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Commercial Valuation 1 COMMERCIAL VALUATION REPORT FOR 298-295 SUSSEX STREET SYDNEY NSW 2000 By (NAME) Course: Professor’s Name: Institution: Location of the Institution: Date: Commercial Valuation 2 APPENDICE 1: Picture of the property (circled in red) 1. INSTRUCTIONS In accordance with the instructions contained in your official communication to me dated 1st April 2020, I have duly inspected the property named above while making all the relevant enquiries to provide my opinion of the current Market Value as at the date of inspection of the Freehold interest, subject to an existing lease and the Market rental value. I understand that my valuation is needed for a safe lending purpose for my client, who is proposing for a property refinance. According to 2. BASIS OF VALUATION This valuation has been carried out to conform the ANZPI (Australia & New Zealand Property Institute) professional practice standard, having being inspected by…[NAME]…on the 15th of April 2020.This is also the inspection date. According to ‘RICS-sustainability and Commercial property valuation 2nd edition’ (January 2020), a person valuing the property is asked to express his/her opinion on the property’s suitability for various reasons. I refer in this report matters in my knowledge and which may assist you in practice of the above named reasons for the valuation of the property. The valuation is subject to there being no unusual matters or factors not revealed to us and to comments in this report. 3. LOCATION The property is located in Sussex Street, New South Wales in the central business district of Sydney, Australia. The area itself is a prime CBD precinct with only a minute walkway to Town Hall station and Sydney’s popular Chinatown. Commercial Valuation 3 APPENDICE 2: Location of the Property 4. DESCRIPTION The Property is located in the ground floor of a 13-storey building at the mentioned location. According to real commercial.com, the property is leased until 24 March 2023 to an established hairdresser. It also offers two basement secure car space and storage, access to gymnasium, sauna and swimming pool facilities. New fit-out of internal kitchenette and bathroom, immaculately designed and occupied by the established tenant are also a feature. I am not aware of any factors which would result to probable adverse effects on the sale or use of the property for any legally bound means. A photograph of the front-view of the property is shown at the front page. 5. ACCOMODATION Having previously measured on site the property in relation with IPMS and RICS measuring practice code. I calculate the internal floor area to be one hundred and eight (108) square meters. The size details of the properties’ features are listed on the [TABLE 1 below.] 6. SERVICES I understand that the property is connected to all main services, which include water, gas, electricity and drainage through the main premise. Heating and hot water is provided through the individual gas fired boilers to wall mounted radiators. Commercial Valuation 4 I did not notice any defects in equipment or service in the property during the course of the inspection. 7. CONSTRUCTION The property is part of a large 13-storey premise made of concrete walls and furnished with glass on the front part of the building. The property-which resides on the ground floor-has steel curtain doors on one part of its front walls while transparent glass fully covers the other part. The inside of the property boasts large a round concrete counter furnished with Glass on one corner, and transparent mirrors mounted on both sides of the walls with chairs behind them. It is important to note that it’s a tenanted investment rented by a hairdresser. 8. CONDITION I did not carry out a building survey as instructed. We did not test any services. However, I would like to voice a non-liable comment; during the inspection course for valuation purposes, we observed that the property is in generally excellent and satisfactory condition throughout. I am not aware of any immediate repairs required for exterior or interior property encompassing, or defects affecting the sale or use of the property in legally bound means. There is no evidence of past or current structural movement affecting the building, nor is the building of age and type susceptible to insinuate the presence of any materials which are deleterious, hazardous or likely to give rise to structural defects of the property/premises. There is no evidence that any construction technique that was far from usual had been used to construct the building from which the property above mentioned is adjoined. There are no items where specialist investigations are required or where re-inspection will be required. Should a more detailed report on the structure condition and repair state be needed, a further report and inspection is bound to be carried out. 9. ENVIRONMENTAL CONSIDERATION According to the report Environmental wind assessment: 230-232, 234-238 Sussex Street, Sydney. (p.3), Sussex Street footpath will continue to be exposed to strong southerly wind conditions channeling along Sussex Street. However, the above named premises has being built to withstand those conditions. This means that potential customers to the above named premises may have difficulties walking down the street, dictating the desirability of the above named property. I have not carried out any investigation to make certain that there is a use to the landlargely in the past-that may have resulted to possible pollution that is hazard to the human health. However, should it be established subsequently that this property, or any near property to the above named premise may have been put to contaminative use, I reserve the right to review my valuation advice. 10. TOWN PLANNING AND HIGHWAYS Commercial Valuation 5 The property is located along the Sussex Street and also adjoins the Bathurst Street on the other hand. The premises holding the property are registered residential and commercial use, with the above named property build out for commercial purposes. The property current use also complies with this arrangement. I have not made any enquiries to the local planning authority as I have assumed that all necessary planning consents and approvals have been obtained. I am not aware of any policies in the relevant structure plan that is likely to have any adverse effects upon the property. 