14 August 2018
Over recent years there has been a significant growth in Academy schools and colleges. SHW has acted on behalf of several large Academy Trusts and Colleges in providing valuations for accounting purposes. The properties were of a size and nature which would not normally be sold on the open market and the valuations undertaken on the basis of a Depreciated Replacement Cost (DRC) approach in order to assess the Fair Value in accordance with the Financial Reporting Standards and RICS Valuation – Global Standards 2017.
The properties were of a size and nature which would not normally be sold on the open market and the valuations undertaken on the basis of a Depreciated Replacement Cost (DRC) approach in order to assess the Fair Value in accordance with the Financial Reporting Standards and RICS Valuation – Global Standards 2017.
The methodology of a DRC relies on the principle of substitution. Essentially it is a cost-based approach making adjustment for obsolescence and other factors.
Firstly, a new property is envisaged providing an equivalent floor area of the subject property. Generally this means applying different construction costs for the various styles and types of actual buildings. An adjustment is then made for each building to reflect its actual physical obsolescence compared with a brand new property. An adjustment is also made for the functional obsolescence of the building if it is of inferior “usability” compared with the brand new property.
An addition is made for professional fees and for the value of the land. Where the buildings occupy only part of the site, generally a higher rate per acre is applied to that part with lower and appropriate rates per acre for sports fields, woodlands, etc.
Finally, consideration is given as to whether an end allowance is necessary to reflect issues such as a sloping site or scattered building layout on the actual campus.
SHW Professional Division Partner Peter Turner said: “Over recent years SHW has valued a variety of school and college properties ranging from a large college in North London comprising a substantial number of purpose-built educational buildings of various ages, styles and conditions, to converted period mansions in rural locations with ancillary buildings and large areas of grounds, woodlands and lakes.
“We have a long history of advising educational sector clients on a wide range of property matters including Open Market Valuations, Rent Reviews and Planning, Rating and other matters.”