is used to refer to a member of Gerald Eve LLP or an employee or consultant with equivalent standing and qualifications. A list of members and non-members who are designated as partners is open to inspection at our registered office; 72 Welbeck Street, London W1G 0AY and on our website.

mailto:[email protected]

mailto:[email protected]

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Contents Section Page

Executive Summary 4

1. Introduction 5

2. Description 6

3. Condition 8

4. Tenure 8

5. Market Commentary and Evidence 9

6. Estimated Values – Depreciated Replacement Cost 11

7. Estimated Risk Adjusted Annual Repayments 11

8. Conclusion 12

Appendix i

Appendix ii

Appendix iii

Appendix iv

Appendix v

Appendix vi

Appendix vii

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Photographs

Floor Plans

New Build Comparable Evidence

Second Hand Comparable Evidence

Instruction Letter

Terms and Conditions

Abbreviations

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Executive Summary PURCHASE REPORT

Valuation Date: 27 October 2017

Queen Mary Modular Maternity Units, West Middlesex Hospital, Isleworth TW7 6AF

Description Five modular maternity units at West Middlesex Hospital, four of which

were installed in 2014 and one in 2008. The modules are arranged over ground and first floors providing 17,772 sq ft of accommodation.

Tenure Freehold / owned Estimated Market Value for Second Hand Re-sale

£500,000 (maximum)

Depreciated Replacement Cost £7,640,000 This executive summary should be read in conjunction with the full valuation report enclosed.

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1. Introduction Chelsea and Westminster Hospital NHS Foundation Trust (the Trust) holds a leasehold interest from Moduleco Healthcare in the following five modular buildings that have been installed on the Trust’s Queen Mary Maternity Unit at West Middlesex Hospital:

Block A, installed in 2014

Block B, installed in 2014

Block C, installed in 2014

Block D, installed in 2014

The 2008 installation

We have not seen the agreements but we understand the modules were initially demised under two leases, the 2008 lease expired September 2017 and the 2014 lease is due to expire December 2017. The leased units do not include any ground works, foundations, or service connections, which infrastructure was installed by the Trust to support the erected modular buildings.

The current cost of the lease (for all the modules) is c £2.8 million (c £2.6 million in rental and c £200,000 in depreciation costs). This sum is well above any market rental value for the buildings.

The Proposed Transaction

It is proposed that CWPLUS borrows funds of £12.6 million (including VAT) on an 8 year loan to finance the capital purchase of the modular buildings at the subject premises. CWPLUS will then lease the buildings to the Trust for a period of 8 years, at a rental cost sufficient to meet the capital and interest repayment costs on the loan. The Trust will receive fixed funding for the lease from a Clinical Commissioning Group (CCG) over the 8 year period of the loan.

The CCG or the Trust will act as guarantor for CWPLUS’s loan. At the end of the 8 year lease the Trust would take a transfer of the units from CWPLUS for no further charge. If the revenue from the CCG exceeds the costs incurred then CWPLUS may retain the surplus.

We do not know how this lease or financing arrangement would be structured nor do we know the terms of any loan. If it were to be structured from a property perspective then you would want the demised to include the buildings, together with appropriate rights of access, services, support etc. The Trust should have full repairing obligations and responsibility for insurance and all running/occupational costs. You would also want the Trust or the CCG to guarantee all contractual terms, including your full purchase costs including professional fees and any financing arrangement fee.

The alternative option for the Trust is to continue to rent the units from Moduleco for an annual rent of £1,550,000 per annum plus VAT.

Our advice is sought on the merits of the proposed transaction from the Charity’s perspective and any material risks associated therewith.

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2. Description Block A (2014)

Block A is single storey, ground floor only and is a small extension to the 2008 modular building. The installation has extended the recovery ward to provide an additional two recovery beds and a changing area.

Block B (2014)

Block B is constructed over two storeys, however, the first floor is significantly larger than the ground. The ground floor comprises 4 birthing suites, a staff base, staff WC, store room and two sluice rooms. All of the birthing suites are en-suite with WC and wash hand basin, two contain showers and two contain shower over bath.

