Hello,

Ensure that you use British law and regulations throughout the report, and please
make sure you use British English, ensuring that no American spellings are used.

For the font, please use Arial or Calibri, with a size of 12 for the body text and size
14 for titles. Line spacing should be set to 1.15 or 1.5, and margins should be set to
the normal size (2.45cm).

The word count for the report is 3,000 words. You can exceed this by up to 10%,
meaning the maximum allowable word count is 3,300 words, if necessary. The
executive summary, appendices, cover page, title page, and references list are not
included in the word count. The titles of each section don’t need to be included in the
word count.

The Executive Summary should be at least three pages long. Based on feedback I
received from my last assignment (which I have attached), it’s important that the
executive summary is concise but also detailed and straight to the point with all
statements made.

Please feel free to attach any additional images or data that could be professional
and impactful towards the report. Ensure that all visuals are relevant and contribute
meaningfully to the report.

It is crucial that you thoroughly read the assignment brief, and review the grading
guidance, as this will help ensure that all areas are covered to at least receive a
grade of 'Good'. The grading guidance outlines specific criteria, and following the
example report as a reference throughout should help you achieve the required
standard.

Make sure that everything discussed in the report is properly cited throughout.
Please use references similar to those in the example. I have attached a document
titled ‘Resources list’, which highlights the sources I used. Please research and
make use of all sources highlighted in yellow as these were some of the reliable
sources recommended to us.

You must include at least 25 references (with a target of 30). A bibliography is not
required for this report, but a references list should be provided.

The report must consistently be written in the third person. Avoid using ‘I’ and use
‘we’ when making recommendations.

Each new report section should begin on a new page.

The brief asks you to write a 3,000-word professional client report for Palmer
Developments, evaluating two lease offers (from FedEx and UPS) for Unit 4 at
Green Valley Park, a new 65,787 sq ft logistics warehouse. You must determine the
market rental value using provided comparisons, critically assess both offers
(including lease terms and covenant strength), and make a justified
recommendation. Ensure you thoroughly Review Appendix 1 & 2 of the brief.
Please find attached the 'Assignment Brief'—this is the main document, and it’s
important to follow all the instructions carefully. I’ve also attached two documents:
one titled 'NOT MINE DO NOT COPY - Assignment Brief' and one titled 'NOT MINE
DO NOT COPY - Report Example'. These will help make things much clearer, as the
assignment details differ. However, they will show you what needs to be included,
how you should write it, etc.

Please do not copy anything from these documents. However, make sure to follow
the same structure, do research around the same topics, include everything that they
have, and follow the same terms for the examples. You'll see when you compare the
example assignment brief to my assignment brief that the examples just use two
different companies, a different comparison, different offers, and different
calculations.

Look closely at how they decided which offer to choose. This will show you how to
select the right offer and how to negotiate on terms you're not happy with. Once you
read the example, you’ll understand the process. If anything isn’t clear, feel free to
message me.

Please do the same research but use different sources and websites. Ensure that
nothing is copied, but the reasoning for most things will be the same, so this should
be a significant help to you.

I’ve provided the 'UCEM Blank Report Template' as a base. Please use this template
and match the structure in the example. Also, create a cover sheet and title page
similar to my previous assignment, which I’ve attached as 'Previous Assignment'.
This is solely for the title page and cover page. Although the details and logos will
change, please make sure the title page looks more professional, similar to the
example, as it’s more polished than my previous one. Make sure to include the same
details as my last assignment but improve the professionalism and quality of the
images, just like the example. Remember to cite and reference any images used.

I’ve attached two CoStar reports: one titled 'Berkshire - North Hampshire GBR
Industrial Market' for current market research and another titled 'CoStar report -
Lease terms for recent industrial real estate lettings - Reading'. You can use these
for Appendix C in the example. You can use fictitious information to make it more
relevant to our sized unit, but base it on real properties as shown in the CoStar
reports.

Also, I’ve provided two referencing guides: 'The UCEM Guide to Referencing and
Citation' and 'Simple Guide to Referencing'. Please make sure to follow these guides
for all UCEM referencing and citations.

All webinar slides are available for review. If you'd like any webinar transcripts to
help you further understand a specific area, please let me know. I’ve also provided
all my weekly notes, titled 'Property Transactions - Week .. - Notes'. Please review
these for further understanding of each area.

I’ve added a document titled 'Rental Comparisons'. This is what you'll use
for Appendix A in the example report. If you read the example report, you’ll
understand how they backed up adjustments. It’s crucial that you back up your
adjustments. While you don’t have to adjust the template, you still need to explain
why a positive or negative adjustment was made. This needs to be backed up
throughout Section 3, the market rental valuation of the example report. Thoroughly
review the example to understand this more, and make sure to check the example
report to understand how this works. The template attached already contains the
comparison done for the comparable properties provided in the brief (Appendix 2,
page 8), which is how you’ll calculate the market rental valuation for Unit 4, Green
Valley Park. This is an important part of the assignment, definitely discuss how/w
why the adjustments were made.

Understanding the Comparable Method of Valuation:

The sales comparison approach to valuation involves making adjustments to

comparable properties to account for differences between them and the subject
property. These adjustments reflect what a buyer would pay for those differences in
the open market.

Here’s how adjustments are typically made:

1. Identify Relevant Differences:

o Location: Proximity to amenities, transport, noise levels, and views
can affect value.
o Size: Adjustments are made for differences in size, including land and
building area.
o Condition: The condition of the property (e.g., need for repairs or
renovations) will impact value.
o Features: Features like garages, gardens, parking, or specific
amenities can be significant.
o Time of Sale: Market fluctuations over time may require adjustments.
2. Determine Adjustment Amounts:
o Market Evidence: The most reliable way to determine adjustments is
through market evidence, analyzing properties with only the
characteristic being adjusted.
o Example: If a comparable property with a garage sold for £10,000
more than one without a garage, this £10,000 difference can be used
as a positive adjustment.
o RICS Guidance: RICS valuation standards guide the principles and
methods for adjustments, but specific figures require local market
knowledge.
3. Applying Adjustments:
o Positive Adjustments: If the comparable property is inferior to the
subject property, a positive adjustment is added.
o Negative Adjustments: If the comparable property is superior, a
negative adjustment is subtracted.
4. Overall Valuation: After making all necessary adjustments, use the adjusted
sale prices to estimate the subject property’s market value, considering the
range of adjusted values.
In summary, identify differences, quantify them with market evidence, and apply
positive or negative adjustments to get a fair market value, all within RICS
guidelines.

Heads of terms section, you had to draft a standard heads of terms in the
appendices, look at the example for this and then this will also be discussed in
section 4 of the example report:

 Heads of Terms:

Appendix:

o Include standard heads of terms as an appendix (outside the word

count) – like the example report.

 Body of report:

o Within the body of your report, specifically present the favorable

heads of terms relevant to the landlord’s strong negotiating position in
the scenario.
o Highlight that it's a landlord's market due to limited supply of suitable
distribution warehouses. Explain clearly what terms a landlord would
prioritise based on your market research and the dynamics of
supply/demand.
 Weightings for Comparables:
o Confirm that adjustments to comparables (percentage adjustments)
effectively act as your weighting system. Ensure clarity on how these
adjustments represent relative importance or suitability of each
comparable property.

