Pinewood Caravan Park Bideford Road
Bude
Cornwall
EX23 8RE
Client: Independent Bank Ltd
Branch: Exeter
Proposed Borrower(s): Mr and Mrs Green
Date of Valuation: 12 December 2012
Reference: 911917
Business Appraisal & Valuation Report
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Purpose and Limitations of Report
This report is provided to assist the instructing Client in consideration of the subject business/property in relation to the purpose stated opposite. Pinders accepts liability only to the Client and no other party, however involved. The report comprises a Business Appraisal & Valuation and expressly does not, in any way, constitute a building (structural) survey or a due diligence assessment. It remains the responsibility of the Client and, where appropriate, the borrower(s), to confirm the accuracy and validity of the information provided. Pinders accepts no liability to the Client, or any other party, should information relied upon in arriving at our opinions of value prove to be misrepresented, either fraudulently or otherwise. Whilst reference may be made within the report to aspects of tenure, title, planning and other statutory obligations, all such aspects should be verified by solicitors acting on behalf of the Client and/or the proposed borrower(s). The report is not intended as a substitute for the searches which would be expected in relation to any property/business acquisition or investment. We can confirm that neither the valuer nor Pinders has any known conflict of interest in accepting your instructions, nor any previous knowledge of the business or the potential borrower other than as specifically stated within the report. Unless specified elsewhere, this report has been prepared in accordance with our Standard Conditions of Engagement, as appended to this report, and in accordance with The Royal Institution of Chartered Surveyors, Valuation - Professional Standards, for the sole purpose of assisting the Client and Proposed Borrower indicated above, in consideration of the subject business. Whilst the valuations contained within this report are expressed in a way which is suitable for lending purposes, any party, other than the Client shown above, wishing to rely upon the contents of the report for such purposes, will need to instruct Pinders to prepare and provide a further report, which addresses the party’s specific requirements. We can confirm that Pinders has in place appropriate Professional Indemnity Insurance in respect of this valuation. A copy certificate to this effect can be provided to the Client upon request.
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Terms of Reference
Client: Independent Bank Ltd, Exeter
Proposed Borrower(s): Mr and Mrs Green
Purpose of Report: Loan security purposes in relation to a proposed re-finance
Business Owner(s): Mr & Mrs Green
Person(s) Interviewed: Mr Green
Previous Visits: No previous visits
Date of Inspection: 3 December 2012
Date of Valuation: 12 December 2012
Undertaken by: John Babb FRICS (0072556)
Registered Valuer
Approved for Issue by: Malcolm Kidby MRICS (1117803) Director
We appreciate that there may be many parties involved in consideration of this proposal and this report (inclusive of photographs, maps and site plans) will be provided by electronic mail in pdf file format (requires Acrobat Reader software) to facilitate easy transfer of information. However, we recommend that our lending clients rely only upon an authenticated hard copy of the report, which has the Pinders’ security seal attached below.
If you wish to discuss any aspect of this report, please contact our Operations team at:-
Pinder House
Central Milton Keynes MK9 1DS
Telephone: 01908 350500
Email: [email protected]
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Synopsis
Property Summary
� Static and Touring Caravan Park
� Freehold
� Edge of major resort town on North Cornwall coast
� 18.9 acre site; licensed for 235, including 60 static caravans
� Club house with bar, function room, café, snooker room
� Modern 3 bedroom house and 3 bedroom caravan, used by owners and staff
� Buildings acceptably presented, with no significant obvious wants of repair noted; site is well maintained
Business Summary
� Regular and repeat custom; site open 11 months a year
� Income split: 12% wet sales, 22% caravan sales, 44% caravan and pitch rents, 17% site fees, rates etc
� Pricing appears reasonable for the area
� Owner run
Accounts Year End
30/04/2010
Accounts Year End
30/04/2011
Accounts Year End
30/04/2012
Current Trade
Assessment
Fair Maintainable
Trade
Total Turnover (£) 447,175 464,995 483,280 450,000 485,000
Gross Profit (£) 357,078 368,665 378,598 350,000 380,000
Gross Profit Margin 79.9% 79.3% 78.3% 77.8% 78.4%
Net Profit (£) 178,956 170,804 178,609 180,000 195,000
Net Profit Margin 40.0% 36.7% 37.0% 40.0% 40.2%
Valuations Summary Existing
Market Value £1,800,000
Market Value (No Accounts; 6 months to sell)
£1,300,000
Market Value (Business closed)
£1,100,000
PLEASE SEE FULL DEFINITIONS OF VALUATIONS AND SPECIFIED ASSUMPTIONS APPENDED TO THIS REPORT
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Executive Summary
In accordance with your instructions, we have inspected the subject property and business in order to provide a Business Appraisal and Valuation Report on Pinewood Caravan Park. The valuation is required as the owners are changing banks. The Park is long established and has been under the present ownership since 1993. There have been many improvements and changes since then, including the introduction of static caravans for sale. This is generally a well presented site in a popular holiday area. It does not have all of the facilities that larger sites offer, such as a pool, but one of the best beaches in the district is within walking distance. The site has 60 pitches for static caravans, 50 of which have been sold on 25 year leases to private owners. They pay ground rent and service charges to the site operator, and there are conditions in the leases that the caravans must not be more than 20 years old, and that new caravans must be purchased through the site operator. The accounts show a steady growth in turnover, assisted in 2011/12 by replacement of the site’s rental/hire fleet of caravans. This comprises of 5 x 3 bedroom caravans, all newly purchased in that financial year. The new static caravans offer much better facilities and attract higher weekly rents. There are a further vacant five static pitches owned by the site, which can either be sold, or used to site additional caravans to enhance the rental income. The Current Trade Assessment shows a fall in turnover. This is due to the appalling summer weather in 2012, resulting in part of the site having to be closed for two weeks in July. We consider this to be a one-off occurrence and have shown turnover returning to normal levels in our assessment of Fair Maintainable Trade. Our primary approach to valuation has been on a profits method, but we have made an allowance for the owners accommodation and a small reduction to reflect the lower than expected current trade. We refer to the Methodology and Comparable Evidence section towards the end of the report for further commentary.
Current Proposed
Base Value £1,600,000 n/a
equating to: Assessed Fair Maintainable Operating Profit £195,000 8.2yp n/a n/a
Value of Private Living Accommodation £225,000 n/a
Goodwill Adjustment -£25,000 n/a
Market Value £1,800,000 n/a
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Location Map
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Local Environment
Location
Bude is a popular seaside resort on the North Cornwall Coast. It is situated eight miles west of Holsworthy, 17 miles north-west of Launceston, and 27 miles west of Okehampton, where there is access to the A30 dual carriageway. The latter links with the M5 motorway at Exeter. Bude is popular as a family resort and with the surfing community. There are some superb beaches along the stretch of coastline, while a few miles south there are the attractive and much visited villages of Tintagel and Boscastle. The town has an excellent golf course, indoor and outdoor pools, and other sports facilities. There is a good selection of mainly independent shops, and a full range of pubs, cafes and restaurants. The subject business is located on the northern outskirts of the town, being just over half a mile from the town centre. The site is well signed and is within walking distance of Crooklets Beach.