The first floor comprises 6 transition en-suite bedrooms with WC, wash hand basin and shower. There is also a special care baby unit, segregation room, breast feeding room, lounge, milk kitchen, staff room, staff WC, sluice room and utility room.

Block C (2014)

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Block C is arranged over two storeys with 5 antenatal bedrooms on the ground floor and 5 postnatal rooms on the first floor with a plant area at the end of the building. The bedrooms comprise a bed with electrics and nurse call and a wet room en-suite with shower, wash hand basin and WC.

Block D (2014)

Block D is also arranged over two storeys and is used for consultations. At ground floor level there are 6 consulting rooms and at first floor there are 5 consulting rooms and a waiting area. The consulting rooms comprise a bed, desk with computer and some contain wash hand basins.

2008 Installation

The 2008 installation is at ground floor level only, it comprises 4 birthing suites, 2 operating theatres, a recovery area, staff base, staff change, WC, utility room and clean store. All of the birthing suites are en-suite with WC and wash hand basin, two contain showers and two contain shower over bath.

In accordance with the current RICS Code of Measuring Practice, we took check measurements and have scaled plans of the subject premises provided by ModuleCo Healthcare. We provide a schedule of areas of the modular buildings as follows:

Modular buildings Floor GIA (sq m) GIA (sq ft)

Block A (2014) Ground 30.1 324

Block B (2014) Ground 249.8 2,689

1st 421.6 4,538

Block C (2014) Ground 179.0 1,926

1st 179.0 1,925

Block D (2014) Ground 83.6 900

1st 84.3 908

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2008 Installation Ground 423.8 4,562

Total 17,772

We estimate that the gross internal area is approximately 17,772 sq ft.

The specification is largely uniform throughout with painted walls, vinyl flooring, tiled ceilings with recessed fluorescent lighting and air handling units and double glazed uPVC windows. Heating comes from the corridors of the original property and is provided into the modules via the air handling units. The smoke detectors are all integrated into the main system of the original property.

At the time of our inspection the property appeared to be served by mains electricity, gas, water and drainage services. None of these services were tested, but, for the purpose of the valuation reported herein, we have assumed all services to be fully operational.

Additional photographs of the subject premises are included at Appendix i. We attach floorplans as Appendix ii.

3. Condition As per your instruction and our Terms of Engagement the inspection we have carried out was for valuation purposes only. From our observation, with regard to the general condition of the subject premises, we would comment as follows.

The subject premises were generally in a good state of condition as they are still relatively new, the first unit was installed in 2008 with the 4 additional units added in 2014. The units are said to have an expected lifespan of 60 years, comparable to that of a permanent build but this will be reliant on certain levels of annual maintenance and renewal. We did not notice any major structural defects or wants of repair and would expect the property to sell readily in its current condition.

Our building consultancy team and Pivotal Services have undertaken condition surveys of the building fabric and mechanical and electrical services. We attach copies of the condition survey reports in respect of building fabric and mechanical and electrical services and would note that the overall conclusion is that there are no grounds to recommend against the purchase but please note the main recommendations.

Upon inspection we did not notice any obvious sign of deleterious or hazardous materials. Accordingly, for the purpose of the valuation reported herein we have assumed that the subject premises are free from such materials.

4. Tenure The buildings are owned by ModuleCo Healthcare and the Trust hold leasehold interests at a passing rent of c £2.6 million per annum. The lease relating to the 2008 installation expired September 2017 and the lease relating to the 2014 buildings is due to expire in December 2017.

We have not seen a copy of the lease but we do not consider this essential for the purposes of our report as we have been instructed to provide our valuation advice on the assumption that the units are offered freehold to the market, without the benefit or encumbrance of the actual or any notional leases.

We advise that all information relating to the tenure of the subject premises and structure of a purchase and leaseback is verified by your solicitors.

