Since inception in 1988 Preston Rowe Paterson has developed an unrivalled track record in valuing and providing strategic advice on single tenant and multi-tenant investment real estate
We have always been at the forefront of using Discounted Cash Flows (DCF) valuation models (Forbury and TEAP) in conjunction with term and reversion capitalisation models.
Reasons for our services range from debt funding, equity raising, annual reporting valuation to acquisition due diligence management and valuations.
We deal with mainstream asset classes including commercial, retail and industrial, as well as a broad range of specialised assets such as accommodation and hotels (including pubs), data centres, build‑to‑rent residential developments, aged care, hospitals and child care centres.
From private investor valued assets and super fund investments to sovereign wealth fund, institutional, listed and unlisted REIT assets including both freehold and leasehold real estate, we apply the same principles of valuation which require a deep and comprehensive understanding of how investment real estate functions in the modern marketplace.
Values are underpinned by forward rental cash flows and capital markets, and both are complex. Australia’s lease terms and conditions are significantly complex given the prevalence of lease incentives in the market place.
Rental cash flow issues which we consider in any valuation include:-
- The timing and frequency of rent reviews;
- Whether the reviews are face rents (stated rent before incentive adjustments) of effective rents (stated rental after adjustment for incentives);
- The nature of incentives as upfront cash or fit out allowances, part term or whole term abatement or rent free periods;
- Whether the incentives are based on gross or net rentals;
- Whether any ratchet provisions or caps or collars apply to market rental reviews;
- If annual fixed rental increases apply;
- Likelihood of whether tenants will exercise an option to renew their lease or seek a fresh lease because of any adverse conditions in the lease;
- Probability of lease renewals;
- Downtime or vacancy until the space is relet;
- Reletting costs (agents fees and lease drafting legal fees);
- Apropos Statutory Outgoing and Operating Expenses whether leases are true gross (no outgoings payable), semi gross (payment of an area based proportion of increases over a base year), net (where an area based proportion of the outgoings is payable by the tenant); and
- Adverse directions to a determining valuer for midterm or option rental review provisions disputes.
As investment real estate valuers, advisers and consultants, our core purpose is to help clients prosper in their property investment endeavours by delivering high‑level, technically robust, professional valuation advice.
Rental Cash Flow Forecasting
Valuing investment real estate requires a comprehensive understanding of how lease rental cash flows are designed and how they function and are applied through application in varying market cycles
Analysing Sale Transactions
Analysing sales transactions to derive capitalisation approach initial yields, fully let yields, market yields and reversionary yields and DCF approach Internal Rates of Return (IRR’s) and understanding direct comparison rates per square meter are fundamental when comparing sales to specific assets
Understanding Capital Markets
The IVSC definition of Market Value and the historically renowned Spencer Case tell us that market value involves understanding the position of two hypothetical parties who are assumed to be knowledgeable, prudent and not compelled to buy and sell.