Environmental Matters
Information in the public domain suggests that this neighbourhood is in a Radon Affected Area, as defined by the Health Protection Agency. Radon is a naturally occurring gas, which, in some areas, can be in higher concentrations and affect people’s health. In this regard, we refer to the Health Protection Agency on the www.hpa.org.uk website for further details. Historically Cornwall was an area in which mining activity took place. Although this part of the county saw minimal activity, we would recommend that a mining search is undertaken. Further information can be obtained from Cornwall Mining Consultants at Camborne.
From our informal enquiries, there is no indication that the property or its immediate locality:
� is on or near landfills; � is in an area that has been identified as having a risk of subsidence or landslip; � is located within an area that is at risk of flooding; � is subject to water or land pollution; � has been used for the manufacture, storage or sale of hazardous/toxic materials such as chemicals, petroleum
products, pesticides, fertilisers, acids, asbestos, explosives, paint or radioactive materials; � is the site of below-ground storage tanks; � is close to incinerators or chimneys giving off heavy emissions.
We have detected no evidence to suggest that deleterious or hazardous materials or techniques have been used in the construction or subsequent modification of the building.
We refer you to the paragraph headed ‘Environmental Matters’ within the appended Conditions of Engagement.
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Site Plan
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Site & Aspects of Title
Site Plan
The plan shown opposite has been obtained from Promap shows the boundaries of the site as recorded. We advise that the area outlined in red corresponds with the property inspected and confirmed with the owners.
It should be noted that this plan and the markings thereon indicate the approximate extent of the site inspected and no guarantee can be given as to whether this corresponds to that over which title is held. It remains the responsibility of the Client to investigate and confirm the legal boundaries and title applying to the property.
Restrictive Covenants, Rights of Way and Easements
We were advised by Mr Green that there are easements, restrictive covenants and rights of way affecting the property. These refer to the ownership rights of the static caravans on the site
Tenure and Title
We are advised that the overall property is freehold. The static caravan pitches have 25 year leases with an annual pitch fee. Each lease contains conditions relating to the sale and purchase of caravans to be sited on the pitches. The caravan has to be purchased from the site owner, and when a pitch owner wishes to sell a caravan, the site operator is entitled to 10% commission regardless of whether he is instrumental in the sale. There are stipulations concerning the condition and age of caravans, the maximum age being 20 years.
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External Property
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External Property
Site Description/Potential
The title plan provided suggests a site area of 18.9 acres. The site boundary includes a long access/driveway from the main road, which is tarmac covered and leads to a section where the house, office, private garages, and some of the pitches are located. The site then opens up to a larger rectangle and includes the remaining pitches, club house, café, games room, ladies’ and gent’s WC/Shower blocks, children’s outdoor play area and water treatment plant. The roads and pathways in this area are rough gravel. The site has a licence for 235 caravans or tents, including a maximum of 60 static caravans. 50 of the static caravan pitches have been sold (see Tenure paragraph for details), 10 are owned by the Park, five of which have static caravans available to rent, and the remaining five can either be sold or used to site additional rental caravans. All static pitches have concrete bases, with electricity, water and drainage connections. The five Park owned caravans consist of Willerby Atlanta 3 bedroom (8 berth) caravans dating from 2011 & 2012. Beyond the static caravans there is a well kept grass paddock licensed for 175 touring caravans and tents, for which there are approximately 150 electricity hook ups. There is a fenced pond area at the bottom of this field, on one side of which is a dog walking area. There is also a childrens’ play area. There may be scope to increase the site’s capacity subject to extension/alteration of the existing site licence. This could involve installation of a new sewerage and waste water treatment plant. However it should be appreciated that the gross permitted density should not exceed 50 caravans to the hectare, calculated on the usable area (i.e. excluding lakes, roads, communal services and other areas unsuitable for the siting of caravans), rather than the total area. There is also scope to increase the number of static pitches, again subject to alteration of the site licence.
Buildings Description
There are a number of buildings on site, to include the residential property with attached office, the club house, shower blocks, and storage buildings. The following table summarises the apparent construction of the major building elements.
Element Description
Walls The buildings have varying construction types. Some of the walls are stone faced, others are rendered/painted, and some have timber cladding.
Pitched Roofs The main club house roof is tiled, while the private house and shower blocks have slate covered roofs.
Flat Roofs Part of the club house building has a flat roof which is covered in mineralised felt.
Rainwater Goods Mainly sectional plastic
Services
We are advised that the property is connected to the following:
Mains Water Electricity Mains Drainage Mains Gas Central Heating
� � � � Gas
The site has its own Klargester sewage treatment plant.
Systems and Equipment
Whilst it is beyond the scope of our instructions to undertake tests of services, equipment, fixtures and fittings, we assume that all such items are operating safely and efficiently and are appropriate for the purposes to which they are put.
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External Property
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External Property
Condition/Decoration
It should be noted that we have not undertaken any form of survey, structural or otherwise and the following comments are based purely on visual observations from ground level, unless otherwise stated. The club house is decorated in a bland, but adequate standard with white painted walls and ceiling, the latter with black beams, fluorescent, spot, disco and mirror ball lighting. The bar is equipped with upholstered stools and red vinyl button back banquette seating. The shower blocks are in a satisfactory condition. We have not inspected the Park owned static caravans internally, but note they are all modern, and four have been acquired new within the last 12 months. All are of good make and specification, suited to the family holiday market. We are advised by Mr Green that a survey of the property for asbestos was carried out by Asbestos Surveys Ltd on 5 September 2010. We have had sight of this survey report. No asbestos material was identified by this survey. An Energy Performance Certificate (EPC) was issued for the property on 15 June 2011, which rated the property as D.
Asbestos
All owners/occupiers of non-domestic properties and communal areas of domestic properties are required, under the Control of Asbestos Regulations (2012), to provide a record of an inspection to verify whether any form of asbestos is present. If asbestos is detected, then an appropriate management plan must be implemented. We have not inspected for asbestos and, unless otherwise stated, our valuations exclude any costs relating to this management plan.
Energy Performance Certificate and Display Energy Certificates
All non-domestic properties over 50m² in size require an EPC when constructed, sold or let. There are certain exemptions if the building is to be demolished. The certificate includes an energy efficiency rating between A (most efficient) and G.
A DEC and advisory report are required for all buildings with a gross internal area over 1,000m² that are occupied in whole or part by a public authority and by institutions providing a public service to a large number of persons, and therefore frequently visited. They are valid for a period of one year.
Please contact us for further information about arranging an asbestos survey or EPC
Reinstatement Assessment
It should be appreciated that an assessment of the likely costs of fully reinstating a property is a complex and detailed exercise usually undertaken by a building or quantity surveyor. The following estimate is provided purely for guidance purposes to assist the named client in their consideration of the stated business proposal. It should not be relied upon by either the named client, or any other party, as a basis for assessing levels of insurance cover and Pinders accept no liability in this regard. Whilst the estimate provided allows for the approximate costs of demolition, debris removal and professional fees, and assumes the use of modern materials, construction techniques and compliance with all current building regulations, it makes no allowance for any alterations to the layout or configuration of the property which may be required for the ongoing operation of the business. On these specific assumptions, we suggest that the reinstatement figure for the existing structure (exclusive of VAT) should not be less than one million and nine hundred thousand pounds £1,900,000.
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Internal Property
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Internal Description
Public Areas
Area Size m² (Approx) Description
Function Room 135 Large open room with stage to one end, dance floor, table tennis and jukebox. There is access to the rear to an outside decking area. Internal seating capacity approximately 80.
Customer Toilets There are ladies’ and gent’s WCs located off the function room.
There are two WC and shower blocks on the site, one for ladies and one for gents. Each provides two wash-hand basins, five WCs and two showers.
Bar 57 Entrance area leads to bar area, with single bar servery and flat screen TV. Seating for 40. Measurement includes bar servery.
Cafe 45 Arranged in two areas with seating for around 30. Simple kitchen alongside the serving counter
Snooker room 75 Including full size snooker table, pool table, TV and dart board..
Service Areas
Area Description
Office Located to the front of the main house.
Cellar Located within a small unit attached to the rear of the bar servery.
Launderette Coin operated commercial equipment
Stores Located to one side of the bar area and measuring 33.6m².
Measurement of Accommodation
We endeavour to measure the accommodation at the time of our inspection but, where this is not possible, we will either rely upon measurements taken from plans provided, schedules of measurements or other information advised to us by the owner of the business.
Residential Accommodation
The owners’ detached house was built in 1990 and later extended in 2001. It provides three bedrooms, study, bathroom, lounge, dining room, kitchen and utility room. There is a caravan which is also used by the owners. This provides three bedrooms, bathroom, and open plan living area. Each of these properties has its own private garden. There is also a row of three garages used by the owners.
Access
There is level access into the bar and function room. There are no disabled WC facilities.
The Equality Act 2010
The Equality Act came into force on 1 October 2010. The Act consolidates and brings together previous equality laws including the law on disability discrimination. Operators are under a duty to make reasonable adjustments to the provision of their services to accommodate people with disabilities. The duty is anticipatory - so adjustments must be made before a claim for disability discrimination is brought. What will constitute a reasonable adjustment very much depends on the size and nature of the service.
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Statutory Authorities
For the purpose of this report and our valuations, we have assumed that there are no matters outstanding or that would be of concern to any of the Statutory Authorities, or any matters that would have a detrimental impact on Market Value.
Planning and Highways
We are advised by Mr Green of the following:
Listed Building Conservation Area Tree Preservation Orders Section 106 Agreements Adopted highway
� � � � �
We have been in contact with Cornwall Council’s planning department by phone who verbally advised that this site has a lengthy planning history, requiring a full planning search to verify. We were informed by Mr Green that there are no unimplemented planning consents, and our valuations assume that there are appropriate consents for the property’s existing use. We are also aware that the residential dwelling is tied to the business preventing it being sold off in isolation.
Rates, Water and Environmental Charges
The rateable value of the subject property is £45,000. Within our calculations we have made an allowance of £30,000 for rates, water rates and environmental charges. The private residence is Council Tax band E.
Fire Authority
The fire authority no longer routinely inspects premises, and it is the responsibility of the occupier to undertake an appropriate Fire Risk Assessment. We were advised by Mr Green that the site is now self certificating with regard to fire safety and that there were no matters outstanding. We further comment that caravan site operators have a range of requirements relating to fire points, hydrants and signage and we are advised that the business complies with these requirements.
Regulatory Reform (Fire Safety) Order 2005
We have not undertaken any form of Fire Risk Assessment for the premises, nor can we confirm the adequacy, or otherwise of any Risk Assessments seen. We recommend that business proprietors fully acquaint themselves with the requirements of the Regulatory Reform (Fire Safety) Order 2005, which cover statutory fire prevention in almost every commercial property.
Environmental Health Authority
Mr Green confirmed that the subject concern is registered under the provisions of the Food Safety Act 1990 and it is assumed that the business meets fully with the requirements of this legislation. We were advised that an inspection was undertaken in April 2012, with no matters outstanding.
Food Safety Act 1990
We recommend that business proprietors fully acquaint themselves with the terms and conditions of the Food Safety Act 1990 and its various subordinate regulations. These include the introduction of a scheme for compulsory registration of all food premises under The Food Premises (Registration) Regulations 1991, the latter relating to England, Scotland and Wales, and applying to most types of businesses, with few exemptions.
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Local Sector Profile
Customer Profile
The business is said to achieve 80% of its business from repeat custom and a high proportion of its revenue from the six weeks between mid July and August. The majority of the guests are UK based, plus some foreign tourists. Around 60 touring caravans remain on site all year round and are owned by fairly local people who come for weekends and holidays. The average length of stay for other visitors in high summer is 7 -10 nights when the park owned static caravans and the touring caravan and camping pitches are said to achieve 95% occupancy. The traditional Whitsun and Easter week holidays achieve 50% occupancy with reduced occupancy and shorter lengths of stay for the remainder of the season.
Competition
The National Caravan Council estimate that there are over 4,000 caravan parks in the UK with 498,000 touring caravans, 112,000 motor-homes and 335,000 caravan holiday homes in use with the value of caravan holidays plus production in the UK now estimated to be over £3 billion. Data from South West Tourism Alliance indicates that there are 18,130 touring caravan and tent pitches on 155 sites and 8,964 static caravans on 130 sites in Cornwall (we assume mixed sites such as the subject one overlap in this data). We are aware of seven other caravan and camping sites in the Bude area:
• Budemeadows 9 acre site for touring caravans only
• Bude Camping Site 100 tent pitches
• Wooda Farm 40 acre site with 55 static holiday caravans to rent
• Hentervene Luxury lodges and static caravans to rent
• Penstowe 30 acre mixed site
• Pentire Haven 220 pitches for touring caravans and tents The subject concern appears to have its own niche in the local market in that it can cater for all aspects of the holiday trade, apart from luxury lodges.
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The Business
Business History
Pinewood Caravan Park was created on former agricultural land in the mid 1970s. The current owners acquired the site in 1993. Over the years they have improved the site, introduced park owned static caravans for holiday letting (including four purchased in the last 12 months), and extended the owners’ house. We are advised that this report is required in respect of refinance following the expiry of an existing loan agreement.
Historic Accounts
We have been provided with financial statements, prepared by Sharples & Co, Bristol, for the three-year period ending 30 April 2012. Despite the economic downturn, and recent years’ poor seasonal weather, in the UK, this business has shown good growth in turnover during the last three years. The gross profit margin has been fairly consistent, despite a small decline in 2012. We understand that prices in the bar were not increased during that year, despite higher costs from the wholesaler. The operating expenses are in line with our expectations for a caravan park of this size, although repairs and maintenance costs of £39,911 in 2011/12 including some exceptional non-recurring items. Motoring costs are shown in the region of £10,000 per annum. However, these costs include the operation and maintenance of two mowers and a mini tractor.
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Accounts Analysis
Accounts Summary
Accounts Year End
30/04/2010
Accounts Year End
30/04/2011
Accounts Year End
30/04/2012
Total Turnover (£) 447,175 464,995 483,280
Gross Profit (£) 357,078 368,665 378,598
Gross Profit Margin 79.9% 79.3% 78.3%
Profit/(Loss) as per accounts (£) 145,740 135,488 142,112
Adjustments to Expenses (£)
Bank Charges 3,493 2,598 2,110
Depreciation 17,673 15,491 13,420
Amortisation 2,000 2,000 2,000
Bank Interest 11,430 14,504 18,145
Hp & Finance 145 723 822
Disposal Of Fixed Assets (1,525) 0 0
Reconstituted Net Profit (£) 178,956 170,804 178,609
Net Profit Margin 40.0% 36.7% 37.0%
VAT Returns
We have been provided with VAT returns, from which the information summarised in the table has been extracted.
Ended Net Outputs
Nov 2012 £109,202
Aug 2012 £156,114
May 2012 £139,503
Feb 2012 £44,001
Total 448,820
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Trading Format
Licensing
The Licensing Act 2003
The Licensing Act 2003 provides that premises where a licensable activity takes place require a Premises Licence. This will incorporate an operating schedule to outline the basis of trading of the business, such as trading hours, whether and when entertainment is provided and the capacity of the premises, etc. In addition, there will need to be a named Designated Premises Supervisor who will need to hold a Personal Licence. For the purpose of this report and our valuations, we have assumed that the business will have the necessary licences in place to continue to trade as existing and/or proposed.
The Premises Licence was on display, dated 21/04/09, and among the permitted activities are alcohol on sales, live entertainment, dancing, and making of music. Under The Caravan Sites and Control of Development Act 1960, the use of land as a caravan site requires a Caravan Site Licence (with some exceptions) and each Council attaches conditions to the licence. We are advised of the following Site Licence details.
Licence Number H/31/4/1972.
Date issued 21 June 2003
Numbers limit 235 caravans or tents, of which 175 to be touring or motorised caravans, the remaining 60 to be static caravans.
Gross density Not to exceed 50 static caravans per hectare
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Trading Format
Trading Hours and Seasonality
The site is open from 1 March until 31 January. The club/bar is open Wednesday and Thursday from 7pm until 11pm, on Fridays from 7am to midnight, on Saturdays from 1pm to 4pm and 7pm until midnight, and on Sundays from 1pm to 4pm and 7pm to 11pm. These are peak season hours. We understand that the café is open on Friday evenings, Saturday all day and Sunday evenings if a Bank Holiday weekend. It also opens some mornings during the week, again during peak season.
Sources of Income
- Site Income
Site income is generated through caravan sales, touring pitches fees, caravan rentals, site fees, and rates etc.
- Caravan Sales
Income is generated from the sale of new and used caravans. A new caravan is either sold to an existing pitch owner, or to a new customer who has to purchase the pitch separately. The price is currently £10,000 for a 25 year lease, and there were two pitch sales in 2011/12, in conjunction with new caravans. New caravans typically cost in the region of £30,000 to £35,000 according to specification. The site is offering units in its rental fleet for sale at between £26,995 and £28,995. We are advised that a typical gross profit on a new caravan is around 32.5%, and last year the average price of used caravans was around £12,000, either being sold to a dealer or other customers. Despite the continuing tough economic climate, income from caravan sales has shown a year on year increase: 2009/10 £104,550 2010/11 £116,354 2011/12 £118,999 We have been told that two owners of pitches have indicated that they will be replacing their caravans in 2013.
- Caravan Rentals
The Park owns five static caravans which are available to rent (or sale). Each caravan has three bedrooms and can sleep up to eight. They are double glazed and have central heating. The tariff varies according to the time of year, with peak prices being £875 a week. The letting season is around 32 weeks. The caravans are not let between the end of October and Easter. Income from this source has also shown an increase over the last three years: 2009/10 £44,550 2010/11 £46,100 2011/12 £51,795 Three of the caravans were replaced in time for the 2011 season, and two more were replaced for the 2012 season.
- Static Pitches
There are 55 fully serviced static pitches of which 50 are currently occupied by privately owned caravans. The remaining five are occupied by caravans owned by the Park. Site fees and rates for 2012 are shown below:
Period Site fees + VAT Rates (est)
11 months £1,194 £365
The connection and siting charge is £600. Removal from pitch costs £315.84 plus VAT.
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Trading Format
- Touring Pitches
The site has 175 gravelled seasonal touring pitches with electric hook up. In 2012 around 60 were let on a seasonal basis at £795 plus VAT (includes electricity). The touring season runs from 1 March until 30 November and the seasonal pitch fee includes winter storage. The daily tariff for touring/camping on the site varies during the low/mid/high season and the size of the tent/caravan. In 2012 prices were between £10.50 and £22.50 per night.
- Wet Sales
The 2012 accounts show that bar income was £65,280, with a gross profit margin of 50%. A range of draught, wines, spirits and soft drinks are sold. Purchases are made through a local wholesaler who delivers weekly. Other purchases are made from local supermarkets. Prices are very competitive with local pubs, with draught beers/lagers being £2.75 to £2.90 a pint.
- Laundrette Income
The site has three washing machines and two dryers which are coin operated. The machines are owned by the Park with limited maintenance required. Income for the last 12 months was £4,722.
- Café/Snooker Room
The café is let to a third party who pays the business £500 per annum, for use of the building. They are liable for their own electricity and keep all profit which is generated. Mr Green advised that any income generated from the snooker room (adjacent to the café) is also kept by the café operator.
- Retail Sales
There is no shop on the site as there is a convenience store within a few yards of the site entrance.
Entertainment
The business offers regular entertainment consisting of groups, singers and various forms of children’s entertainment at an average cost of £150 per night during the five/six week summer season, plus occasional further provision. We note that entertainment costs shown in the 2012 accounts are £6,680.
Advertising and Promotion
The Holiday Park has an AA four pennant score, and the Park also has a 72% AA rating. The site achieves high levels of repeat custom, supported by a good quality website and road frontage signage. No additional formal advertising takes place.
Hire Purchase, Leasing and Rental Agreements
We were advised that all items of equipment are unencumbered and our valuations have been provided on this basis.
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Trading Format
Management
Mr and Mrs Green live on site and are fully involved in all aspects of the business.
Staffing
We are advised that there are four permanent members of staff.
Maintenance person £13,260 pa Grounds person £12,187 pa Bar manager £10,140 pa Bar person £4,200 pa There are some additional part time staff during the main summer holiday period.
The accounts to April 2012 show wage costs of £59,809 and we are advised that the current annual costs are similar.