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5. Market Commentary and Evidence New Build Market

In our experience, Trusts almost always acquire new build modular units, designed to their specific requirements, direct from the manufacturer. For valuation for financial reporting, as they tend to form part of specialised estates, and in many cases are specialised buildings themselves, we would typically expect to provide fair value assessments of such buildings by reference to their depreciated replacement cost, with the resultant values equating to market value assuming a continuation of their existing use. It follows that such valuations will have close regard to the observable costs of procuring equivalent modular buildings with adjustments for accumulated physical and functional depreciation. We observe that relatively high prices are paid by Trusts for both specialised and non-specialised modular buildings. There is little transparency of pricing in the market for these buildings but we are advised by our Trust clients that the advantages of modular construction in terms of the speed and ease of the construction process may justify construction costs at least as high, if not higher, than conventionally constructed buildings. We attach as Appendix iii, a schedule of new-build costs incurred by Trusts for modular buildings, adjusted to values by reference to the BCIS all-in Tender Price Index. For maternity, gynaecological hospital facilities operating theatres and other specialised facilities, the average of the new build costs we have been able to obtain is c. £5,912/m2 (£549/sq ft), although this masks a considerable range of £3,445-£7,722/m2 (£320-£717/sq ft). These costs (which include for fees and VAT) may be compared to indicative costings provided for conventionally constructed maternity and gynaecological hospital facilities in the following published cost guide:

BCIS Average Prices:

Cost Range £/m2

BCIS Building Function From To Mean Cost

Surgery Inc. Operating Theatres £4,423 £11,750 £6,559

N.B. we have added professional fees at 12.5%, VAT at 20% and external works at 3% to the published costings to enable a more accurate comparison with our analysed costings of modular buildings.

For non-specialised new-build modular buildings, which are mainly deployed for office purposes, we observe average costs paid for units by Trusts to be c. £2,200/m2 (£200/sq ft). Published costs for equivalent conventional build offices are as follows:

BCIS Average Prices:

Cost Range

BCIS Building Function From To Mean Cost

Maternity, gynaecological hospital facilities £4,479 £5,740 £4,950

Ward Blocks £1,979 £8,764 £4,209

Offices 1-2 Storey non-air conditioned £1,499 £4,445 £2,476

The available evidence does confirm our view that entities will be prepared to pay broadly similar pricing to the typical costs of procuring buildings through conventional construction routes in order to benefit from the ‘quick-fix’ solution that modular buildings represent and recognising the significant improvement in the quality of modular building systems achieved in recent years.

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Second Hand ‘Re-Sale’ Market Our instructions also require us to estimate the market value that could be ascribed to the modular buildings in their used state, excluding the value of any associated infrastructure such as footings and service connections. Market value ignores any distortions that may arise from particular value being ascribed to a property by a special purchaser, i.e. a buyer for whom a particular asset has a special value because of advantages arising from its ownership that would not be available to other buyers in a market. The requirement is therefore for us to estimate the value that the units might realise, were they to be removed from the site and presented to the wider market, rather than their residual value ‘in-use’ to the Trust. As the market for second hand modular buildings is not especially visible, we sought in 2014 assistance from a leading auctioneer of surplus healthcare equipment (including modular buildings), Hilditch Group Ltd for a similar exercise and we comment on the findings below. We have made similar enquiries this time but within the timescales we have not been able to secure any evidence from them although in conversation their retroflection is that they have only sold one second hand modular building to a Trust since 2014. This was at Aldenhay Hospital 2 or 3 years ago. Certainly in 2014, the Hilditch Group worked for most of the acute trusts in the UK, selling their redundant assets and providing site clearances. They had carried out most of the site clearances of hospitals following PFI new builds. Based on previous evidence, Hilditch confirmed our expectation of a very substantial divergence as between the cost of new build modular units and their second hand value. They support our analysis that the cost of new-build installation, in particular for large multi module buildings, tends to be very high, these costs reflecting the bespoke nature of the modules and, if on lease, the expectant lease life of the building. Whilst they confirm the existence of a market for second hand modules, we are advised that there is not necessarily a market for original buildings in their designed form, and that accordingly values achieved are generally unrelated to the original cost of provision. Modular buildings are often designed in a particular way to suit a unique site; in addition to this, in order to relocate the building it has to be broken down into its component parts; in which case most of the original value will be lost and whilst it may be possible to re-install the building as originally designed, most of the internal fittings will have to be replaced, and much of the ancillary plant. Large modular buildings like those at West Middlesex Hospital are generally commissioned by public and private institutions, who generally buy new. Whilst there is a market for the component parts of the building, we are advised that there is practically no market for used modular hospital facilities. In the experience of Hilditch, the only chance of selling a specialised unit for the use it was intended, at a price that comes anywhere near to reflecting the original purchase price less depreciation, would be to sell it to another Trust – however such sales are exceptionally rare, as Trusts will invariably not be prepared to take on the clinical and operational risks associated with utilising healthcare delivery buildings that have not been designed, constructed and commissioned for use to the highest possible standards. Apart from single cabins, which have a wide appeal, we are advised that larger modular buildings tend to sell to dealers who will use structural elements to create new buildings. Below are some examples of buildings that Hilditch have sold (or have attempted to sell):