This shows the marker you understand critical terms from the landlord’s perspective,
as well as the significance of adjustments to your comparables.

Please find three investment brochures for distribution warehouses for sale in
England to support/ discuss within the "Heads of Terms" section. These should be
used to show what lease terms are currently typical in the market and help inform
recommendations to the client.

Examples but please search others:

https://finnandcompany.co.uk/perch/resources/swindon-amazon.pdf

https://www.atlasre.co.uk/wp-content/uploads/Stoke-on-Trent-Smyths-Toys.pdf
https://www.hsmuk.com/wp-content/uploads/2016/04/HSM-Reading-Investment-
Brochure.pdf
https://dtre.com/search/properties/98461-reading-logistics-park-reading-logistics-
park-reading

Key features to highlight:

 Lease lengths (10–15 years typical)

 Break clauses (e.g. 10-year breaks)
 Rent reviews (upward-only, open market, or index-linked)
 Repair obligations (usually FRI)
 EPC ratings

You may find alternative examples from agents such as Finn & Co, Atlas Real
Estate, B8 Real Estate, JLL, CBRE, or Savills. Use screenshots if helpful and
professional.

Cite all brochures using UCEM Harvard referencing. Focus only on lease terms—not
sale prices or rental values.

Suggested search terms:

“distribution warehouse investment brochure UK” or “distribution warehouse for sale
PDF”.

https://www.rics.org/content/dam/ricsglobal/documents/standards/
February_2020_Code_For_Leasing_Business_Premises_England_And_Wales_1st_
Edition.pdf

Appendix D of the example report, please review the example report to

understand what to do here and then see how it is discussed in the report:

1. Company Overview (FedEx and UPS)

 Visit their official websites to find their latest annual general meeting (AGM)
reports and annual accounts.
 Quickly review these documents to gain a general understanding of the
companies’ current performance and overall financial health.
o Note: Don’t read these documents cover-to-cover, just focus on key
headlines or summaries.

2. External Analysis

 Look for recent articles or expert commentary from reliable financial sources
such as:
o Bloomberg
o Reuters
 o Financial Times
 Specifically, search for articles highlighting:
o Strengths and positive aspects of each company.
o Any potential risks, concerns, or negative issues reported about
FedEx or UPS.

3. Risk Assessment

 Clearly identify any potential risks or red flags discovered during your
research.
o This might include financial stability concerns, market risk, operational
issues, leadership concerns, or regulatory challenges.
 Provide a brief commentary on how these risks could influence your
recommendation to the landlord/client.

4. Depth and Detail

 Avoid overly technical or complex financial analysis such as liquidity ratios or

acid tests.
 Provide a concise, easy-to-follow overview of each company’s stability and
suitability for the landlord.

5. Format

 Summarise clearly, focusing on key insights rather than extensive detail.

 Aim for a brief, informed narrative highlighting important factors that might
influence decision-making.

We need market commentary for the SWOT analysis, we’re using

the comparable already provided.
You must do a SWOT analysis on both offers made

https://www.rics.org/content/dam/ricsglobal/documents/standards/Comparable
%20evidence%20in%20real%20estate%20valuation.pdf

You are required to provide a detailed SWOT (Strengths, Weaknesses,

Opportunities, and Threats) analysis for both FedEx and UPS. This analysis will help
assess the strategic position of each tenant and inform the decision on which lease
offer is more favourable for Palmer Developments.

Sources:

 Utilise the market research sources provided in the ‘Resources list’ and the
Market CoStar report I provided, to analyse current industrial market trends,
including demand and pricing dynamics for warehouses in the Berkshire &
North Hampshire region (Readings county).
  Incorporate current political factors, economic forecasts, and any relevant
industry insights.
 Reference the details from the lease offers (FedEx’s 10-year IRI lease and
UPS’s 20-year FRI lease) as part of your analysis.

Explanations for stuff you may not understand:

The headline rent is the contractual annual rent I.e. £100,000. The net effective rent
is the actual rent paid when all the incentives are taken into account.

For example. The headline rent is £100k a year for 10 years but you have 1 year rent
free period. Instead of £1,000,000 over the 10 years you’ll only get £900k. So over
the ten years it’s £90k a year in real terms. That’s the net effective rent.

Wyatt P (2022) Property Valuation (3rd edn) [e-book], Chichester: Wiley-

Blackwell. (Available via VLeBooks which can be accessed through
OpenAthens.) - Section 6.2.3.2

Useful read from last semesters valuation module on adjustments to comparisons if

anyone needs it.
Bits and pieces I have prepared for you to include:

For section 4 of the example report, Rent Review section but for reading:

Citation: Average rent achieved in the industrial real estate market over the past 5
years.
Source: EG Radius, 2025

Reference: EG Radius (2025) Industrial Market Analytics [online]. Available at: EG

Market
Analytics (egi.co.uk) (Accessed 20 June 2025)

Look at page 7 & 8 of the Co Star Market report.

For section 3, location section of the example report, I have created the maps
ready for you to use:
 4.2 mi

M4 Motorway

Figure 1: Map showing the location of Huntley in relation to Green Valley Park
(Atlist, 2025)

3.7 mi

M4 Motorway

Figure 2: Map showing the location of Prospect Park in relation Green Valley Park
(Atlist, 2025)
Reference: Atlist (2025) Atlist: Custom Google Maps made easy. Available
at: https://www.atlist.com (Accessed: 20 June 2025).

Cover page logos:

Palmer Developments logo for cover page:

Blackbird Real Estate logo for cover page:

Stuff you need to include/consider but not how I’ve

written it, with your own research:

Comparative Analysis of Lease Offers (FedEx vs UPS)

Rent-
Annual Lease Repair Break
Tenant Free Rent Reviews
Rent Term Responsibility Clause
Period
FedEx £900,000 10-year 1 year Landlord (cost for Upward-only None
 Rent-
Annual Lease Repair Break
Tenant Free Rent Reviews
Rent Term Responsibility Clause
Period
(IRI) landlord)
20-year Tenant Tenant
UPS £770,000 None Upward/downward
(FRI) responsible (Year 5)

o Rent-free periods (FedEx has 1 year, UPS has none)

o Repair responsibilities (FedEx has landlord responsibility for repairs;
use the percentage provided in the comparable spreadsheet)
o Impact of UPS’s Year-5 break clause and atypical downward rent
reviews.
 Provide clear written commentary summarising pros, cons, and risks for
both leases. Consider how the break clause in UPS’s lease and the repair
obligations in FedEx’s lease affect the financials.

Covenant Strength Assessment

 Provide a concise profile and financial stability summary for FedEx and
UPS.
o Identify explicitly any red flags, recent mergers, controversies, or risks.
 Compare clearly their respective covenant strengths.
 Conclude if covenant strength significantly differentiates the two
tenants.