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Current and Fair Maintainable Trade
Basis for Current Trade Assessment
The formal accounts for three years ending 30 April 2012 show an upward trend in turnover. However, since then the business has experienced its worst trading conditions for some time, mainly due to the wettest summer in 100 years. Part of the touring field was waterlogged for two weeks in July and had to be closed. VAT returns for four quarters ending 30 November 2012 show sales of £448,820, which is a fall of 7% from the April 2012 accounts. All aspects of the business were affected, and the most recent breakdown of sales is as follows (approximate figures): Caravan sales £100,000 Rentals £52,000 Site fees £60,000 Touring Pitch fees £150,000 Rates etc £20,000 Wet sales £55,000 We have therefore assessed Current Trade income at £450,000, although an adjustment has been made for Fair Maintainable Trade purposes (see below).
Basis for Fair Maintainable Trade Assessment
The recommended method of valuation of trading businesses is the profits method of valuation, with an appropriate yield/multiplier applied to the assessed Fair Maintainable Operating Profit (FMOP). The FMOP is the level of profit which can reasonably be expected to be sustained by the business when operated by a normally efficient operator. It should exclude any influence on trade, positive or negative, which may result from an exceptional operator. We have shown our opinion of Fair Maintainable Trade (FMT) in the table opposite. For the sake of transparency, we have shown a comparison with the levels of income and expenditure which we have assessed as currently being demonstrated by the business. We have commented below on the reasons for any differences between these two trade assessments. As stated above, the income in 2012 was adversely affected by the appalling summer weather. The London Olympics also had an effect, with a noticeable reduction in the number of foreign tourists to the area. Our FMT assessment therefore takes out the impact of these events, with turnover reverting to levels seen in previous years. However, higher turnover usually means some increased operating costs, and these have been altered where appropriate.
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Trade Assessments
Current Trade Fair Maintainable Trade
450,000 Total Turnover 485,000
350,000 77.8% Gross Profit 380,000 78.4%
350,000 Total Income 380,000
Less Expenses
30,000 6.7% Rates, Water, Environmental Charges 32,000 6.6%
20,000 4.4% Heat and Light 22,000 4.5%
60,000 13.3% Wages (excluding family payments) 65,000 13.4%
3,500 0.8% Printing, Postage, Stationery, Telephone 3,500 0.7%
5,500 1.2% Insurance 5,500 1.1%
3,000 0.7% Accountancy and Stocktaking 3,000 0.6%
2,500 0.6% Laundry and Cleaning 2,500 0.5%
20,000 4.4% Repairs and Maintenance 25,000 5.2%
10,000 2.2% Transport 10,000 2.1%
500 0.1% Licences 500 0.1%
7,500 1.7% Entertainment 7,500 1.5%
7,500 1.7% Sundries 8,500 1.8%
170,000 Total Expenses 185,000
180,000 40.0% Operating Profit (£) 195,000 40.2%
Operating Profit is expressed before interest, taxation, depreciation, amortisation and hire purchase and leasing costs
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Methodology and Comparable Evidence
In some cases caravan parks are valued on a build up approach, taking the value of the various pitches, to which is added the value of the trade buildings, any residential property on the site, and the goodwill. However, in the current economic climate greater emphasis is placed on the profits method, essentially driven by the banks’ requirements to assess debt serviceability and we have used the profits method in this instance, although have cross checked this approach with local pitch values.
Comparable Evidence
Relevant comparable evidence includes the following (due to the confidential basis on which much of our comparable information is obtained and held, we are only able to divulge information which is already within the public domain): A smaller site of 8.5 acres in West Cornwall sold in March 2012 for £965,000. It had 85 touring pitches, five static pitches with site-owned caravans, and a four bedroom house. A larger site in North Devon licensed for 170 touring and static caravans, with 10 luxury lodges and an owners’ house, sold in February 2012 at the equivalent of 9YP, and a 12 acre site in South Devon for 50 touring and 26 static caravans, plus a 4 bedroom house, is currently under offer at £1,250,000 (8.5YP). Overall we are aware of transactions taking place at between 8 and 10 times FMOP, excluding any allowance for owners’ private accommodation. While we have provided the above sales comparables, we would comment that in this sector it is very difficult to compare one business with another. There are many variables to consider – some sites can be mainly for touring caravans/tents, others can include luxury lodges, with a range of hybrid sites in between. In respect of the residential property, we are aware that a three bedroom detached house in Thistle Close sold in May 2012 for £285,000. A four bedroom detached house in Watermouth Road sold for £310,000 in July 2012, and a smaller three bedroom house in the same road sold for £287,000 in September 2012.
Methodology
We have adopted a multiple at the lower end of the range to reflect that a good proportion of income is from caravan sales, which is perceived to be at greater risk in the current economic climate and our valuation is based on a Fair Maintainable Operating Profit (FMOP) of £195,000, compared to a Current Trade Operating Profit of £180,000. We have previously given the reason for this difference, and it results in a valuation adjustment to reflect this difference in current profitability. We have also considered a build up approach as a cross check and from an analysis of the limited comparables possible, discussions with experienced agents and market sentiment, these are typically £10,000 for a static unit and £5,000 for a fully serviced touring pitch, and whilst there can be considerable variations to these figures according to the size, location, and quality of the site, this approach broadly supports the profits method once goodwill is taken into account. There is a difference of £25,000 between the Current Trade Operation Profit and the FMOP. As the business has yet to achieve the latter, we have shown a goodwill adjustment equivalent to the difference between the two profit levels. There is a residential property on site, although we understand that planning conditions tie it to the business, and it cannot be sold separately. The value is therefore somewhat less than it would be without such a restriction, but the following local sales give an indication of values. We have assessed the value of the private house at £200,000, and made an allowance of £25,000 for the privately owned caravan situated on its own hard standing near the house.
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Additional Commentary
Marketability
The market for caravan parks in South West England is competitive and there are always a reasonable number of units for sale. The level of transactions is low compared to pre 2008, but there are still purchasers willing to pay a sensible price for the right site. The most sought after sites tend to be either those that are somewhat run down, with scope for development, or those offering top quality facilities, and a proven track record of income and profit. Pinewood has a good trading record and offers reasonable facilities. It does have potential for further expansion and on that basis we consider that it would attract interest if offered for sale on the open market. We consider that the most likely purchaser would be an individual operator, as opposed to corporate, although possibly another site owner.
Loan Security
Clearly, the value of a trading business is subject to fluctuation over time, resulting from the trading performance of the business, changes in local market forces, legislation and national economic conditions. Whilst it is for the lender to assess the risk attached to such fluctuations over the period of any loan, and to determine an appropriate level of security, we are unaware of any foreseeable events or circumstances, other than those detailed within this report, which would suggest that the subject property is unsuitable security for loan purposes and we would expect this business to be able to at least maintain its value in relation to the general economic and market conditions. We would expect this business to be able to at least maintain its value in relation to the general economic and market conditions, subject to the terms of the lease. We would expect the property to have a useful economic life within normal loan terms, over a typical loan term for this type of business. This assumes that the necessary maintenance and upgrades are made to the property to ensure that it continues to meet legislative and market requirements. Whilst it is possible for sales to complete quickly, especially if offered for sale at auction, in the current market we would not consider it unusual for a marketing period of 12 months to be required. However, if the property required disposing of in the event of foreclosure, or if a restrictive time period were imposed then we would expect a reduction in realisable value. It is impossible to be definitive as to the extent of this as it would be dependant upon the particular circumstances, but Valuation (c) gives some illustration of this scenario.
