Investment report

MODULE EBB-7-182 PROPERTY INVESTMENT APPRAISAL
COURSEWORK BRIEFING

Introduction

This assignment is intended to assess your ability to collect, analyse and interpret economic and property market information, and to use it as the basis for selecting and appraising an investment in commercial property. The appraisal is to be a sophisticated analysis based upon your own assumptions which need to be fully and clearly specified.

The assignment is to be carried out on the basis that you are working for a small UK property company called South Bank Holdings. It has assets of approximately £500m and its portfolio is located mainly in the City and West End of London.

South Bank are currently reviewing their long-term investment strategy and are considering the investment potential of the rest of the UK. They have divided the UK into regions in accordance with the government’s standard economic units and they intend to analyse each one with regard to each property sector; namely office, retail and industrial.

You have been allocated a region and a property sector and are required to produce an investment report recommending a suitable property for purchase. The report should contain an economic assessment of the region and should form the basis for the selection of the particular property. The property appraisal should establish the worth of the property using a discounted cash flow approach, based upon a full risk assessment. South Bank has suggested that they are looking for properties in the region of £1-10m.

Tasks

The economic assessment of your region should involve an analysis of both the general economic outlook and the corresponding outlook for the property market. These need to be integrated and established within a historical context. The relationship between the underlying economic variables and the particular property sector being examined should be thoroughly investigated.

The economic assessment should be used to provide the criteria for the selection of a particular property for appraisal. The property does not necessarily have to be on the market but it may be easier if it is. A full financial appraisal of the property is required to establish it’s worth using a discounted cash flow approach. The assumptions behind your key variables need to be clearly identified and stated. A full risk assessment needs to be undertaken and it is suggested that you consider one of the following approaches: sensitivity analysis, scenarios, probability, Monte Carlo simulation etc. Whichever approach is used a clear statement of the rationale for the figures used needs to be clearly stated.

Written report and presentation

Your assignment should be written up in the form of a professional report on the assumption that it is being presented to the Board of South Bank Holdings. The report should not exceed 2500 words.

Assessment

The assessment will be based upon the following marking scheme:

Economic and property market assessment 25
Property investment appraisal 25
Quality of assumptions and analysis 40
Overall presentation 10
Total 100