Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are required to value an unimproved business erf, measuring 2 0 0 0 m 2 , that is ripe for development and is situated

You are required to value an unimproved business erf, measuring 2000m2, 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: R4000.00m2(Concrete column and slab
construction, multi-storeyed building).
(ii) Shop windows : R1000.00/m (Need 90m).
(iii) Elevators : R800000 per unit (Need 2).
(iv) Air conditioning: R6000000.
(The above escalate at 10% per year.)
(v) Professional fees amount to 12,5% of the construction costs.
(vi) Various municipal fees amount to R1000000.00.
(vii) Assessment rates: 4c in R1 on R6000000(municipal valuation) with
expected escalation of 11% p.a.
(viii) Refuse and sanitary fees: R150000 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 - R150/?m2 per month.
Offices - R 80,50m2 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: R240000 p.a.(includes maintenance of building, air-
conditioning and elevators).
(ii) Management: 5% of gross income.
(iii) Insurance: R5 per R1000 p.a.
(iv) Water and electricity: R250000 p.a.
(v) Cleaning: R120000 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.
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Business Research Methods

Authors: Alan Bryman, Emma Bell

3rd Edition

0199583404, 9780199583409

More Books

Students also viewed these General Management questions