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Valuations
MARKET VALUE
(a) The business as a fully operational going concern, to include the freehold property in its present condition, has a Market Value of one million and eight hundred thousand pounds ......................................................................... £1,800,000
MARKET VALUE subject to:-
[i] a sale of the concern has been required within a 6 month period;
(b) The business as a fully operational going concern, to include the freehold property in its present condition, and
subject to the assumptions specified above, has a Market Value of one million and three hundred thousand pounds ............................................................................................................................. ................................................................. £1,300,000
MARKET VALUE subject to:-
[i] a sale of the concern has been required within a reasonable time period;
[ii] accounts or records of trade would not be available to a prospective purchaser;
[iii] the business has been closed;
[iv] the inventory has been removed;
[v] the licences have been lost or breached.
(c) The former operational going concern, to include the freehold property in its present condition, and subject to the
assumptions specified above, has a Market Value of one million and one hundred thousand pounds ... £1,100,000
* In view of the unpredictability of the conveyancing process, valuations which are expressed subject to a specified time restriction are provided on the basis that a sale has been agreed within that timescale, subject to contract, rather than legally completed.
** Where the term ‘Inventory’ is used, it is assumed to include all items of relocatable furniture and equipment (beds, chairs, tables, crockery, etc) but not permanently installed fixtures and fittings, sanitary ware, floor-coverings, etc. All opinions of valuation are exclusive of any belongings (chattels) owned personally by the operator.
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Valuations
Basis of Valuation
The bases of valuation above are as defined The Royal Institution of Chartered Surveyors, Valuation - Professional Standards, and are subject to the qualifications and limitations referred to within this report. For further clarification of valuation terminology, please see the sections below. Full definitions of the valuations are also given within the Conditions of Engagement appended to this report.
Market Value – Special Assumptions
Unless otherwise specified, this valuation assumes that the business is to be offered for sale free of any perceived blight resulting from factors such as the threat of action by statutory authorities or the appointment of Receivers. It should be appreciated that the impact of the specified restricted sale period will be more significant during periods where transactions are prolonged due to uncertain market conditions.
Market Value – Business Closed
We have provided our opinion of the value of the subject concern should it cease to trade and be offered for sale as a closed unit. Unless otherwise specified, this valuation assumes that the vacant property is to be offered for sale free of any perceived blight resulting from factors such as the threat of action by statutory authorities or the appointment of Receivers, but it should be appreciated that the value of empty business premises may vary considerably depending on the circumstances of the business closure. It is also important to recognise that this valuation assumes continuation of the existing use and excludes the possibility of any change of use being permitted.
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Appendix 1 - National Sector Profile
The caravanning and camping market has benefited from the increasing trend towards independent activity and short break holidays. The caravanning sector is preferred by some investors as it is asset-backed, provides predictable seasonal cash-flow, and meets the demand for shorter, less expensive, holidays. This sector is, however, vulnerable to the UK weather, and users are often families and the older generation, who have budget restrictions, rather than couples and singles who may have more disposable income. Nevertheless, in recent years the sector has been made more attractive to a younger clientele through several means, to include the high profile of celebrity caravanners, books and articles promoting camping and caravanning as a stylish activity and the increasing numbers of alternative camping and caravanning sites, which offer unusual accommodation such as yurts, Airstream caravans, disused vintage railway carriages, etc. The Caravan Club represents the interests of over one million caravanners, motor caravanners and trailer tent owners. Across the UK, Caravan Club members spend over £400 million in local economies every year. Many other, more independent, caravanners will add significantly to this figure. Caravanning plays a key role in the tourism mix and is said to be the most popular ‘paid for’ holiday accommodation choice in the country. Touring and static caravan parks, plus camping sites, are sought-after businesses. They offer the combination of a pleasant lifestyle, invariably situated in an attractive area, often combined with good quality owners’ accommodation on the site, and are easy to manage with minimal staffing. However, visitors are demanding ever higher standards and therefore it is vital that the owners continue to invest in improved facilities. The values of static and touring caravan sites vary widely, with often little correlation between income/profit and market value. Good businesses attract premium prices, particularly in the South, with some purchasers trading down from busier concerns in the leisure industry, whilst others use these businesses to obtain rollover relief for capital gains tax purposes. There are several factors that have to be taken into account in arriving at site values, including the site rents currently being achieved, the number of vacant plots, the number of sales of individual units likely to take place during a year, the on-site facilities, and the potential for upgrading existing units. In view of these variables, it is very difficult to compare the value of any particular site with another and in this respect there is a dearth of comparable transactions available on a purely like for like basis. Many buyers of smaller and medium sized leisure businesses fund their deposit through the sale or re-mortgaging of their own residential properties, and this market is still fragile. Any stabilisation or recovery in the housing market may lead to increased activity in the caravan site market. Few open market transactions have taken place recently, thus restricting transactional evidence, although the main agents within the market report that demand is still strong, subject to funding availability.
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Appendix 2 – Conditions of Engagement
(Effective from 1 October 2012)
This Appendix forms part of the Report, and it is assumed that the Client is fully conversant with its contents.
(a) Definitions
Unless the context otherwise requires, the following terms have the meanings ascribed (where appropriate, references in the singular will also apply in the plural):-
"Pinders" means Pinders Professional & Consultancy Services Limited whose registered office is at Pinder House, Central Milton
Keynes, MK9 1DS.
"the Client" means the person(s) or body from whom the instructions to prepare the Report have been received. Reference to the Client, who shall be identified on the front page of the Report, shall in all cases be interpreted to mean only this person(s) or body.
"Proposed Borrowers" means the individual(s) or company whose proposal is the subject of the Report. Any reference to Proposed Borrowers within these Conditions of Engagement also applies to alternative forms such as "Proposed Purchasers", "Proposed Vendors", etc.
"the Property" means all those freehold/leasehold premises which have been inspected by Pinders and reported upon.
"the Business" means the business trade or profession carried on or to be carried on by the Proposed Borrower in respect of which Pinders has been requested to prepare the Report.
"the Report" means a Report on the Property and/or Business prepared by Pinders.
"date of Inspection" the date on which Pinders’ representative carried out the inspection of the premises.
"date of Valuation" the date as of which the Valuation and/or Appraisal is stated to be expressed.
(b) Limitations of Report
Pinders has prepared this Report for use only by the Client to assist them in the consideration of the proposal stated and in respect of the subject business and/or premises, and for no other purpose whatever. It is confidential to the Client and other than for information purposes it is not for use by the Proposed Borrowers or any other party in any way.