Recommended Negotiation Strategy

 Clearly state your recommended tenant (FedEx or UPS), explicitly based

on:
o Net effective rental income (first 5 years)
o Lease certainty and risk profile
o Covenant strength
 Recommend an exclusivity negotiation period explicitly with your chosen
tenant.
 Clearly note potential future engagement opportunity for the unsuccessful
tenant

7. Measurement Standards

 Explicitly state:
o Gross Internal Area (GIA) is standard for warehouses.
o IPMS 3 not fully standardised for industrial properties yet.
 Mention explicitly the measurement tools:
o Laser measurers (regular calibration)
 oTraditional tapes (external measurements)
 Reference clearly:
o RICS Code of Measuring Practice (6th Edition)
o IPMS All Buildings (2023)

8. Schedules of Condition & Dilapidations

 Clearly explain the importance of a Schedule of Condition, especially for

FedEx’s IRI lease.
 Detail clearly when dilapidations schedules are issued (terminal and
interim).
 Provide relevant examples illustrating practical issues:
o Insurance impact (sprinklers, locks, alarms)
o Landlord repair cost exposure
o Break clauses linked to property condition
o Tenant disputes and third-party surveyor involvement

9. Format and Referencing

 Professional layout matching the style of Assignment 1.

 Cover page clearly stating: “Palmer Developments – Unit 4 Green Valley
Park,” date (1 July 2025), and your name.
 Clearly structured sections, professional headings, and well-formatted
tables.
 Adhere strictly to UCEM Harvard referencing style, including a minimum
of 20 high-quality references and a bibliography.
We don’t need to do the Appendix C – Lease terms for recent industrial real estate
Lettings of the example. You can leave that part out which will save you some work 

IMPORTANT, where appendix C from the example report is discussed throughout

the body of the report, in my report use the brochures as comparable instead. This is
the main/only difference between how the example report is done and how mine
needs to be done. You don’t need an appendix C.

Make sure to use the information in Appendix 1 of the brief throughout the report as
this detail should be demonstrated/considered for the terms and heads of terms.

There are 12 mandatory headings that should be included in the Heads of Terms,
ensure all are in the appendix. Do the same as the example, make sure all those
headings are the appendix as they are essential.

In the main body of your report, you should critically evaluate the heads of terms,
based on the market research you've conducted. Use the investment brochures I
provided/explained in the instructions, this ties in with that part of the assignment.
The brochures contain relevant information on typical lease terms for properties like
the one in question. Make sure to use these brochures to demonstrate the standard
terms you would expect for a building of this nature, ensuring your evaluation is
grounded in solid market data. This will show what is considered normal or ideal for
a distribution warehouse like the one we are reviewing.

When discussing the heads of terms in the main body, be sure to refer to the HOT's
appendix for further details on the headings. This will provide clarity and support for
your analysis.

You should also comment on the preferred lease terms we would like to negotiate
after you've chosen which company is best to provide the lease to, and make sure
they are reflected in the Heads of Terms and explain why these terms are ideal
based on your research. The example report provideddoes this correctly, so make
sure you do it the same way.

Don’t forget to include the conflict of interest decision tree:

For the financials section/appendix, please include the following key pieces of
information for each prospective tenant (briefly).

1. Share Price: If available, include information about how their share price has been
performing.

2. Company Overview:

o Where the company is based.

o What the company does (services/products).

o How many staff members they have.

o How old the company is.

o The overall reputation and stability of the company. Essentially, we want to ensure
they are a well-established, professional, and mature organization.

3. Dispute History: Make sure there is no record of the company being involved in
significant disputes, such as those with unions or other stakeholders. Avoid
recommending companies with any ongoing issues.

4. Management Team:

o Include details about the senior leadership and their reputation.

o Be cautious of companies led by individuals who may have been involved in any
scandals (e.g., referencing Robert Maxwell as a well-known example of a leader
whose actions significantly damaged the company). We want to ensure that the
company’s leadership is stable and trustworthy.

This information will help paint a clear picture of the tenants and their suitability for
the lease agreement.

Key Points from this weeks lecture for assignment – Week 13 lecture
(Webinar slides are week 13 slides)

1. Covenant Strength:
o This topic is crucial for Assignment 2, where you'll assess the
covenant strength of two prospective tenants (FedEx and UPS).
o You are expected to have a basic understanding of financial
statements, specifically – you can look at previous years if this year’s
accounts won’t be finalised for each company:
 Profit and Loss Statements – Shows profit margins, income,
and expenditures.
 Balance Sheets – Gives an overview of a company's financial
health, showing assets, liabilities, and equity.
 Cash Flow Statements – Provides information on the
company’s liquidity, showing how cash moves in and out of the
company.
o You need to analyse the accounts to determine whether the tenants
(FedEx and UPS) are financially suitable tenants for the property.
2. Understanding Financial Statements:
o Focus on key metrics like profit, balance sheet size, and cash flow
rather than diving into complex details or reading hundreds of pages of
reports.
 oIt is helpful to use market reports and financial analysts' summaries
after an annual general meeting (AGM) to get an overview of financial
health quickly.
o Make sure you understand the differences between profit and loss,
balance sheets, and cash flow statements to explain their relevance.
3. Business Plans & Strategy:
o In annual reports, look for the business plans of the companies.
These plans often give insight into the company's strategy for growth
and stability, which is crucial in assessing their long-term viability as
tenants.
4. Reputation of Management:
o Check for any scandals involving the companies or their executives. A
company's financial standing may look solid, but if it is embroiled in a
scandal, it may affect its stability. For example, Rupert Murdoch’s
scandals or similar incidents.
o Look at the management board, their history, and if any board
members are associated with previous financial mismanagement.

Trump is an example of how negotiations work. President Trump’s tactics in dealing

with Israel and Iran to show that understanding the motivations of the other party is
important in negotiations. When assessing tenants for properties, like in your
assignment, you need to understand the financial health and background of the
companies you’re dealing with, just like understanding your counterpart in a
negotiation. Good example of the importance of understanding who you're dealing
with.

5. Key Details to Address in Assignment:

o Summarise the key messages from the profit and loss, balance sheet,
and cash flow statements in a few linesfor each.
o Include details like how long the business has been established,
the headquarters' location, their global presence, and key board
members.
o Report on whether any scandals or financial issues have affected
the company’s stability.
6. Discussion Forum Questions:
o Activity 13.1: Focus on the importance of profit levels for prospective
tenants, which should be steady and growing (not volatile).
o Evaluate which elements of a balance sheet are most important to
landlords when considering a tenant’s ability to pay rent.
Generally, profit margins relative to the rent proposed are key.
o Consider whether cash flow is more important for small startups or
large international companies. This will vary, but in general, startups
may struggle with cash flow while large companies may have steady
cash flow.
7. Role of REITs:
o In Activity 13.2, REITs are suggested for comparison because
they publish annual accounts and can be used to
understand financial stability.
 o Focus on publicly available data, as private companies may not
provide audited accounts.
8. Important Ratios for Assessing Covenant Strength:
o Profitability: Profit divided by sales to understand how much profit is
made on each sale.
o Efficiency: Look at how quickly a company turns over its stock or
inventory. For example, in industries like fashion, quick stock turnover
is key.
o Acid Test Ratio: Measures financial stability after removing inventory
from the equation. This is critical for assessing a tenant’s ability to
cover liabilities.
9. Consider Sector Specifics:
o Some sectors are more willing to take risks with tenants that have less
established financial history, like restaurants or celebrity chefs.
Other sectors, particularly office and retail, may require stronger
financial backgrounds.
o Understand the differences in risk tolerance across sectors (e.g.,
some property types are more open to startups).
10. Covenant Strength and Negotiation:
o The quality of a tenant’s financial health will affect negotiation
strategies. For example, if a tenant's financial position is weak, you
may need to structure more favorable terms or offer flexibility in
negotiations.
11. Questions for Drop-in:
o If you need clarification on aspects of Assignment 2, you can bring
questions to the drop-in session on Friday at 3 pm. You can also email
David in advance if you want him to focus on a particular topic.

