An office unit located on the outskirts of Edinburgh has recently been let to a major accountancy
Question:
An office unit located on the outskirts of Edinburgh has recently been let to a major accountancy firm on a 10-year lease on FRI terms with no reviews at £220,000 p.a. which is considered to be the market rent. Shortly after taking possession, the property was sublet to another company for the full term less one day on FRI terms with rent reviews every 5 years, at an initial rent of £220,000 p.a. The first rent review is in 5 years. Comparable evidence of similar property in the area indicates that an all risks yield of 7.00% and 10.00% equated yield would be appropriate for the heritable interest in this type of property.
Value the head leasehold interest by the traditional method of valuation.
Accounting Principles
ISBN: 978-0470534793
10th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso