Lecture 11 of 12 - Commercial Valuation.pptx - SCHOOL OF...

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SCHOOL OF BUSINESS 200603 - COMMERCIAL VALUATION LECTURE 11 of 12 Due Diligence Process
Last week we discussed … Retail property valuation: Introduction to the NSW Retail Leases Act Retail demised area measurement (GLAR) Major classifications of retail properties Location, design and demographic considerations Report headings and valuation analysis Mortgage security retail valuation reporting requirements Weighted Average Lease Expiry (WALE)
This Week (Lecture 11) Due diligence process: Introduction to due diligence process Valuation issues and due diligence process Legal / land title issues and due diligence process Town planning / development issues and due diligence process Property location influences and due diligence process Property design influences and due diligence process Leases and due diligence process List of References
Introduction to due diligence process….
Multiple definitions: A comprehensive appraisal of a commercial property undertaken by a prospective buyer, especially to establish its positive aspects and actual/potential liabilities and finally thus evaluate its overall commercial potential. Due diligence is the process of systematically researching and verifying the accuracy of a statement. Measure of prudence, responsibility, and diligence that is expected from, and ordinarily exercised by, a reasonable and prudent person under the circumstances. Duty of the investor to gather necessary information on actual or potential risks involved in an investment.
In regards to valuation of commercial property: In the course of their careers, commercial valuer’s may be called upon to assist clients with: Formal valuation reports for mortgage security and other purposes Pre-purchase / Pre-sale advice Facilitation of Investment due diligence Retail/Commercial letting and advice No-recourse based private mediation (commercial disputes) And many other possible matters…….. Thus, as a professional, having regards to due diligence will be most prudent.
In regards to Valuers work: The Valuation profession as regulated in Australia by the API and RICS provide guidelines as to professional scope and limitations of a Valuers work. The Valuer necessarily needs to understand where property valuation may overlap with other professionals works (and thus perhaps not be covered by professional indemnity insurance) , those other potential overlapping scopes may include: Provision of investment advice (ASIC regulated) Provision of managed investment schemes Provision of property syndicate schemes Tax and accounting advice Technical and engineering determinations Environmental determinations Specialised town planning advice Legal advocacy and advice
Valuation issues and due diligence process….
In regards to comparable sales methodology: Points to be considered in relation to both the subject property and comparables include: location size and type of the property

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