1. Review the latest audited accounts for FedEx and UPS to assess their
financial health.
2. Analyze their profit and loss statements, balance sheets, and cash flow to
determine whether they are financially suitable tenants.
3. Consider the wider market view: Check if there are any scandals or
financial instability affecting the companies’ management or reputation.

Financial statements
Consider the following questions:
 1. Which of these three statements would be of most use to a
landlord considering the covenant strength of a tenant, and
why?
2. Which of these three statements would be of most use to a
vendor considering the sale of a major shopping centre
investment, and why?
3. Which of these three statements would be of most use to a
financial director of an internet start-up, and why?

Re: Financial statements

Monday, 23 June 2025, 19:54
Number of replies: 1
1) Which of these three statements would be of most use to a
landlord considering the covenant strength of a tenant, and why?

The balance sheet would be the most use to the landlord as it

shows a snapshot of where the company is at that exact moment
which is normally at the end of the trading year. It shows the
assets, liabilities and net asset position. It is a good starting point
for getting a handle on the value of the business. However, it
could be argued that the balance sheet and profit and loss
accounts together provide the best idea of the covenant strength
of a tenant.

2) Which of these three statements would be of most use to a

vendor considering the sale of a major shopping centre
investment, and why?

The cash flow statement indicates the operating cash flows which
is related to direct trading, the investing cash flows which
indicates buying and selling of fixed assets as well as the
financing cash flows which is the cash in and cash out. It also
provides a NET cash flow so it provides the investor with a clear
picture of whether the business is growing or not.

3) Which of these three statements would be of most use to a

financial director of an internet start-up, and why?

The cash flow statement as this is critical for new start up

businesses as they tend to be working on limited funds. As the
cash flow statement shows the actual ingoing and outgoing
costs/cash it helps the financial director understand what funds
are available to cover day to day operating costs, invest in growth
which assists with decision making within the business.

Re: Financial statements

- Wednesday, 25 June 2025, 01:34
Number of replies: 0
1. The Profit and Loss Statement details the profitability of a
company over the course of a determined period and hence
should provide the strongest indication of the covenant
strength, over the other two. It will also provide the detail of
where is spending it money to conduct operations. Without
profits, operations will either need to reduce or cease in the
long term.
2. The Balance sheet will provide the best understanding of
the value of the business providing reasonable clarity on
how much money is in the bank, tied up in assets, how much
debt is held and how much the company owes and is owed
by suppliers and customers amongst other things. This snap
shot would provide the best understanding of how much
money/assets/debts the company has at a point in time.
3. In the early stages of a company the balance sheet will
likely include small figures with few assets and debts due to
being an internet start-up. I would assess the financial
director has the most interest in a Cash Flow statement as
they will be looking to ensure they have sufficient money
available to pay it's workers, seeking loans where necessary
and ensuring cash is available to meet the early demands of
the organisation when cash availability can be stretched.

REIT example:
What’s included in the work count:
Other Notes taken from Week 13 surgery today: please read through to ensure
I have done all.

1. Market Research and Comparable Transactions

Comparable Transactions Table: You do not need to include additional comparable

evidence beyond what is provided in the rental adjustments table. Refer to this table
in the body of your report.

Market Adjustments: In the body of the report, you should explain the adjustments
made in the rental adjustments table. Use logic to justify why certain adjustments are
made. If, for example, you adjusted the rents based on the proximity, size, or age of
the properties, explain those adjustments.

Guidance on Figures: You can adjust the figures in your analysis based on market
conditions. For instance, if you feel the market value should be adjusted to reflect a
higher figure, you are allowed to do so as long as you justify these changes logically.

No Extra Comparables Needed: Don’t worry about finding more comparables. The
provided rental adjustment table suffices. The focus should be on evaluating and
adjusting the data given.

2. Heads of Terms

Mandatory Headings: Ensure you include 12 mandatory headings in the heads of

terms section, which can be placed in the appendix. In the body of your report,
critically evaluate these terms based on market research and investment brochures
you’ve been given.

Use of Market Research: You will need to discuss the typical lease terms for
buildings like the one you’re evaluating. Reference the investment brochures to
highlight what is common in the marketplace, such as lease durations (typically 10–
15 years), FRI leases, etc.

Preferred Lease Terms: It’s important to include your preferred lease terms (what
you would like to negotiate) and explain why they are ideal based on your market
research. Use the example heads of terms as a reference for structuring this.

Critical Evaluation: You should offer a critical evaluation of the terms that are
proposed in the offers from FedEx and UPS. Assess what is good and what needs to
be negotiated further.

3. Exclusive Negotiations and Lockout Agreements

Exclusive Negotiations: You may suggest exclusive negotiations (i.e., negotiating

with one party exclusively for a set period, typically 2–3 weeks) to avoid both parties
walking away. If no deal is made within this period, you can then approach the
second party again.

Communication: If you enter into exclusive negotiations with one party, you don’t
need to tell the other party which one you are negotiating with, but you can inform
them that you are in discussions with another party until a certain date.

Strategy: When working with two offers, you need to identify the preferred party and
explain the reasons for this preference, such as better lease terms or better financial
standing. However, make sure to communicate any weaknesses in their offer and
recommend negotiations on those points.

Second Party: If the preferred party doesn’t come through, you may then go back to
the second party and re-open negotiations.

4. Summary Profile of Prospective Tenants

Share Price: If the share price is relevant, you should mention how the share price
has been performing. This will provide insight into the financial health of the
prospective tenants.

Key Information: You should gather and report on:

Where they are based (location of the company)

What they do (business focus)

What services they offer

How many staff they have

How old the company is (established history)

Ensure the company is well-established and professional, with no significant

disputes.

Dispute History: It’s important to note if the company has been involved in any
disputes. Avoid recommending a company that has had significant issues, such as
disputes with unions or any other scandals that could harm the business.

Senior Team: Include details of the senior management team, their backgrounds,
and whether they have been involved in any scandals or damaging activities (like
Robert Maxwell's legacy).

5. Formatting and Word Count

Word Count: Be aware of the word count limit (3,000 words). This will include the
main body, heads of terms, recommendations, and conclusions.
Appendix: Use the appendix effectively for supporting material (tables, charts,
comparison data), ensuring these are referenced in the main report but do not count
towards the word count.

No Bibliography Needed: A bibliography is not necessary for this assignment, but

you may include one if you wish.

6. Primary Research (Interviews)

Interviews: If you choose to interview an industry professional, this can be

referenced in the report as primary research. Make sure you have their permission to
quote them.

Type of Questions: Focus on questions that address the current market situation,
how they would handle a lease negotiation, and any other relevant insights. The
interview doesn’t need to be extensive, but it should add value to the report.

PTY7PRT resources list

Definitely use what is highlighted in yellow:

 Carter Jonas
 CBRE
 Bloombery
 Cushman and Wakefield
 EG Radius
 CoStar
 JLL
 XPO
 Estates Gazette
 Knight Frank
 Infabode
 Lambert Smith Hampton
 Property Week

RICS Valuation – Global Standards (Red Book)

https://www.rics.org/profession-standards/rics-standards-and-guidance/sector-standards/
valuation-standards/red-book/red-book-global

https://www.rics.org/content/dam/ricsglobal/documents/standards/Red-Book-Global-
Standards-incorporating-IVS.pdf
Wyatt P (2022) Property Valuation (3rd edn) [e-book], Chichester:
Wiley-Blackwell. (Available via VLeBooks which can be accessed
through OpenAthens.)