a) 2008 Sale - Vic Hallam Modular Kitchen, 5 years old, 15m x 6m, with full security system and gas central heating. Sold amount: £1,000

b) 2010 Sale - GE Capital Building, situated at University Hospital, Hartlepool, building consisting of 6

modular units. Sold amount: £3,000 c) 2010 Sale -Modular Operating Theatre, Bolton, a 2003 building with just 6 months use, consisting of

ten 6m x 2.8m modular units, the theatre consisting of 8 units fitted with Hereaus operating lights in air flow canopy. Sold amount: £10,000. (This unit had already been removed from site and was sold from storage).

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d) 2012 Auction - Modular Theatre Building, 13 modules from South Wales NHS Trust, approx. 2 years

old, reserve of £30,000 bid £15,000. Not sold.

As can be seen, the prices achieved at auction for specialised modular buildings equate to around £500- £1,000 per module. At this level, which equates to below £100/m2 capital value, these prices represent salvage value only. It is particularly notable that the operating theatre in South Wales brought to auction in June 2014 failed to find a buyer even though it was designed to a high specification and only 2 years old. Hilditch has suggested to us that in this case, the theatre fittings could potentially be sold separately, in particular the lights, scrub sinks and some plant; however the return on this is unlikely to be more than £10,000 depending on precise specification. To supplement the information supplied by Hilditch we have made an on-line search of non-specialised modular buildings available for sale and attach some examples of these at Appendix iv. This suggests small single module units (such as portacabin offices) might achieve up to £320/m2, but that lower values of c. £150 - £300/m2 would be expected for larger buildings comprising multiple modules. Moluleco would probably argue that the value to them is materially higher as they would take them back, recondition them and then sell or lease them to another Trust. This argument may have some merit but what is clear is that there is no functioning second-hand market where such modular buildings achieve pricing anywhere near their original costs, particularly, if the special purchaser overbid of a party who is currently using the installation is disregarded. 6. Estimated Values – Depreciated Replacement Cost In order to estimate the value in use to the Trust, as at today, and on the assumption that they firstly, own the modular buildings and secondly, foresee an ongoing use for buildings alongside the remainder of the operational estate, we have undertaken a depreciated replacement cost evaluation. We estimate the current values to the Trust on this basis to be as follows:

Building Depreciated Replacement Cost Block A (2014) £140,000 Block B (2014) £3,040,000 Block C (2014) £1,620,000 Block D (2014) £765,000 Theatre Block (2018) £2,075,000 Total £7,640,000

These estimates are based on average build costs of £3,857 per square metre plus fees, extremals and VAT (£5,363

per square metre inclusive) and depreciation of only circa 14%.

Against this analysis, it could be said that the Trust and therefore, CWPlus are being asked/required to pay a full

price to acquire the buildings at £10.5 million plus VAT. The price of £12.6 million, including VAT devalues to

£7,631.41 per square metre which sounds high for buildings which are c. 3 to 9 years old.

However, we do not know the contractual terms applying to the Trust should they not want to extend the lease

nor acquire the buildings and there is clearly a significant ‘operational ransom’ in needing the facilities for ongoing

service delivery. Nonetheless, there might be merit in challenging the pricing.

7. Estimated Risk Adjusted Annual Repayments The Trust has currently been paying an annual rent to Moduleco of £2.6-2.8 million per annum.

We do not know what financing offers you have received which amortise the loan from £12.6 million to zero over

an 8 year period. We note that the Public Works Loan Board are currently lending to public bodies on a fixed rate

for 8 year term at 1.73%. On the assumption of the following fixed interest rates, we would estimate the

repayments would be:

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At 3.0% interest - £1,773,408 per annum; and

At 2.5% interest - £1,739,460 per annum.

