Will Green Credentials Impact Property Values – Let’s Go Dutch

By Morag Beers

Going Dutch does not always have particularly positive connotations; but Going Dutch in green investments is a whole other matter. The Dutch do it well, and the results are increasingly being recognised as beneficial.

dutch cycle

How do the Dutch know how to do this? I learned a joke about developers when I arrived in Holland: ‘

What is the first thing a developer does? He makes the land’. Ha ha.

The Dutch grow up to the national tune, Living with Water, not taking it for granted that our land is permanent and knowing that we are together collectively responsible for its stability. There is also the inbuilt advantage of being brought up on bicycles: as soon as you are old enough to sit up straight at a few months old, you can expect to be riding along on a seat out front on your parent’s bike. Being a very small baby projected into town traffic makes you brave in life. It is hardly surprising that these people grow up to be creative engineers and responsible investors, intuitively understanding environmental protection and not being easily fazed by life. Some of the most innovative, sustainable and thought-provoking investments and construction projects stem from Dutch activities which have served Dutch investment returns well. It is no accident that GRESB, the leading sustainability performance measurement, has its roots in Holland working with that other seat of innovation, California.

Continue reading Will Green Credentials Impact Property Values – Let’s Go Dutch

Demystifying real estate financial models

Real Estate financial models are mainly spreadsheets used extensively as an aid in decision support in the areas of property investment and lending. These spreadsheets will ascertain the present value of a stream of cash flows and generate risk / return ratios.

Continue reading Demystifying real estate financial models

What is the relationship between yields, risk, rents and price/value in property?

Yields have many different meanings in finance – yield to maturity, running yield, dividend yield, interest yield – and in property finance, the case is very similar. We can talk about initial yield, equivalent yield, reversionary yield etc. It is, therefore, really easy to get lost in a “yield” conversation, unless you stop the other person and ask: “which yield?!”

If you are emotionally intelligent enough (and I bet you are if you are reading this!), you won’t do this so blatantly. So, let’s break down this “yield” conversation first to ascertain the relationship between yields, risk etc. Continue reading What is the relationship between yields, risk, rents and price/value in property?

What is covenant strength and why does it matter?

By Cleo Folkes

As many high street stores find themselves closing their doors permanently, we hear that landlords increasingly worry about covenant strength. What is it exactly that they worry about?

In property you often hear the word covenant strength when people talk about a tenant or the quality of an investment property or real estate loan. When you Google the definition for covenant it will tell you it is “an agreement” or something you “agree by lease, deed, or other legal contract”. Thus, when people talk about covenant strength, they are talking about how secure the income is coming from a lease with a tenant. Continue reading What is covenant strength and why does it matter?

Are REITs real estate?

Cambridge Finance Property Training Courses

Firstly, REITs, or Real Estate Investment Trusts, are companies that own and manage real estate. Therefore, owning shares in REITs is a way for investors to access the risks and rewards of holding property assets without having to buy and manage property directly. REITs typically pay out all of their taxable income (90% in the UK) as dividends to shareholders and in turn, shareholders pay income tax on those dividends. Continue reading Are REITs real estate?

The benefits of SUMPRODUCT?

By Victor Alarsa

If you are one of those who loves to model using lots of “IF”, “AND” and “OR” functions, then this article is for you.

Let’s discuss the SUMPRODUCT, which literally means summing up the multiplication (product) of two or more different arrays.

For example, if you want to calculate total rental value of a property with different floor sizes and rents per square foot, then you simply need to multiply each floor size by its corresponding rent and sum up everything in the end.

Continue reading The benefits of SUMPRODUCT?

Is England’s planning system in the wrong direction?

By Victor Alarsa

From a developer perspective, sometimes the UK planning system can be quite intricate and vague. One of the reasons is due to its uncertainty at the initial stage.

Before starting a site negotiation with the landowner, the developer needs to calculate the residual land value. However, to appraise the prospective development, the developer needs to know precisely the maximum number of unities, max stories height, and all other building metrics. That is only possible if the developer officially consults the local planning authority (pre-application), which is going to charge for the information (ranging from a few dozens to thousands of pounds).

That is a dilemma: the developer needs to decide whether it is worth to pay a pre-application fee for each and every new deal to verify the residual land value.

Continue reading Is England’s planning system in the wrong direction?

Valuation in crisis – Art versus Science – The Science View

The Science View on Valuation

Estimating Property Values in Times of Significant Uncertainty

In times of Covid-19 pandemic, property market or fair values are harder than ever to estimate. Valuers desperately trying to find enough ‘evidence’, but property is an illiquid asset by definition and as such, transactional evidence disappears during periods of market unrest.

So, what can property valuers do in times of market uncertainty?

The International Valuation Standards Council (IVSC), whose standards have been adopted by the ‘RICS Red Book’, issued a letter in March 2020 with the title ‘Dealing with valuation uncertainty at times of market unrest’[1]. Their advice was mainly based on three points:

  • If the valuer can’t carry out an inspection due to government restrictions, clearly state it and agree this with the client.
  • If the valuer considers that it is not possible to provide a valuation on a restricted basis, the instruction should be declined.
  • Valuers should not apply pre-crisis criteria to their valuations as this approach is based on the potentially erroneous assumption that values will return to their pre-crisis levels and there is no way of predicting that this assumption in fact correct.

 As a valuer, Continue reading Valuation in crisis – Art versus Science – The Science View

Valuation in crisis– Art versus Science – The Art View

The Art View on Valuation

The life of a valuer is pretty tough at the best of times, even with the benefit of good comparable evidence. This is because valuers are carrying out transaction analysis in the most imperfect market that exists. This is why valuation is often described as both an art and a science.
Before a valuer starts to worry about the valuation methodology and analysis, the basis of value needs to be defined, this represents the fundamental measurement assumptions of the valuation. For the purposes of this article, I will focus on the most common basis of value, market value.

Market value
This is defined by Valuation Practice Statement 4 in the RICS Valuation Global Standards 2020 as: Continue reading Valuation in crisis– Art versus Science – The Art View

Online Courses Launched

In order to halt the rapid spread of Covid -19 and to try and ease the pressure on the strained NHS, we, as a country have to stay at home, to work, rest and play.

Cambridge Finance have launched online courses to continue giving you the skills and knowledge you need to better deliver your job; we were committed to this ethos before and now more than ever. We truly believe that we must keep our industry going, so we can all come out of this phase better than we were ever before.

We are however mindful that virtual learning comes with its challenges: we will not be able to replace the face-to-face rapport, it will take longer to explain the complex subject of real estate financial modelling in simple terms, and bad jokes will not make as much sense as they would in the classroom. We also understand that with schools and nurseries closures, you may be facing extra childcare responsibilities on top of trying to keep things going at work and learning new skills.

With all that in mind, the online solution will entail more CPD hours and will comprise of shorter sessions of 4 hours each with regular short breaks in order to maintain focus.

We have the following on offer as online courses: Continue reading Online Courses Launched