Pinders accepts responsibility to the Client alone that the Report will be prepared with the skill, care and diligence to be expected of a competent business valuer and appraiser, but accepts no responsibility whatsoever to any person other than the Client. No person or body other than the Client may rely on the Report and neither the whole, nor any part of the Report, nor any reference thereto, is to be included in any published document, circular or statement, nor published in any way without the written approval of Pinders as to the form and context in which it may appear.
The Report may include an appraisal of a business concern together with comments as to its trading potential. In making such assessments Pinders accept no responsibility for loss of whatever nature which may result directly or indirectly from:
� the suppression, deception or falsification of material facts by the Vendor, Proprietor, and/or Proposed Borrowers;
� any mismanagement of the business;
� insufficient capitalisation, stock and staffing levels;
� changes in the financial and market situation compared to those prevailing at the date of the Report;
� material alterations to the nature, character, extent and pricing structure of the business;
� failure to maintain all proper and prudent insurance cover.
This Report is not intended to replace any of the investigations or enquiries normally undertaken in connection with the purchase or mortgage of a property/business and we do not accept responsibility for loss of whatever nature directly or indirectly arising out of failure to make such enquiries. Such enquiries include, but are not limited to, the taking of independent professional advice from solicitors and accountants, the entering into of a professionally drawn acquisition agreement with the appropriate warranties being taken from the Vendor or Proprietor, the taking up of all necessary trade and bank references, the inspection of the Vendor’s or Proprietor’s or Proposed Borrowers' accounts, examinations of all necessary consents, regulations, permissions, licences and bylaws.
Furthermore it is the Client’s responsibility to ensure that all trading information provided to Pinders is substantiated by audited/certified accounts and, where appropriate, an Accountant’s Certificate. Any discrepancy arising from such documentation should be reported to Pinders as soon as practicable in order that any necessary adjustments may be made to the Report. The Report may point to further enquiries being necessary and failure to make such enquires will be taken as evidence of non-reliance upon the Report and valuations therein.
It must be remembered that the Report does not contain a decision as to whether the stated proposal should proceed. It should also be noted that we do not supply "investment advice" either for the purposes of the Financial Services Act 1986 or at all. We do not offer advice as to whether shareholdings or debentures should be taken in the case of an incorporated business or equity acquired in the case of an unincorporated business or partnership. Should the Client and/or the Proposed Borrowers require such advice, they should seek assistance from their independent financial adviser.
Unless otherwise stated, the Report is not a Report of a survey, whether "Building Survey", "Structural Survey" or otherwise and no such building or structural survey has been carried out. In making the Report regard will be had to the apparent state of repair, construction and condition of the Property, taking into consideration major defects which are obvious in the course of a visual inspection of so much of the exterior and interior of the Property as is accessible at the time of inspection with safety, and without undue difficulty. The inspection will view those parts of the Property as can be seen whilst standing at ground level within the boundaries of the site and adjacent public/communal areas and whilst standing at the various floor levels, which Pinders considers reasonably necessary to provide the service, having regard to its purpose.
Pinders shall be under no duty to examine those parts of the Property which are covered, unexposed or inaccessible, or to raise boards, inspect woodwork, move anything, or use a moisture detecting meter. Neither shall Pinders have a duty to arrange for the testing of electrical, heating or other services which, unless indicated to the contrary, shall be assumed to be in a working and serviceable condition. If Pinders’ inspection suggests that there may be material hidden defects Pinders will so advise and may exceptionally defer submitting a final Report until the results of further investigations are available.
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It is assumed that those parts of any building erected on the Property which have not been inspected or made available for inspection would not reveal material defects of such a nature as to cause Pinders to alter the Report and Valuation.
In making the Report Pinders has made the following assumptions:
(i) We have not arranged for any investigation to be carried out to determine whether or not any deleterious or hazardous material has been used in the construction of this property, or has since been incorporated, and we are therefore unable to report that the property is free from risk in this respect. For the purpose of this Report we have assumed that such investigation would not disclose the presence of any such material to any significant extent.
(ii) Pinders cannot give any opinion whatsoever regarding the structural design of any construction upon the property nor as to the suitability of any foundations to such constructions.
(iii) That the plant, machinery, equipment, fixtures and fittings are in serviceable order, adequate for the effective trading of the business, and will remain so for the foreseeable future.
(c) Aspects of Title
In making the Report Pinders has made the following assumptions:
� That the Property is not subject to any unusual or especially onerous covenants, restrictions, encumbrances or outgoings which might affect Pinders’
valuation or which might prevent all or part of the Property from being properly used in connection with the Business.
� That the Title is as described to Pinders and as referred to in this Report and that there is good and marketable Title to the Estate or Interest which
Pinders has valued. Unless indicated to the contrary, title deeds and/or lease documents have not been inspected. Any interpretation of leases and
other legal documents and legal assumptions given in our capacity as Business Valuers and Appraisers must be verified by a suitably qualified lawyer
if it is to be relied upon.
� That the valuation of the Property/Business is unaffected by any matters which would be revealed by any searches and replies to such enquiries as are
raised or should properly be raised by the Client/Proposed Borrower and/or by Solicitors acting on his/their behalf or by any statutory notice,
restriction or liability; Pinders must be advised of any variations as to this assumption.
� That the Property and/or Business, its use or intended use, or its condition is not in any way unlawful or in breach of any provisions of the Town and
Country Planning Acts, Building Control, Licensing Acts, Registered Homes Act, Environmental Health Acts, or other statutory requirements, and that
the Property has direct access from a publicly maintained highway.
� Pinders’ understanding of the boundaries is noted, but Pinders has no knowledge (expressed or implied) of the responsibilities for fencing and legal
advice should be sought in this respect, if required. Pinders assumes that such boundaries show the true extent of the property and that there are no
potential or existing boundaries or other disputes or claims outstanding. Where indicated site areas are obtained from published plans or as advised
to Pinders. They are not derived from a physical site survey and are approximate unless otherwise indicated. Unless otherwise stated, any
measurements noted are carried out in accordance with the Code of Measuring Practice issued by the Royal Institution of Chartered Surveyors.
Pinders shall be under no obligation to verify any of these assumptions. It remains the responsibility of the Client to ensure that all appropriate enquiries and investigations are made and the report is not intended to replace any of those enquiries/investigations.
(d) Environmental Matters
Pinders has not carried out, nor has it commissioned, a site investigation, geographical or geophysical survey and therefore can give no opinion or assurance or guarantee that the ground has sufficient load bearing strength to support the existing constructions or any other construction that may be erected upon it in the future. Pinders cannot give any opinion or assurance or guarantee that there are no underground mineral or other workings beneath the site or in the vicinity nor that there is any fault or disability underground. It is not possible for Pinders, therefore, to certify that any land is capable of further development or redevelopment at a reasonable cost for the use for which there is permission.