These sums would need to be increased to take account of the professional fees and any finance arrangements

costs which you will incur as these should be reimbursed by the Trust.

For comparison, the short-term nature of the interest (8 years) and the dispersed nature of the modular buildings

as opposed to a self-contained building would probably mean that the opportunity would not be of interest to

property investors who are otherwise, interested in acquiring property backed income strips where they receive

30-40 year rental income, secured by annuity grade covenants such as NHS trusts, with annual RPI rental

indexation and no residual value.

Nonetheless, following similar principles we have undertaken a discounted cashflow at a discount rate of 1.75%,

which reflects the returns sought on longer income deals with annuity grade tenant covenants, to determine the

annual sum required to fully recover the initial investment of £12.6 million over an 8 year period. This shows an

annual payment in year 1 of £1,687,500 per annum.

Provided CWPlus can raise 100% finance with a guarantee from the Trust or CCG then we would expect the annual

repayments to be in the region of £1.70-1.80 million per annum. This would both be lower than the reversionary

rent of £1.55 million plus VAT (£1,860,000 per annum) suggested by Moduleco and would also leave the Trust with

a residual value in the buildings.

Based on present day costs and adjusting only for age and obsolescence, we estimate that the depreciated

replacement cost of the modular buildings in 8 years time would be approximately £5.6 million, ie: there would be

a material residual value to the Trust.

8. Conclusion The Trust have proposed that CWPLUS will borrow funds of £12.6 million (including VAT) to purchase the subject premises. The Trust propose to repay this loan over a period of 8 years at a rental cost sufficient to meet the capital and interest repayment costs on the loan. This would indicate likely annual repayments in the region of £1.70-1.80 million. These are good quality modular buildings, in good condition and we are informed with a service requirement by the Trust of not less than 8 years. At the end of 8 years we think they will retain significant value to the Trust if they have been acquired.

We are not qualified to provide financial advice on any loans but provided the Trust or the CCG fully underwrite full repayment of capital and interest over the 8 year period and that the Trust hold full responsibility for all occupation and running costs then we cannot see any material risks to the Charity in the arrangement.

However, there is a small degree of covenant risk being taken which would justify the Charity taking an income return over and above the repayment of the financing arrangements. If the Trust/CCG were to fail to make the payments then the re-sale value of the modular buildings in the open market would only be a fraction of the price being sought, say up to a maximum of about £500,000.

Thus, the proposed arrangement appears to have merit for the Trust and CWPlus in furtherance of your objects to support the Trust.

However, particularly from the perspective of the Trust it does appear that the price being sought by Moduleco is on the face of it, a full ‘ransom price’ and there may be benefits to them in seeking to negotiate a lower Purchase price. The degree to which the Trust have leverage will depend on aspirations of future business relations, termination costs, estimated re-provisioning and decant costs. It would appear to be worthwhile for the Trust to seek a better deal from Moduleco.

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Gerald Eve LLP is a national firm of chartered surveyors and property consultants with a network of nine offices and more than 460 employees. In addition to valuation our range of services includes occupational and investment agency, planning and development, every aspect of building consultancy, rent review and lease renewal instructions, compulsory purchase and compensation, business rates, property taxation and project services. If we can assist you further with regard to the subject of this valuation or any other property related issue please do not hesitate to contact either of the signatories to this report.


