Maximising Asset Value - A case study from our commercial experts

March 2019

Ensuring that our clients obtain the most out of their assets is a key part of Symonds & Sampson’s philosophy as a company. We have always been intrigued with the different ways in which almost any property can be remodelled/developed as an asset, whether to improve income or the property’s capital value. In this enlightening case study, Commercial & Valuation surveyor Neville Thorner explains how a redevelopment project was planned, drawing of the depth of Symonds & Sampson's professional team.

Maximising Asset Value - A case study from our commercial experts

I was approached recently by a client to provide advice on how an older style office property, set in a fairly large area of surrounding grounds, could be redeveloped so that the client could achieve “best value”. As you might expect, the initial consultations with architects had led to the conclusion that demolishing the existing buildings and obtaining planning permission for residential development on the entire site would deliver the highest value for the land. 

However, in order to truly realise the property’s optimal format, it is crucial for a surveyor to understand the requirements of the client.  Whilst the sale of a prospective development site would provide a significant cash windfall, once the land had been sold the client would have no further assets and consequently, no resource to generate income.

Having carried out a valuation of the existing office, we discussed the current rental income being produced by the multiple let office which (including the section “let” to the owner occupier). The significance of this reasonable level of income was that the money received/offices rentals not only assisted with the business’s cashflow but also meant that the client’s own office unit was effectively paid for by the rental income received from the other tenants.

Once we had reviewed several schemes and discussed the alternatives with the architects involved, we reached the conclusion that a mixture of both residential development and the retention of the commercial office investment would be the best option.

By retaining the existing office, the client would be able to use the rental income to assist with the cashflow of their business, whilst still developing part of the land which would produce a cash injection for the owners of the land.

Another advantage of this phased and mixed development was that one half of the potential development land could be retained for a later date.  This had a number of advantages relating to planning implications, taxation issues and the owner occupier’s business requirements.

This particular case study highlights the importance of understanding the objectives of the client and how a property can be adapted to assist with both short and long term development strategies.

From any perspective (and particularly when providing professional advice), the existing rental income being produced and/or the potential to produce a rental income, should always be considered alongside the sale of any asset. As seen from the above case study, whilst the rental income may not have produced a lump sum of funds, the retained income stream would continue to assist the property owner with improved/maintained cashflow projections whilst being complimented by lump sum receipts from the phased part disposal of the site.

For information about the Commercial Valuation and Development services offered by Symonds & Sampson, please contact Neville or Charlie Snow at our Yeovil office 01935 382904

 

 

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