 RICS (2024) Commercial Rent Reviews [online]. Available at: RICS Find a
Surveyor
- Commercial rent reviews (ricsfirms.com) (Accessed 28 June 2024)
 RICS (2017) Conflicts of interest [online]. Available at: Conflicts of interest
(rics.org)
 (accessed 28 June 2024)
 RICS (2022) 'Rules of Conduct' [online], Available at:
www.rics.org/uk/upholding-
 professional-standards/standards-of-conduct/rules-of-conduct/ (accessed 28
June 2024)
 RICS (2021) Red Book Global Standards [online]. Available at: Red Book
Global
 (rics.org) (accessed 28 June 2024)
 RICS (2022) Code for lease business premises [online]. Available at: Code for
 leasing business premises, 1st edition (rics.org) (accessed 28 June 2024)

Amos Z (2022) How to improve sustainability in commercial real estate. Stratafolio.

Available at: https://stratafolio.com/how-to-improve-sustainability-in-commercial-real-
estate/ [accessed 21 November 2022].

Bagust B (2020) ‘Build back better: Is commercial property going green?’ [online]. Available
at: www.rics.org/uk/news-insight/future-of-surveying/sustainability/build-back-better-is-
commercial-property-going-green/ [accessed 6 January 2022].

BRE Group (2022) 'BREEAM' [online]. Available

at: https://bregroup.com/products/breeam/ [accessed 12 December 2022].

British Land (2022) 'Glossary' [online]. Available

at: www.britishland.com/glossary [accessed 6 December 2022].
Card R, Murdoch J and Murdoch S (2011) Real Estate Management Law (7th edn)
[e-book], Oxford: Oxford University Press. (Available via Activity 1.4.)
CBRE (2022) Home page [online]. Available at: www.cbre.co.uk/ [accessed 12 December
2022].

Clifford J (2014) Demand and Supply Explained – Macro Topic 1.4 (Micro Topic
2.1) [video], YouTube. Available at: https://youtube.com/watch?v=LwLh6ax0zTE
[accessed 12 December 2022].
Cluttons IM (2023) Home page [online]. Available at: www.cluttonsim.com/ [accessed 10
March 2023].

Colliers (2022) Home page [online]. Available at: www.colliers.com/en-gb [accessed 12

December 2022].
CoStar (2022) ‘CoStar | # 1 Commercial Real Estate Information Company’ [online].
Available at: www.costar.com/ [accessed 12 December 2022].

Designing Buildings Wiki (2021a) ‘Schedule_of_condition_of_property’ [online]. Available

at: www.designingbuildings.co.uk/wiki/Schedule_of_condition_of_property [accessed 6
January 2022].

Designing Buildings Wiki (2021b) ‘Schedule of dilapidations’ [online]. Available

at: www.designingbuildings.co.uk/wiki/Schedule_of_dilapidations [accessed 6 January
2022].

EG (2022a) ‘EG Magazine – the UK’s number one magazine for the real estate week’
[online]. Available at: www.egi.co.uk/eg-magazine/ [accessed 12 December 2022].

EG (2022b) ‘Welcome to EG | Commercial Property Data, News & Analysis’ [online].

Available at: www.egi.co.uk/ [accessed 12 December 2022].

Estate Agents Act 1979, London: Her Majesty’s Stationery Office.

Financial Expert (2022) 'The Best UK REITs (Real Estate Investment Trusts)'
[online]. Available at: www.financial-expert.co.uk/best-reits-real-estate-investment-
trusts-uk/ [accessed 12 December 2022].
Gates L (2018) Negotiating Foundations: The Three Core Negotiation
Practices [videos], LinkedIn Learning. Available
at: www.linkedin.com/learning/negotiation-foundations/welcome?u=2027147 [access
ed 12 December 2022]. (Access LinkedIn Learning via Section 5 of the e-Library)
GOV.UK (no date) 'Energy Performance Certificates for your business premises' [online].
Available at: www.gov.uk/energy-performance-certificate-commercial-property [accessed 6
January 2022].

IPMS (2023) International Property Measurement Standards: All Buildings [online],

London: RICS. Available
at: www.rics.org/uk/upholding-professional-standards/sector-standards/real-estate/
international-property-measurement-standards/ [accessed 31 January 2023].
isurv (2022) Conveyancing Procedure [online]. Available
at: www.isurv.com/site/scripts/documents_info.aspx?
documentID=8817&categoryID=1344 [accessed 5 January 2022].
JLL (2016) The Promise and Perils of Location Decisions: Corporate location
planning in a rapidly changing business climate [online], London: Jones Lang
LaSalle. [accessed 5 January 2022]. (Available via Activity 11.3.)
Jones Lang LaSalle (2022) Home page [online]. Available at: www.jll.co.uk/ [accessed 12
December 2022].

legislation.gov.uk (2020) Home page [online]. Available

at: www.legislation.gov.uk [accessed 5 January 2022].

Metrowebukmetro (2009) ‘For sale: Charming white fronted cottage... by nuclear power
station’, Metro [online], 29 September. Available at: https://metro.co.uk/2009/09/29/for-sale-
charming-white-fronted-cottage-by-nuclear-power-station-448867/ [accessed 5 January
2022].

Misrepresentation Act 1967, London: Her Majesty’s Stationery Office.

MoneyWeek (2011a) What is a balance sheet? – MoneyWeek Investment

Tutorials [video], YouTube. Available at: https://youtube.com/watch?v=DuKEcxVplnY
[accessed 12 December 2022].

MoneyWeek (2011b) What is profit? – MoneyWeek Investment Tutorials [video],

YouTube. Available at: https://youtube.com/watch?v=IQuYnADhuwo [accessed 12
December 2022].

MoneyWeek (2012) What is a cash flow statement? – MoneyWeek Investment

Tutorials [video], YouTube. Available at: https://youtu.be/GkGdlgX3xYI [accessed 12
December 2022].

Pereria Gray (2021) Independent Review of Real Estate Investment Valuations [online].
Available at: www.rics.org/mena/upholding-professional-standards/sector-standards/
valuation/review-of-real-estate-investment-valuations/ [accessed 12 December 2022].

Promap (2022) ‘Home | Promap Digital Magazine’ [onilne]. Available

at: www.promap.co.uk/ [accessed 12 December 2022].

Property Week (2019) ‘Property News from the Real Estate Market | Property Week’
[online]. Available at: www.propertyweek.com/home [accessed 12 December 2022].

RICS (2015) Code of Measuring Practice (6th edn) [online], London: RICS. Available
at: www.rics.org/uk/upholding-professional-standards/sector-standards/real-estate/code-of-
measuring-practice/ [accessed 6 January 2022].

RICS (2016a) Dilapidations in England and Wales (7th edn), Guidance note [online],
London: RICS. Available at: www.rics.org/uk/upholding-professional-standards/sector-
standards/building-surveying/dilapidations-in-england-and-wales/ [accessed 6 January 2022].

