VALUER THE SOUTH AFRICAN - GS's visit to REIZ Northern Branch Country Seminar mSCOA: an overview SA's oldest practising valuer?
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THE SOUTH AFRICAN
VALUER
November 2016, NO. 126
GS's visit to REIZ
Northern Branch
Country Seminar
mSCOA: an overview
SA's oldest practising valuer?
THE SOUTH AFRICAN
VALUER
NOVEMBER 2016, NO 126 A
Special offer to valuers and
candidate valuers who are registered with the V P R E S I D E N T ’S
SACPVP AND who are members of the SAIV
THE SOUTH AFRICAN LETTER
INSTITUTE OF VALUERS
G
NATIONAL EXECUTIVE reetings fellow valuers.
OFFICE BEARERS 2016/2017
PRESIDENT The end of 2016 is rapidly approaching
Patrick O’Connell and what a year it has been!
VICE PRESIDENT
Tracey Myers
In between student protests, service delivery
LEGAL AND CONSTITUTION protests and the wranglings of Treasury, the
Derrick Griffiths (portfolio head)
valuer profession continues to deliver unabated
Patrick O’Connell, Edwin Schoeman, Adrian Vallun
MANAGEMENT AND FINANCE what it does: the valuation of some of the most Patrick O’Connell
Trevor Richardson (portfolio head), Mark Bakker, important assets which make up a substantial
Adrian Vallun, Thys Beukes, Patrick O’Connell
Farrel October element of many personal and business balance sheets.
MARKETING
Tracey Myers (portfolio head),
General Secretary (website) In the world of the South African Institute of Valuers this is no different, albeit at a
PROFESSIONAL LIAISON somewhat different level. In the Municipal Property Rates Act space, with specific
Patrick O’Connell (IAAO, WAVO, CBE and VAs)
Tracey Myers (RICS)
reference to the MPRA Standards Version 7_2, the SAIV through representations by
General Secretary (SACPVP, IVSC, SERVICES Janet Channing, Martin Fitchet, Trevor Richardson, Douw Boshoff and the General
SETA and SANRAL)
Secretary, has advanced our view considerably by participating in the Technical Task
Adrian Vallun (AfRES, REIB and REIZ)
Janet Channing Co-opted (SAGI) Team, which was to review the document and make the necessary changes so that it
MEMBERSHIP AND DEMOGRAPHICS meets the requirements of the municipal valuation environment. The changes were
Patrick O’Connell (portfolio head)
Thys Beukes, Tracy Kuyk, Gerrie Minnaar, deliberated and we wait for the final draft to be presented. This was due in August and
Mark Bakker it is understood that communication from the chairman of the meeting, Chris Gavor, will
EDUCATION
Tracy Kuyk (portfolio head), Edwin Schoeman, be forthcoming by the end of November 2016.
In the current economic climate, planning is just that much easier if you’re able to base your Tracey Myers, Thys Beukes
decisions (especially property-related ones!) on accurate and up-to-date research. With regard to progress on the proposed Municipal Assessors Qualification,
GENERAL SECRETARY’S OFFICE communications from the SAIV have been sent to the Local Government Sector
Education and Training Authority (LGSETA) and the Quality Council for Trades and
GENERAL SECRETARY
PO Box 35500, Menlo Park, 0102 Occupations (QCTO) to whom we have given our views on both the proposed course
t. 086 100 SAIV content and the naming of the position and similar to the MPRA Guidelines; we await
f. 086 657 3164
So here’s the deal: Rode is offering valuers and candidate e. gen@saiv.org.za further communication on this.
www.saiv.org.za
valuers who are registered with the SACPVP AND who
are members of the SAIV a special on our authoritative ACCOUNTS The Memorandum of Agreement signed by the SAIV immediate Past President Mark
Rode’s Report on the SA Property Market at a discounted e. accountsdesk@saiv.org.za Bakker with the presidents of the Black Professional Valuers Association and the
MEMBERSHIP
rate of R2 200 + VAT per annum (i.e. four issues). The e. membership@saiv.org.za
Professional Valuers Association in November 2015 has come up for renewal and, given
standard price is R4 500 + VAT. OTHER QUERIES that the above matters are not yet concluded, we have proposed an extension of the
e. info@saiv.org.za
MoA on the same terms and conditions, for a further year. This has been communicated
to the presidents of the respective voluntary associations.