11. TAXATION It was brought to our attention that the above named property had no tax obligations. 12. TENURE After valuation of the freehold interest in the property subject to leases/tenancies and also with the benefit of full vacant possession. Assumptions are that full rights access are enjoyed; with no third party enjoying any rights over the subject property. I have not seen a copy of any report on title nor made any enquires to the relevant land/property authorities. My attention has not been drawn to the existence of any such restrictions or of any known easements, servitudes or rights of way that may adversely affect the property. I have come to conclusion to the assumption that none exist for the purpose of our valuation. 12.1 LEASES The property in question is leased until 24 march 2023, with net income of $116,330 plus GST per annum. 13. MARKET OVERVIEW 13.1 RETAIL MARKET According to CBRE (2020) “The retail environment is changing dramatically, putting pressure on retailers and transforming the way consumers shop and spend money. Landlords and tenants continue to adapt in order to remain relevant and capture trade from customers whose spending is under pressure from increasing costs of living and deteriorating balance sheets” Australia’s retail spending improved in 2018, averaging 3.0% growth compared to 2.7% in 2017 although those results are well below the 5-year average of 3.9%. Retailers felt those conditions to be challenging –conditions that persisted to 2019-20. The COVID-19 pandemic also marked a major blow to the retail market. 13.2 OFFICE MARKET Commercial Valuation 6 According to CBRE (2020), sales volume for 2019 were $23 billion across 226 transactions, a 32% increase on 2018 ($12 billion).Cost of debt to investors has in many instances fallen to below 2.75% in part due to the three 25bps interest rate cuts Top prime CBD performers were Perth and Canberra, registering annual net effective rent (NER) growth of 11.7% and 10.9% respectively. Top non-CBD performers were Crow’s Nest/St Leonard and Southbank, with a (NER) growth rate of 8.9% and 7.6% respectively. 13.3 RESIDENTIAL MARKET In reference to the above mentioned source, Sydney has seen a return of price growth with the September quarter recording the first quarterly rise in Median prices since 2007. Melbourne’s price rebounded like that of Sydney, propelled by state economic and population growth which were the highest. Brisbane continued to present itself as a significantly more affordable hub in the country as price spreads widened again. Perth started showing some positive signs to the end of a long negative price cycle while Adelaide is showing mixed performance indicators. 13.4 HOTEL MARKET Hobart, Brisbane and Adelaide had positive annual Rev PAR growth for the year ending December 2019.However, National occupancy declined 0.9% to 73.9% A Spending by domestic visitors in the year to September 2019 was $79.1bn, up 13.3% on 2018, while visitors of the overnight nature spending was $31.3bn, up 5.0% on 2018. Hotel sales volume for 2019 was approximately $1.8bn. 14.0 MARKET VALUATION Market Value, according to RICS (2019) is defined as follows: “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 parties had each acted knowledgeably, prudently and without compulsion” Having carefully considered the property as described above, I am of the opinion that the current value, on the basis specified below, of the freehold interest, subject to and with the benefit of the leases described above with the full vacant possession benefit is as follows:- Commercial Valuation 7 14.1 MARKET VALUE (DIRECT COMPARISON APPROACH) $600,000 (SIX HUNDRED THOUSAND DOLLARS) 14.1.1 Considerations In arriving at the market value of the proposed security, considerations of the sales transactions below have been made. 1. A commercial property(150 square meter) on 149 Lang Street, Kurri Kurri, NSW 2327 that has two parking spaces sold for $452000.This property is far below the quality of the property being valued 2. A commercial property (187 square meter) on 457 Pacific Highway, Wyoming NSW 2250 and with 3 parking spaces sold for $500000. This property is also below the quality of the property being valued. 3. A commercial/residential property (184 square meter) on 274 Princes Highway, DAPTO NSW 2530 with 8 parking spaces sold for $615000. This property is far more spacious and better than the subject property. 14.2 MARKET VALUE (DISCOUNTED CASH FLOW ANALYSIS) Using this method, it should be noted that the values used are as follows: Gross market rent: $116330. Rental growth rate: 3% for the next four years. Vacancy level: 0%. Outgoing: 20%, with a flat growth of 2% per year. Terminal CAP rate: 8% Discount Rate: 9% Holding period: 4 years. After due calculation as per the table shown below, the market value of the above named property was; $683,741 (SIX HUNDRED AND EIGHTY THREE THOUSAND, SEVEN HUNDRED AND FOURTY ONE DOLLARS) Commercial Valuation 8 TABLE 1: DISCOUNTED CASH FLOW ANALYSIS FOR THE PROPERTY FOR A HOLDING PERIOD OF FOUR YEARS. 15. VERIFICATION This report contains numerous assumptions of general and specific nature. The valuation contains various information supplied by others. I recommend that you satisfy yourself on all these points either by verification of points or by judging the relevance of each point. 16. CONFIDENTIALITY Finally, it should be clearly stated that this report is given forth for the specific purpose stated above. It is secret to and for the use only of the party to whom it is addressed. No responsibility is accepted for a third party for the whole or a part of this report. Any such parties use this document at their own risk. Commercial Valuation 9 REFERENCES 1. Martin-Henry, B. (2020) CBRE Australia Real Estate Market Outlook (www.cbre.com.au/research-reports/australia-real-estate-marketoutlooks) 2. SLR Consulting Australia, (2020) 232-230and 234-238 Sussex Street, Sydney Environmental Wind Assessment Report No. 610-14201 R1R3 Third revision P.3 3. Real Commercial. com (realcommercial.com.au) 4. Sustainability and Commercial Property valuation 2nd Edition (2020) (7, 2.6) (www.rics.org) ...
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