Unless otherwise stated, we are not aware of the content of any environmental audit or any other environmental investigation or soil survey which may have been carried out on the property and which may draw any attention to contamination or the possibility of any subsequent contamination. In our undertaking we will assume that no contaminative or potentially contaminative uses have ever been carried out in the property. We have not carried out an investigation into past or present uses, either of the property or of any neighbouring land, to establish whether there is any potential for contamination to the subject property from these uses or sites, and have therefore assumed that none exist. Should it be established subsequently that any contamination exists at the property or on any neighbouring land, or that the premises have been or are being put to a contaminated use, this might reduce the values now reported.
(e) Generally
This Report has been prepared in good faith on the basis of enquiries made and information supplied to us. We reserve the right to claim qualified privilege in respect of any part of this Report should the contents be subsequently challenged by a party claiming to be aggrieved at anything stated herein. Sections 12 to 16 of the Supply of Goods and Services Act 1982 (or any statutory enactment thereof for the time being in force) are hereby excluded.
Valuations may be relied upon for the stated purpose as at the date specified. It is for the Client alone to make judgement as to their reliance upon the contents of the Report thereafter. In normal market conditions the value may not change materially in the short term (approximately 3-6 months). However, the property market is constantly changing and is susceptible to many external factors which can affect investor confidence and corresponding values.
Value added tax, taxation, grants and allowances are not included in capital and rental values as, unless otherwise specified in the report, these are always stated on a basis exclusive of any VAT liability even though VAT will in certain circumstances be payable. Unless otherwise specified no account is taken of any existing or potential liabilities arising for Capital Gains or other taxation or as a result of grants or capital allowances.
In the event of a dispute arising in connection with a valuation or the contents of the Report, unless expressly agreed otherwise in writing, Pinders Professional & Consultancy Services Limited and the Client will submit to the jurisdiction of the British Courts only. This will apply wherever the property or Client is located, or the advice provided.
Pinders are deemed to be "External Valuers" with no other current or presently foreseeable fee earning relationship concerning the subject property and/or business apart from the valuation fee. Pinders will disclose to the best of its knowledge previous inspections undertaken. Pinders is not however able to disclose any present or previous relationship with any of the interested parties, contrary to the requirements of the Valuation - Professional Standards of the Royal Institution of Chartered Surveyors.
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(f) Valuations
The valuations provided will be made on the assumptions stated within the Report and/or these Conditions of Engagement in respect of the individual subject business/property, unless otherwise agreed, on whichever of the following or other bases as have been agreed between Pinders and the Client, such bases where applicable to be as defined or referred to in the Valuation - Professional Standards of the Royal Institution of Chartered Surveyors.
The valuations provided are for the value of the business/property as described. No account has been taken of any special tax or other inducement or liability which may arise as a result of any transaction in contemplation nor of normal costs involved in the execution of such a transaction. The full definitions of the valuations provided in the Report are set out below: If the Report contains other valuation bases, these are as specifically requested by the Client with our advice identified within the Report to be on a basis not recommended by the Royal Institution of Chartered Surveyors, and provided for guidance purposes only.
DEFINITIONS OF VALUATIONS
Market Value (MV) The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
Market Value
with special assumptions
Opinions of Market Valuation can be provided in accordance with special assumptions which are indicated by the client. These assumptions will be clearly stated within the body of the report.
Interpretive Commentary, as published in International Valuation Standard 1.
3.2 The term property is used because the focus of these Standards is the valuation of property. Because these standards encompass financial reporting, the term asset may be substituted for general application of the definition. Each element of the definition has its own conceptual framework.
3.2.1 'The estimated amount ...'
Refers to a price expressed in terms of money (normally in the local currency) payable for the asset in an arm's-length market transaction. Market Value is measured as the most probable price reasonably obtainable in the market at the date of valuation in keeping with the Market Value definition. It is the best price reasonably obtainable by the seller and the most advantageous price reasonably obtainable by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of Special Value.
3.2.2 '... a property should exchange ...'
Refers to the fact that the value of an asset is an estimated amount rather than a predetermined or actual sale price. It is the price at which the market expects a transaction that meets all other elements of the Market Value definition should be completed on the date of valuation.
3.2.3 '... on the date of valuation ...'
Requires that the estimated Market Value is time-specific as of a given date. Because markets and market conditions may change, the estimated value may be incorrect or inappropriate at another time. The valuation amount will reflect the actual market state and circumstances as of the effective valuation date, not as of either a past or future date. The definition also assumes simultaneous exchange and completion of the contract for sale without any variation in price that might otherwise be made.
3.2.4 '... between a willing buyer ...'
Refers to one who is motivated, but not compelled to buy. This buyer is neither over-eager nor determined to buy at any price. This buyer is also one who purchases in accordance with the realities of the current market and with current market expectations, rather than on an imaginary or hypothetical market which cannot be demonstrated or anticipated to exist. The assumed buyer would not pay a higher price than the market requires. The present asset owner is included among those who constitute 'the market'. A Valuer must not make unrealistic assumptions about market conditions or assume a level of Market Value above that which is reasonably obtainable.
3.2.5 '... a willing seller ...'
Is neither an over-eager nor a forced seller prepared to sell at any price, nor one prepared to hold out for a price not considered reasonable in the current market. The willing seller is motivated to sell the property at market terms for the best price attainable in the (open) market after proper marketing, whatever that price may be. The factual circumstances of the actual asset owner are not a part of this consideration because the 'willing seller' is a hypothetical owner.
3.2.6 '... in an arm's-length transaction ...'
Is one between parties who do not have a particular or special relationship (for example, parent and subsidiary companies or landlord and tenant) which may make the price level uncharacteristic of the market or inflated because of an element of Special Value.(see para 3.1. above) The Market Value transaction is presumed to be between unrelated parties each acting independently.
3.2.7 '... after proper marketing ...'
Means that the asset would be exposed to the market in the most appropriate manner to effect its disposal at the best price reasonably obtainable in accordance with the Market Value definition. The length of exposure time may vary with market conditions, but must be sufficient to allow the asset to be brought to the attention of an adequate number of potential purchasers. The exposure period occurs prior to the valuation date.
3.2.8 '... wherein the parties had each acted knowledgeably and prudently ...'
Presumes that both the willing buyer and the willing seller are reasonably informed about the nature and characteristics of the asset, its actual and potential uses and the state of the market as of the date of valuation. Each is further presumed to act for self-interest with that knowledge and prudently to seek the best price for their respective positions in the transaction. Prudence is assessed by referring to the state of the market at the date of valuation, not with benefit of hindsight at some later date. It is not necessarily imprudent for a seller to sell property in a market with falling prices at a price which is lower than previous market levels. In such cases, as is true for other purchase and sale situations in markets with changing prices, the prudent buyer or seller will act in accordance with the best market information available at the time.
3.2.9 '... and without compulsion'
Establishes that each party is motivated to undertake the transaction, but neither is forced or unduly coerced to complete it.
Market Value is understood as the value of an asset estimated without regard to costs of sale or purchase, and without offset for any associated taxes.