Please note: The offer is only applicable to valuers and SAIV BRANCHES
CENTRAL BRANCH
candidate valuers who are not in the employ of an institution t. 053 831 6500 f. 086 657 3023
The MoU which we signed between ourselves and the REIZ (Real Estate Institute of
or non-valuation company. e. central@saiv.org.za
EASTERN CAPE BRANCH Zimbabwe) has already begun to yield the desired results. The SAIV was invited to
t. 041 396 1400 f. 086 657 3003
e. east@saiv.org.za attend their Winter Workschool. I was unfortunately not able to accept, but our General
KWAZULU-NATAL BRANCH Secretary, Melanie Vallun, willingly offered to fill in for me and the trip was a great
Make Rode’s Report work for you. Order now!
t. 081 428 4137 f. 086 657 3031
success. The fruits of this have been a number of applications from members of REIZ
e. kwzn@saiv.org.za
NORTHERN BRANCH to become affiliate members of the SAIV.
t. 012 348 1752 f. 086 657 3201
e. north@saiv.org.za
To get your copies, simply email us on lynette@rode.co.za with your request. It’s that easy. SOUTHERN BRANCH
t. 081 405 8402 f. 086 730 9193
e. south@saiv.org.za Continued on page 3
THE SOUTH AFRICAN
VALUER
NOVEMBER 2016, NO 126 1
V CONTENTS
SA Valuer Editorial Panel:
Thys Beukes (Central Branch) 60 John Loos writes
053 831 6500 / 071 600 5327
The residential mortgage market is weak in terms of transaction growth.
Mark Bakker (Eastern Cape Branch)
041 396 1400 / 083 227 3496 Overview – commercial property outlook.
November 2016, no. 126 Home buying continues to be very much about size, smaller being better.
Janet Channing (KwaZulu-Natal
Branch)
The sectional title housing market segment still mildly outperforms the full
033 343 2868 / 082 570 5834
Tracey Myers (Northern Branch)
title segment.
011 721 7141 / 083 408 1755
1 President’s letter Dean Ward (Southern Branch) 66 SAIBPP annual convention: The future of empowerment in
021 400 9915 / 082 714 9490
property development
4 Cover story: Visit to REIZ Winter School and AGM in Gweru, Zimbabwe Editor and advertising:
Patricia Leitich 67 Appraisal Institute news
6 Northern Branch Country Seminar 2016 patricialeitich@telkomsa.net
Background, purpose and functioning of the Office of the Valuer-General, The editor welcomes contributions 68 SAIV at home
by Christopher Gavor (by way of letters or articles) that are Fellow in focus: David Arthur Thomas White
Case Study: Serengeti Golf Course & farm land, by Ben Espach appropriate and that address an is-
South Africa’s oldest practising valuer?
sue that is topical or of strategic con-
Subdivision of agricultural land, by Derrick Griffiths cern to the sector as a whole. These
General Secretary’s news
APP up your valuation, by Pieter Venter should be submitted to the editor at Membership statistics
Measuring efficiently, by Huxley Reynolds patricialeitich@telkomsa.net for pos-
Demystify the valuation of trade related properties with reference to hotels sible publication. Please, use the SA
75 Tailpiece: Top ten fastest growing cities in Africa
Valuer as your platform to promote
and hospitals, by Tom Bate dialogue between SAIV members.
This is us – a demographic overview, by Dawie Roodt 78 Professional Directory
Knots and Ties, by Dr Antonie Gildenhuys The information and data presented
in the SA Valuer are recorded in
When valuers rush in where angels fear to tread, by Dianne de Wet and good faith, using sources believed
Darran Kuppan to be reliable.
The views and opinions expressed
28 Valuing real estate in Mozambique – a case of input availability in the SA Valuer are not necessarily
uncertainty, by David Jansen van Vuuren those of the SAIV, notwithstanding
the fact the SA Valuer is the official Continued from page 1
38 Municipal Standard Chart of Accounts, mSCOA: an overview, publication of the SAIV. Neither are
they representative of the opinions
by Janet Channing In addition to this, the MoU which was signed between the SAIV and the Geomatics
of the editor. Copyright applies to
all material contained in this issue Institute has also been met with success. The SAIV was invited to take a stand at their
43 Filling station valuations for bank security purposes – and reproduction in whatever form annual convention which took place on 12 and 13 September at Emperors Palace. Our
is not permitted without the written
a practical approach authorisation of the editor. stand was manned by Melanie Vallun – our thanks to her for this. Our sincere thanks
are also extended to Peter Newmarch, current President of the Geomatics Institute, for
49 Buying a farm - a valuer’s perspective, by Rumpff Krüger affording us this opportunity.
53 Legal beagle And so, with all of the above on the go, the year has slipped by rather quickly and we
Act 70 of 1970: Subdivision of Agricultural Land Act (part two),
now find ourselves preparing for end-of-year celebrations and hopefully for most of
by Derrick Griffiths
us, a well deserved break. If you are taking a holiday and plan on travelling, please do
so safely and come back to meet the new year with renewed energy and enthusiasm.
55 Gladwin v Ekurhuleni Metropolitan Municipality, by Chantelle
Gladwin and Rogan Heale
Patrick O’Connell
57 Prescription of municipal charges, by Chantelle Gladwin and
Rogan Heale
59 Restraint of trade and unlawful competition: what’s the
difference? by Pierre van der Merwe
THE SOUTH AFRICAN THE SOUTH AFRICAN
VALUER VALUER
2 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 3
cover stor y
V Visit to REIZ Winter School Memorandum of Understanding between our two institutes.
