You are required to value an unimproved business erf, measuring $2000m^2,$ that is ripe for

development and is situated on a corner stand just outside the central business district of

Johannesburg $.$ Coverage is $100\%$ and height is restricted to $6$ floors.

No comparable sales can be traced. Date of valuation is $1$ July $2016.$

It is established that optimum development would consist of an office block with ground

floor shops. After thorough investigation and analysis of the particular submarket the

following is established:

A$.($i$)$ Construction Costs: $R\frac{4000\mathrm{.}00}{m^2}($Concrete column and slab

construction, multi$-$storeyed building$).$

$($ii$)$ Shop windows : R$1000\mathrm{.}00/$m $($Need $90m).$

$($iii$)$ Elevators : R$800000$ per unit $($Need $2).$

$($iv$)$ Air conditioning: R$6000000.$

$($The above escalate at $10\%$ per year.$)$

$($v$)$ Professional fees amount to $12,5\%$ of the construction costs.

$($vi$)$ Various municipal fees amount to R$1000000\mathrm{.}00.$

$($vii$)$ Assessment rates: $4$c in R$1$ on R$6000000($municipal valuation$)$ with

expected escalation of $11\%$ p$.$a$.$

$($viii$)$ Refuse and sanitary fees: R$150000$ p$.$a$.($expected escalation $11\%$ p$.$a$.).$

$($ix$)$ Period required for planning and calling for tenders: $1$ year.

$($x$)$ Period of construction: $2$ years.

$($xi$)$ Payments would be made as follows:

Assessment Rates and Fees: Payable on $30$ June of each year.

Construction costs: $40\%$ on $30$ June $2018$ and balance on completion of

project.

Municipal fees: on $30$ June $2017.$

$($xii$)$ Rate of finance: $12\%.$

B$.($i$)$ Market rental: Shops $-$ R$150/\frac{?}{m^2}$ per month.

Offices $-$ R $80,\frac{50}{m^2}$ per month.

$($ii$)$ Net lettable area amounts to $80\%$ of the total area.

$($iii$)$ Market rental escalates at $10\%$ p$.$a$.$

C$.$ Other expenses after completion of building:

$($i$)$ Maintenance: R$240000$ p$.$a$.($includes maintenance of building, air$-$

conditioning and elevators$).$

$($ii$)$ Management: $5\%$ of gross income.

$($iii$)$ Insurance: R$5$ per R$1000$ p$.$a$.$

$($iv$)$ Water and electricity: R$250000$ p$.$a$.$

$($v$)$ Cleaning: R$120000$ p$.$a$.$

$($vi$)$ Vacancies: provision @ $4\%$ of gross income.

D$.$ Initial return: $10\%.$

E$.$ Initial letting costs amount to $12,5\%$ of the gross income.

F Transfer cost amount to $5\%$ of land value

Use the residual approach and determine the value of the property as at $1$ July $2016.$