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Value is in the eye of the beholder

24th March 2021

Currently, we are negotiating on a property on behalf of a client.  The property includes a  commercial unit on the ground floor, and has been on the market for the best part of a year; and yes, this time COVID19 can be blamed for the lack of movement.

As far as the agent and seller are concerned there is little which can be done to the usage class of the property.  Therefore, from their perspective, the value is to be derived primarily from the rental income and the strength of the tenants; as the value of a commercial property is mostly derived from rental yield.  Of course, the location and the development potential have an impact as well.

This property is, therefore, being sold as a straight commercial investment.  The yield will govern the price, both the current yield and the future stream.  This will bring the price of the property down to a sensible level.

However, our angle is not as a yield play.  We know there is potential to change the usage of the building, if it is structured in the right manner.

This gives us an edge, which both the seller and the agent seem to be unaware of, and it seems the rest of the market who has viewed the property.  By changing the usage of the building we hope to double the value our client will pay for the property.

At the moment, we are negotiating the offer; the fact that the property has not sold for a year, the current environment, and a few other issues which can be evidenced, should hopefully secure us a good price.

If it is accepted, the aim would be to get a late completion period, in order to have all the planning in place at the point of completion.

So, at the point of completion you are no longer completing on the same value of property you exchanged upon, but something which has a far higher and enhanced value.

The process we will use in this particular situation means that permissions should take no longer than 56 days to obtain.

This is an interesting proposition, as you’re not necessarily buying a cheap property according to conventional thinking.  The value is in having the knowledge to enhance the investment, which the majority, including the agent, cannot see.

Suresh Vagjiani

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