Appendix i – Photographs


Appendix ii – Floor Plans


Appendix iii – New Build Comparable Evidence


Appendix iv – Second Hand Comparable Evidence


Appendix v – Instruction Letter


Appendix vi – Terms and Conditions These are the general terms and conditions upon which our valuation and report are prepared, unless agreed otherwise in writing or stated otherwise in the body of this report. The below terms and conditions are written in the singular. Where the reported valuation(s) refer to two or more properties these terms and conditions should also be taken to apply in the plural. Bases of Valuation We have carried out our report and valuation in accordance with the Valuation – Global Standards 2017 of the Royal Institution of Chartered Surveyors (RICS). We refer in this report to those Global Standards and the national standards and guidance set out in RICS Valuation – Professional Standards UK January 2014 (revised April 2015) [collectively “the Standards”]. In accordance with the Standards, we have valued on the basis of Market Value and Market Rent subject to any special assumptions, which are set out herein. The definitions of these valuation bases are given below: Market Value (MV): VPS 4 (4) of the Standards defines Market Value as (as defined in IVS 104 paragraph 30.1): “The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.” Market Rent (MR): VPS 4 (5) of the Standards defines Market Rent as (as defined in IVS 104 paragraph 40.1): “The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.” A full commentary on the meaning of and implicit assumptions within these definitions is included in the Standards and we can provide a copy of this on request. Valuation Assumptions: We have made the following assumptions: 1. All valuations are carried out in accordance with the Valuation – Global Standards 2017 of the Royal

Institution of Chartered Surveyors (RICS). We refer in this report to those Global Standards and the national standards and guidance set out in RICS Valuation – Professional Standards UK January 2014 (revised April 2015) [collectively “the Standards”].

2. All information supplied to us by your Client, yourselves, or your professional advisers, or any other named

party, is assumed to be correct and complete. 3. We have not had access to the title deeds of the property and are therefore unable to comment as to

whether they are free from, for example, any onerous or unusual covenants, restrictions, outgoings, or statutory notices likely to have an adverse effect upon the value of the property. We have assumed for the purpose of our valuation that none such exist.

4. Generally, plans and maps provided for identification purposes only are reproductions of Ordnance Survey

maps with the sanction of the Controller of HM Stationery Office, Crown Copyright reserved, and are based on a scale of 1:1,250 or are location maps based on a scale of 1:50,000 and provided by Promap.

5. All the covenants in any Headleases have been complied with and there are no disputes with the Lessors or

notices received from the Lessors or Lessees which would adversely affect the valuation.


6. Unless our enquiries have indicated otherwise, it is assumed the property’s use is duly authorised or established with the local planning authority and that no adverse planning conditions or restrictions apply. It should be noted that employees or Town Planning Departments now give information on the basis that it should not be relied upon and, therefore, we advise that formal searches are undertaken if greater certainty is required.

7. It is assumed that each property is not occupied and used with, nor that the premises have been, or are,

being, put to any contaminative use. This might reduce the values now reported. 8. In the absence of any information to the contrary, no allowance has been made for rights, obligations or

liabilities arising under the Defective Premises Act 1972. 9. The Landlord and Tenant Act 1987 gives certain rights to residential tenants to acquire the freehold

interest in a building where more than 50% of the floor space is in residential use. Where this is applicable we have assumed that necessary notices have been given to the residential tenants under the provisions of the Act and that such tenants have elected not to acquire the freehold or head leasehold interest, and therefore any sale on the open market is unrestricted.

10. We have inspected and carried out a measured survey of the property in accordance with the Code of

Measuring Practice (6th Edition) prepared by the Royal Institution of Chartered Surveyors. Unless otherwise stated, it is assumed that the building has been constructed and is being occupied and used with all requisite consents and in compliance with valid Town Planning and Building Regulations approval and has the benefit of a current Fire Certificate and that the property complies with all relevant statutory regulations.

11. We have not undertaken a building survey, nor have we tested any services or inspected woodwork or

other parts of the structure, which are covered, unexposed or inaccessible. Therefore these parts are assumed to be in good repair and condition and the services in full working order.

12. The Government requires an Energy Performance Certificate (EPC) to be produced for property

transactions including the sale, rent or construction of both residential and non-residential dwellings. For the purposes of this valuation we have not been provided with a copy of an EPC for the premises. Our valuation is based on the assumption that any transaction will be conducted in accordance with the aforementioned legislation.

13. We have not arranged for any investigation to determine whether high alumina cement concrete, calcium

chloride additive, blue asbestos or any other deleterious or hazardous material has been used in the construction, and we cannot therefore confirm that the property is free from risk in this regard. Our valuation has been prepared on the assumption that any investigation would not reveal the presence of such materials.

14. We have not undertaken any site investigation, geological, mining or geophysical survey and therefore

cannot clarify whether the ground has sufficient load-bearing strength to support any of the existing buildings or any other constructions that may be erected in the future.