RICS (2016c) Real Estate Agency and Brokerage (3rd edn) [online], London: RICS.
Available
at: www.isurv.com/downloads/download/1282/real_estate_agency_and_brokerage [accessed
5 January 2022].

RICS (2016d) UK Commercial Real Estate Agency (1st edn) [online], London: RICS.
Available
at: www.isurv.com/downloads/download/1428/uk_commercial_real_estate_agency_standard
s [accessed 5 January 2022].
RICS (2018a) RICS Property Measurement (2nd edn) [online], London: RICS. Available
at: www.rics.org/uk/upholding-professional standards/sector-standards/real-estate/rics-
property-measurement-2nd-edition/ [accessed 6 January 2022].

RICS (2018b) RICS Consumer Guide: Dilapidations [online], London: RICS. Available
at: www.ricsfirms.com/residential/maintenance/rics-consumer-guide-dilapidations/ [accessed
6 January 2022].

RICS (2018c) ‘Schedules of Conditions’ [online]. Available

at: www.ricsfirms.com/commercial/business-premises/retail/schedule-of-conditions/ [accesse
d 6 January 2022].

RICS (2019a) Comparable Evidence in Real Estate Valuation [online], London: RICS.
Available at: www.rics.org/uk/upholding-professional-standards/sector-standards/valuation/
comparable-evidence-in-real-estate-valuation/ [accessed 6 January 2022].

RICS (2019b) Countering Bribery and Corruption, Money Laundering and Terrorist
Financing [online], London: RICS. Available at: www.rics.org/uk/upholding-professional-
standards/standards-of-conduct/aml-bribery-corruption-terrorist-financing/ [accessed 5
January 2022].

RICS (2019c) Surveying Safely, Guidance note [online], London: RICS. Available
at: www.rics.org/uk/upholding-professional-standards/sector-standards/building-surveying/
surveying-safely/ [accessed 6 January 2022].

RICS (2021a) ‘SKA rating’ [online]. Available at: www.rics.org/uk/about-rics/responsible-

business/ska-rating/ [accessed 6 January 2022].

RICS (2021b) RICS Valuation – Global Standards’ (Red book global) [online], London:
RICS. Available at: www.rics.org/uk/upholding-professional-standards/sector-standards/
valuation/red-book/red-book-global/ [accessed 6 January 2022].

RICS (2021c) Sustainability Report 2021 [online], London: RICS. Available

from: www.rics.org/uk/wbef/home/reports-and-research/sustainability-report-2021/ [accessed
18 February 2022].

RICS (2022a) Home page [online]. Available at: www.rics.org/uk/ [accessed 6 January
2022].

RICS (2022b) 'Rules of Conduct' [online], Available at: www.rics.org/uk/upholding-

professional-standards/standards-of-conduct/rules-of-conduct/ [accessed 4 February 2022].

Savills (2022) Home page [online]. Available at: www.savills.co.uk/ [accessed 12 December
2022].

Scarrett D and Wilcox J (2018) Property Asset Management (4th edn) [e-book],
Abingdon: Routledge. (Available via Activity 11.2).
Sustainability Illustrated (2015) Sustainability: Definition with Simple Natural
Science [video], YouTube. Available at: https://youtu.be/eec0UYGIeo4 [accessed 6 January
2022].

Suzy Lamplugh Trust (2019) ‘Personal safety advice’ [online]. Available

at: www.suzylamplugh.org/Pages/Category/personal-safety-advice [accessed 6 January
2022].

Szumilo N and Wiegelmann T (2020) ‘How Struggling Businesses Can Renegotiate

Rent’, Harvard Business Review [online]. Available
at: www.search.ebscohost.com/login.aspx?
direct=true&db=buh&AN=143147927&site=ehost-live [accessed 12 December
2022]. (Available via EBSCO which can be accessed through OpenAthens.)
The B1M (2018) Building The World's Greenest Office [video], YouTube. Available
at: www.youtube.com/watch?v=QdHui8YE644 [accessed 21 November 2022].

The Business Protection from Misleading Marketing Regulations 2008, London: The
Stationery Office.

The Consumer Protection from Unfair Trading Regulations 2008, London: The Stationery
Office.

The Estate Agents Act 1979, London: Her Majesty’s Stationery Office.

TwoTeachers (2020) Factors Affecting Business Location Explained. [Video],

YouTube. Available at: www.youtube.com/watch?v=eU2VMJ2d1ks [accessed 12
December 2022].
Which? (2021) ‘Consumer protection from Unfair Trading Regulations 2008’, Consumer
Rights [online]. Available at: www.which.co.uk/consumer-rights/regulation/consumer-
protection-from-unfair-trading-regulations-2008 [accessed 5 January 2022].

Appendix A: IMPORTANT, MUST CONDIDER THIS IN RESEARCH

Comparisons Subject Unit

1 2 3 4 4 Green Valley Park

Prospect Park Huntley Estate

Unit 4 Unit 7 E4 E7
1 Rent 400000+C6:C3 £ 800,000 £ 1,500,000 £
3 1,600,000

2 Area IPMS2 38,360 88,820 124,000 112,44 65,787

0
Comment Much smaller Slightly larger Larger Larger
unit

Adjustment -5.00% 0.00% 2.50% 2.50% Minus

(%) adjustments for
smaller units as a
larger unit would
benefit from
economy of scale
and be at a lower
rent per sq ft
3 Rent Per sq #VALUE! £ 9.01 £ 12.10 £
ft 14.23
4 Date Dec-24 Mar-23 Sep-23 Mar-24
Comment Older Older Older transaction Older
transaction transaction transaction

Adjustment 1.00% 4.00% 3.00% 2.00% Positive

(%) adjustment as
these transactions
are dated.
5 Transaction 6 months Rent review New Letting New Letting
Type tenancy

6 Specification Not as good Not as good Similar Similar

Comment - - No adjustment Plus Unit E7 - The
sustainable landlords have
features paid for the
tenant to retrofit
their unit with
many sustainable
features including
water recycling,
solar panels,
insulation, and a
wind turbine.
Adjustment 3.00% 3.00% 0.00% -5.00% Positive
(%) adjustments for
the first 3
comparisons as
the subject unit is
in better
specification and
would achieve a
higher rent.
7 Lease term 6 months 20 years lease 10 years with break 15 years
tenancy option in year 5 lease

Comment - No adjustment - No
adjustment

Adjustment -5.00% 0.00% -2.50% 0.00% Negative

(%) adjustments as
comparisons are
on shorter leases
and would have a
risk
premium/higher
rent attached.
8 Repairing IRI FRI IRI FRI
obligation
 Comment - - - -
Adjustment -2.00% 0.00% -5.00% 0.00% Negative
(%) adjustments as
rents on IRI basis
would be higher
to account for
added landlord
responsibilities.
9 Rent Review 6 monthly 5 yearly 5 yearly 5 yearly
Comment - Upward Only Upward Only Upward or
downward

Adjustment 0.00% 0.00% 0.00% -5.00% Negative

(%) adjustment as
comparison rent
would be higher
than Market Value
on account of the
added risk of an
upward/downwar
d rent review
clause.
1 Location Not as good Not as good Similar Similar
0
Comment - - - -
Adjustment 5.00% 5.00% 0.00% 0.00% Positive
(%) adjustment as
location of subject
property is better
and would attract
a higher rent per
sq ft.
1 Incentive None None 6 months rent free 12 months
1 rent free

