You are requested to value an income producing property using various methods. The property consists of two buildings one of retail on the ground floor only and the second building with offices on the ground and first floor and residential units on the second and third floor. A super basement is in place under both buildings. 1. The Open Market Value of the property using the Income capitalisation method as at 1 November 2018. 2. The Replacement Cost of the improvements as at 1 November 2018. 3. The Open Market Value of the residual or undeveloped land as at 1 November 2018. 4. The Open Market Value using the Comparable sales method (sales rate per square metre) as at 1 November 2018. The gross building area of the development is summarised as follows: ? Retail 5,000m ? Offices 4,000m ? Apartments 5,000m ? Basement parking 9,800m The parking area is to be calculated as follows: ? 4 bays per 100 m2 gross lettable area for offices ? 6 bays per 100m2 gross lettable area for retail. ? 1 bay per apartment unit. 1. Income Capitalisation method In determining the income, the following must be considered. Retail Total lettable area 4,000m The anchor shop is 1000 square meters and is being charged a rental of R80 per square meter gross. The rental is escalating at 6% on 1 January 2019. A second large tenant occupies 800 square meters at a rental of R90 per square meter gross with an escalation of 8% on the 1st December 2018. The balance of the retail area is let out at market related rates of R150 per square metre. The escalation rate is 10% and is effective from 1 July 2019. There is no vacancy in the retail portion at present. Office Tower Total lettable area 3,500m The offices are multi-let to various tenants at average rental of R120/m gross escalating at 6% on 1 February 2018. 400m2 of the offices are undergoing renovation with 250m2 of the renovated offices available for letting on 1 March 2019 with the balance available from 1 June 2019. Apartments The apartments are let out at a rate of R4,500 per apartment and there are 81 apartments. Basement Parking The basement parking is let to the tenants, who are are paying R600 per bay per month. Operational Costs In addition to the rentals listed above an op costs rental is recovered at R25.00 per square meter for the offices and retail and R1,000 per month for the apartments. Both the op costs increase by 10% on 1 March 2019. Expenditure Rates and Taxes R800,000 Audit fees R15,000 Air-conditioning R15,000 Lift maintenance R25,000 Security R70,000 Directors fees R55,000 Meter reading fees R5,000 Cleaning contract R10,000 Electricity Common Parts (non recoverable) R30,000 The expenses are annual expenses, utilise the expenses as per the above table, but remember to utilise the property expenses only and not the business expenses. The managing agents charge 3% of the gross income as a management fee. The expense to income ratio should be around 20% - make adjustments to the sundries to ensure that the expenses are in line with other developments of this nature. Capitalisation rate The capitalisation rate needs to be calculated from market evidence. Use the information shown below to determine the capitalisation rate. Property 1 Sale price R350,000,000 with a gross lettable area of 10,700 metres squared at an average net rental of R230 per metre squared. Property 2 Sale price R300,000,000 with a gross lettable area of 12,600 metres squared at an average net rental of R180 per metre squared. Property 3 Sale Price R275,000,000 with a gross lettable area of 17,000 metres squared at an average net rental of R135 per metre squared. 2. Replacement Cost Value Calculate the insurance premium and a provision for repairs and maintenance utilising the Replacement Cost method. The current Replacement Costs per square metre for the improvements is as follows: ? Retail R10,000/m ? Offices R8,500/m ? Apartment R11,000/m ? Basement parking R2,500/m 3. Land value calculation There is land available for further development with the same rights. Market evidence supports a value of R2,500 per bulk square metre. The property is 4 hectares in extent and the town planning information is as follows: Zoning: Business Coverage: 70% FAR: 0.7 Height: 4 floors Building Lines: Not prescribed Parking: 4 bays per 100 m2 gross lettable area for offices 6 bays per 100m2 gross lettable area for retail 1 bay per apartment unit. Determine the Coverage, FAR and parking requirements for the future development. Once this has been calculated determine the value of the remaining bulk. 4. Comparable sales method Both the buildings will be sectionalised and therefore you need to calculate the Open Market Value based on the Comparable Sales method using the sale rate per square metre. Sales of retail sectional units have sold at R10,000 per square meter and the offices have sold at R15,000 per square meter with the apartments at R25,000 per square meter. State all your assumptions and show all your calculations.