15. We have not included plant and machinery not forming part of the service installations of the building. We

have also excluded furniture and furnishings, fixtures, fittings, vehicles, stock and loose tools. Furthermore, no account of any goodwill, that may arise from the present occupation of the property, is allowed for in our valuation.

16. This report gives no warranties as to the condition of the structure, foundations, soil and services.


17. We have not instigated any environmental audit or other environmental investigation or soil survey on the property which may evidence any contamination or the possibility of any such contamination. Therefore we have assumed that there has been no contaminative or potentially contaminative uses ever carried out in the property. Should it be established that contamination, seepage or pollution exists at the property or on any neighbouring land or that the premises have been, or are being, put to a contaminative use (unless stated otherwise in our report) then this might affect the values stated in the report.

18. i) There are no abnormal ground conditions, archaeological remains, or hazardous or deleterious

materials present which might adversely affect the present or future occupation, development or value of the property;

ii) The property is free from rot, infestation, structural or design defect;

iii) No high alumina cement or other currently known prohibited or suspect materials or techniques have been used in the construction of, or any subsequent alterations or additions to, the property;

iv) The property is not contaminated and is not adversely affected by the Environmental Protection Act 1990 or any other environmental law; and

v) Any processes carried out on the property which are regulated by environmental legislation are properly licensed by the appropriate authorities and operated in accordance with the licence.

If any of the above assumptions prove to be inappropriate, then the value of the property concerned may be lower

19. We have not included any allowance in our valuation for works that might become necessary to enable

access for disabled persons under the Equality Act 2010. 20. In respect of commercial and residential premises valued on a yield basis, the Market Value reported is the

gross amount paid for the subject interest, less an allowance for standard purchasers costs, calculated as 1.8% in respect of agents’ and legal fees, together with stamp duty liability, as follows:

Commercial & Mixed Use Residential Charged at different rates depending on the

portion of the purchase price that falls within each rate band:

Charged at different rates depending on the portion of the purchase price that falls within each rate band:

Up to £150,000 0% Up to £125,000 0% £150,001 to £250,000 2% £125,001 to £250,000 2% Over £250,001 5% £250,001 to £925,000 5% £925,001 to £1,500,000 10% Over £1,500,001 12% Company > £500,000 15% 21. We have taken no account of any other taxation liability that may arise on disposal, nor of any costs

associated with either acquisition or disposal incurred by the owner. In addition, no allowance has been made to reflect any liability to repay any government or other grants or taxation allowance that may arise on disposal.

22. Unless stated to the contrary, all rental and capital values stated are exclusive of VAT at the prevailing rate. 23. Our valuation report has been based upon a number of assumptions stated therein. If any assumptions are

proved to be incorrect, we wish to reserve the right to alter our opinion of value accordingly.


24. Our maximum liability for all advice and services provided in connection with this project both before or after the date of this letter shall not in the aggregate exceed £5,000,000 (five million pounds). This limitation shall apply to our aggregate liability to you (together with any Associated Person as identified in our Terms of Engagement for whom you are acting as agent in relation to the Contract) on any basis for any losses, damages, costs or expenses (“losses”) arising from or in connection with our services in relation to this project.


Appendix vii – Abbreviations Abbreviations used within our reports are defined below. ADR Average Daily Rate AGA Authorised Guarantee Agreement AST Assured Shorthold Tenancy BREEAM Building Research Establishment Environmental Assessment Method EPC Energy Performance Certificate FF&E Furniture, Fixtures and Equipment FMS Fair Market Share FRI Full Repairing and Insuring GIA Gross Internal Area GOP Gross Operating Profit ITZA In Terms of Zone A MOD Minor Operated Department MPI Market Penetration Index MR Market Rent MV Market Value NIY Net Initial Yield NIA Net Internal Area pa Per Annum pcm Per Calendar Month psf Per Square Foot psm Per Square Metre pw Per Week RGI Revenue Generation Index RICS Royal Institution of Chartered Surveyors RPI Retail Price Index RevPAR Revenue Per Available Room sq ft Square Feet sq m Square Metres UBR Uniform Business Rate (multiplier) VAT Value Added Tax ZA Zone A

valuation of: queen mary modular maternity units, west … · richard ayres mrics, rics registered...

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