Comment - - Standard incentive - -

no adjustment

Adjustment -2.50% -2.50% 0.00% 2.50% You would expect

(%) a 6 month rent
free allowance.
So no rent free
will attract a
negative
adjustment and an
excessive 12
months rent free
would attract a
positive
adjustment. Look
at worksheet 3.
1 Condition Not as good Not as good Similar Similar
2
Comment - - - -
Adjustment 2.50% 2.50% 0.00% 0.00% The subject unit is
(%) in better condition
so a positive
adjustment is
applied to the
poorer
comparisons.
1 Car parking Not as good Not as good Similar Similar
3
Comment - - - -
Adjustment 2.50% 2.50% 0.00% 0.00% The subject unit
(%) has better parking
provision so a
positive
 adjustment is
applied to the
poorer
comparisons.
1 Total -0.50% 14.50% -2.00% -3.00%
4 percentage
adjustment
to rent
1 Adjustment #VALUE! £ 10.31 £ 11.85 £ #VALUE!
5 rent per sq ft 13.80
1 Rent for #VALUE!
6 subject unit
Say #VALUE!

Source: https://www.colliers.com/en-gb/research/industrial-logistics-rents-maps-h2-2023#:~:text=The%20UK%20average
%20prime%20headline%20rent%20for%20large,%28and%209.3%25%20y%2Fy%29%20reaching%20%C2%A314.2%20psf.
%20Land%20Values

We don’t need to do the Appendix C – Lease terms for recent industrial real estate
Lettings of the example. You can leave that part out which will save you some work 

IMPORTANT, where appendix C from the example report is discussed throughout

the body of the report, in my report use the brochures as comparable instead. This is
the main/only difference between how the example report is done and how mine
needs to be done. You don’t need an appendix C.

Make sure to use the information in Appendix 1 of the brief throughout the report as
this detail should be demonstrated/considered for the terms and heads of terms.

There are 12 mandatory headings that should be included in the Heads of Terms,
ensure all are in the appendix. Do the same as the example, make sure all those
headings are the appendix as they are essential.

In the main body of your report, you should critically evaluate the heads of terms,
based on the market research you've conducted. Use the investment brochures I
provided/explained in the instructions, this ties in with that part of the assignment.
The brochures contain relevant information on typical lease terms for properties like
the one in question. Make sure to use these brochures to demonstrate the standard
terms you would expect for a building of this nature, ensuring your evaluation is
grounded in solid market data. This will show what is considered normal or ideal for
a distribution warehouse like the one we are reviewing.

When discussing the heads of terms in the main body, be sure to refer to the HOT's
appendix for further details on the headings. This will provide clarity and support for
your analysis.

You should also comment on the preferred lease terms we would like to negotiate
after you've chosen which company is best to provide the lease to, and make sure
they are reflected in the Heads of Terms and explain why these terms are ideal
based on your research. The example report provideddoes this correctly, so make
sure you do it the same way.

Don’t forget to include the conflict of interest decision tree:

For the financials section/appendix, please include the following key pieces of
information for each prospective tenant (briefly).

1. Share Price: If available, include information about how their share price has been
performing.

2. Company Overview:

o Where the company is based.

o What the company does (services/products).

o How many staff members they have.

o How old the company is.

o The overall reputation and stability of the company. Essentially, we want to ensure
they are a well-established, professional, and mature organization.

3. Dispute History: Make sure there is no record of the company being involved in
significant disputes, such as those with unions or other stakeholders. Avoid
recommending companies with any ongoing issues.

4. Management Team:

o Include details about the senior leadership and their reputation.

o Be cautious of companies led by individuals who may have been involved in any
scandals (e.g., referencing Robert Maxwell as a well-known example of a leader
whose actions significantly damaged the company). We want to ensure that the
company’s leadership is stable and trustworthy.

This information will help paint a clear picture of the tenants and their suitability for
the lease agreement.

Key Points from this weeks lecture for assignment – Week 13 lecture
(Webinar slides are week 13 slides)

12. Covenant Strength:

o This topic is crucial for Assignment 2, where you'll assess the
covenant strength of two prospective tenants (FedEx and UPS).
o You are expected to have a basic understanding of financial
statements, specifically – you can look at previous years if this year’s
accounts won’t be finalised for each company:
 Profit and Loss Statements – Shows profit margins, income,
and expenditures.
 Balance Sheets – Gives an overview of a company's financial
health, showing assets, liabilities, and equity.
 Cash Flow Statements – Provides information on the
company’s liquidity, showing how cash moves in and out of the
company.
o You need to analyse the accounts to determine whether the tenants
(FedEx and UPS) are financially suitable tenants for the property.
13. Understanding Financial Statements:
o Focus on key metrics like profit, balance sheet size, and cash flow
rather than diving into complex details or reading hundreds of pages of
reports.
o It is helpful to use market reports and financial analysts' summaries
after an annual general meeting (AGM) to get an overview of financial
health quickly.
o Make sure you understand the differences between profit and loss,
balance sheets, and cash flow statements to explain their relevance.
14. Business Plans & Strategy:
o In annual reports, look for the business plans of the companies.
These plans often give insight into the company's strategy for growth
and stability, which is crucial in assessing their long-term viability as
tenants.
15. Reputation of Management:
o Check for any scandals involving the companies or their executives. A
company's financial standing may look solid, but if it is embroiled in a
 scandal, it may affect its stability. For example, Rupert Murdoch’s
scandals or similar incidents.
o Look at the management board, their history, and if any board
members are associated with previous financial mismanagement.

Trump is an example of how negotiations work. President Trump’s tactics in dealing

with Israel and Iran to show that understanding the motivations of the other party is
important in negotiations. When assessing tenants for properties, like in your
assignment, you need to understand the financial health and background of the
companies you’re dealing with, just like understanding your counterpart in a
negotiation. Good example of the importance of understanding who you're dealing
with.

16. Key Details to Address in Assignment:

o Summarise the key messages from the profit and loss, balance sheet,
and cash flow statements in a few linesfor each.
o Include details like how long the business has been established,
the headquarters' location, their global presence, and key board
members.
o Report on whether any scandals or financial issues have affected
the company’s stability.
17. Discussion Forum Questions:
o Activity 13.1: Focus on the importance of profit levels for prospective
tenants, which should be steady and growing (not volatile).
o Evaluate which elements of a balance sheet are most important to
landlords when considering a tenant’s ability to pay rent.
Generally, profit margins relative to the rent proposed are key.
o Consider whether cash flow is more important for small startups or
large international companies. This will vary, but in general, startups
may struggle with cash flow while large companies may have steady
cash flow.
18. Role of REITs:
o In Activity 13.2, REITs are suggested for comparison because
they publish annual accounts and can be used to
understand financial stability.
o Focus on publicly available data, as private companies may not
provide audited accounts.
19. Important Ratios for Assessing Covenant Strength:
o Profitability: Profit divided by sales to understand how much profit is
made on each sale.
o Efficiency: Look at how quickly a company turns over its stock or
inventory. For example, in industries like fashion, quick stock turnover
is key.
o Acid Test Ratio: Measures financial stability after removing inventory
from the equation. This is critical for assessing a tenant’s ability to
cover liabilities.
20. Consider Sector Specifics:
 o Some sectors are more willing to take risks with tenants that have less
established financial history, like restaurants or celebrity chefs.
Other sectors, particularly office and retail, may require stronger
financial backgrounds.
o Understand the differences in risk tolerance across sectors (e.g.,
some property types are more open to startups).
21. Covenant Strength and Negotiation:
o The quality of a tenant’s financial health will affect negotiation
strategies. For example, if a tenant's financial position is weak, you
may need to structure more favorable terms or offer flexibility in
negotiations.
22. Questions for Drop-in:
o If you need clarification on aspects of Assignment 2, you can bring
questions to the drop-in session on Friday at 3 pm. You can also email
David in advance if you want him to focus on a particular topic.

4. Review the latest audited accounts for FedEx and UPS to assess their
financial health.
5. Analyze their profit and loss statements, balance sheets, and cash flow to
determine whether they are financially suitable tenants.
6. Consider the wider market view: Check if there are any scandals or
financial instability affecting the companies’ management or reputation.

Financial statements
Consider the following questions:

4. Which of these three statements would be of most use to a

landlord considering the covenant strength of a tenant, and
why?
5. Which of these three statements would be of most use to a
vendor considering the sale of a major shopping centre
investment, and why?
6. Which of these three statements would be of most use to a
financial director of an internet start-up, and why?
Re: Financial statements
Monday, 23 June 2025, 19:54
Number of replies: 1
1) Which of these three statements would be of most use to a
landlord considering the covenant strength of a tenant, and why?

The balance sheet would be the most use to the landlord as it

shows a snapshot of where the company is at that exact moment
which is normally at the end of the trading year. It shows the
assets, liabilities and net asset position. It is a good starting point
for getting a handle on the value of the business. However, it
could be argued that the balance sheet and profit and loss
accounts together provide the best idea of the covenant strength
of a tenant.

2) Which of these three statements would be of most use to a

vendor considering the sale of a major shopping centre
investment, and why?

The cash flow statement indicates the operating cash flows which
is related to direct trading, the investing cash flows which
indicates buying and selling of fixed assets as well as the
financing cash flows which is the cash in and cash out. It also
provides a NET cash flow so it provides the investor with a clear
picture of whether the business is growing or not.

3) Which of these three statements would be of most use to a

financial director of an internet start-up, and why?

The cash flow statement as this is critical for new start up

businesses as they tend to be working on limited funds. As the
cash flow statement shows the actual ingoing and outgoing
costs/cash it helps the financial director understand what funds
are available to cover day to day operating costs, invest in growth
which assists with decision making within the business.

Re: Financial statements

- Wednesday, 25 June 2025, 01:34
Number of replies: 0
2. The Profit and Loss Statement details the profitability of a
company over the course of a determined period and hence
should provide the strongest indication of the covenant
strength, over the other two. It will also provide the detail of
where is spending it money to conduct operations. Without
profits, operations will either need to reduce or cease in the
long term.
2. The Balance sheet will provide the best understanding of
the value of the business providing reasonable clarity on
how much money is in the bank, tied up in assets, how much
debt is held and how much the company owes and is owed
by suppliers and customers amongst other things. This snap
shot would provide the best understanding of how much
money/assets/debts the company has at a point in time.
3. In the early stages of a company the balance sheet will
likely include small figures with few assets and debts due to
being an internet start-up. I would assess the financial
director has the most interest in a Cash Flow statement as
they will be looking to ensure they have sufficient money
available to pay it's workers, seeking loans where necessary
and ensuring cash is available to meet the early demands of
the organisation when cash availability can be stretched.

REIT example:
What’s included in the work count:
Other Notes taken from Week 13 surgery today: please read through to ensure
I have done all.

1. Market Research and Comparable Transactions

Comparable Transactions Table: You do not need to include additional comparable

evidence beyond what is provided in the rental adjustments table. Refer to this table
in the body of your report.

Market Adjustments: In the body of the report, you should explain the adjustments
made in the rental adjustments table. Use logic to justify why certain adjustments are
made. If, for example, you adjusted the rents based on the proximity, size, or age of
the properties, explain those adjustments.

Guidance on Figures: You can adjust the figures in your analysis based on market
conditions. For instance, if you feel the market value should be adjusted to reflect a
higher figure, you are allowed to do so as long as you justify these changes logically.

No Extra Comparables Needed: Don’t worry about finding more comparables. The
provided rental adjustment table suffices. The focus should be on evaluating and
adjusting the data given.

2. Heads of Terms

Mandatory Headings: Ensure you include 12 mandatory headings in the heads of

terms section, which can be placed in the appendix. In the body of your report,
critically evaluate these terms based on market research and investment brochures
you’ve been given.

Use of Market Research: You will need to discuss the typical lease terms for
buildings like the one you’re evaluating. Reference the investment brochures to
highlight what is common in the marketplace, such as lease durations (typically 10–
15 years), FRI leases, etc.

Preferred Lease Terms: It’s important to include your preferred lease terms (what
you would like to negotiate) and explain why they are ideal based on your market
research. Use the example heads of terms as a reference for structuring this.

Critical Evaluation: You should offer a critical evaluation of the terms that are
proposed in the offers from FedEx and UPS. Assess what is good and what needs to
be negotiated further.

3. Exclusive Negotiations and Lockout Agreements

Exclusive Negotiations: You may suggest exclusive negotiations (i.e., negotiating

with one party exclusively for a set period, typically 2–3 weeks) to avoid both parties
walking away. If no deal is made within this period, you can then approach the
second party again.

Communication: If you enter into exclusive negotiations with one party, you don’t
need to tell the other party which one you are negotiating with, but you can inform
them that you are in discussions with another party until a certain date.

Strategy: When working with two offers, you need to identify the preferred party and
explain the reasons for this preference, such as better lease terms or better financial
standing. However, make sure to communicate any weaknesses in their offer and
recommend negotiations on those points.

Second Party: If the preferred party doesn’t come through, you may then go back to
the second party and re-open negotiations.

4. Summary Profile of Prospective Tenants

Share Price: If the share price is relevant, you should mention how the share price
has been performing. This will provide insight into the financial health of the
prospective tenants.

Key Information: You should gather and report on:

Where they are based (location of the company)

What they do (business focus)

What services they offer

How many staff they have

How old the company is (established history)

Ensure the company is well-established and professional, with no significant

disputes.

Dispute History: It’s important to note if the company has been involved in any
disputes. Avoid recommending a company that has had significant issues, such as
disputes with unions or any other scandals that could harm the business.

Senior Team: Include details of the senior management team, their backgrounds,
and whether they have been involved in any scandals or damaging activities (like
Robert Maxwell's legacy).

5. Formatting and Word Count

Word Count: Be aware of the word count limit (3,000 words). This will include the
main body, heads of terms, recommendations, and conclusions.
Appendix: Use the appendix effectively for supporting material (tables, charts,
comparison data), ensuring these are referenced in the main report but do not count
towards the word count.

No Bibliography Needed: A bibliography is not necessary for this assignment, but

you may include one if you wish.

6. Primary Research (Interviews)

Interviews: If you choose to interview an industry professional, this can be

referenced in the report as primary research. Make sure you have their permission to
quote them.

Type of Questions: Focus on questions that address the current market situation,
how they would handle a lease negotiation, and any other relevant insights. The
interview doesn’t need to be extensive, but it should add value to the report.