The purpose of the MoU is to stimulate strong relationships
Erwin Rode
addresses the
and AGM in Gweru, Zimbabwe between our associations and the profession in the two
countries.
Winter School
Industry best practice, education and collaboration are highly
E
verything was in place to honour the SAIV’s acceptance of ranked on both our agendas. To this end the SAIV would like
the invitation from the Real Estate Institute of Zimbabwe (REIZ) to take the next step in furthering collaboration and advancing Networking
to attend their 2016 Winter School and AGM from 7 to 10 July. our existing relationship by opening the doors to knowledge
Then came the abrupt interruption of all the planning because of violence sharing and education between our organisations and our
in Zimbabwe. members:
Mr Masuku, Siza, in the light of advancing our relationship, our
Less than a month later, however, on 18 August, Erwin Rode when I realised that he was a long-standing affiliate member National Executive has deliberated, and I am here tonight not
and I were on the plane to Harare. Kura Chihota drove us of the SAIV, Ian Dlamini. It was especially good to meet him just to enjoy all the interaction, but with your permission and
from Harare to The Village Lodge in Gweru, where the REIZ and enjoy a face-to-face conversation with him instead of blessing, to offer all REIZ members free affiliate membership Alex Millin with
proceedings were to be held. communicating via email. of the SAIV until 31 May 2017. Melanie Vallun
Having visited Zimbabwe some 17 years ago, I remembered Saturday’s events were rather different from those which we Industry best practice and education, as all of us are aware, is
the many farm stalls and vendors next to the road bringing usually present at our national events in SA. The day was the key to success. REIZ members, as non-resident affiliate
colour and life to the scenery, and making road trips interesting. spent taking part in leisure activities such as golf, elephant members of the SAIV, will be able to
It was sad to see the vendors with their creative wood, wire rides, a boat cruise, fishing, horse riding and a walk with
and other art work no longer there. What has happened to lions (all included in the conference cost!). It was altogether • access the SAIV’s website;
them? Could it be because tourism has all but disappeared? a wonderful, relaxing day for networking and a contrast to • purchase webinars online at member rates;
In their place we experienced repeated policing and checking the formal dinner that evening (with fines to be paid should • receive the SAIV’s quarterly publication, The South African
of vehicles before entering and when exiting a town. I have anyone not dress according to the rules). Valuer, at no charge;
never previously come across such visible policing. • attend SAIV seminars at member rates.
My address to the REIZ members follows.
The next morning any anxiety one may have had was quickly We are hoping that, in the months to come, your members
dispelled like mist in the sun by the hospitality of the people: REIZ President Siza Masuku, Vice President Luke Matimba, will have the opportunity to experience the benefits of SAIV
each person was treated with respect and acknowledged for ladies and gentlemen: membership and decide whether you want to continue your
who they were and what they did. membership of the SAIV.
On behalf of the SAIV I would like to express our sincere
The Village Lodge was a small but peaceful venue with a appreciation for the invitation and the opportunity to attend I, we, the SAIV, sincerely hope that REIZ members will grab
relaxed ambiance. The seminar was attended by some the Real Estate Institute of Zimbabwe’s Winter School and this opportunity of sharing knowledge and collaborating with
75 valuers from all over Zimbabwe and Botswana. It was related events. each other.
interesting to note that with all the different languages spoken
by the delegates, all the presentations took place in English, Before I commence I would like to applaud all attendees Ian Dlamini with Melanie Vallun presents
Just to end off:
with jokes here and there in a home language. for your hospitality. It was remarkable to experience such Melanie Vallun the SAIV Coat of Arms
friendliness and I must say you made Mr Erwin Rode and me to Mr Masuku
Mr Masuku, the SAIV once again thanks the REIZ for inviting
The highlight of the day was the address by the Vice President feel at home. Please give yourselves and Zimbabwe a round us to your Winter School and other proceedings.
of the Republic of Zimbabwe, the Honourable E Munangagwa. of applause.
Erwin and I were particularly surprised and honoured when I would like to present our Coat of Arms to your President,
by Melanie Vallun, General Secretary,
Mr Munangagwa welcomed us personally and thanked us for As a past president of the SAIV and General Secretary of the Mr Masuku, and respectfully request that you join me South Africa Insitute of Valluers
our attendance. Here again, thoughts of acknowledgement SAIV for the past five years, the profession has presented on stage.
and respect came to mind. me with various memorable historic moments. So I had the
pleasure of meeting Mr Masuku and Mr Mpofu in May in Thank you ladies and gentleman. May we together uphold the
Tea breaks and lunch provided the necessary time to mingle Cape Town when they attended our annual national events. valuer profession.
and meet the delegates. During lunch an elderly gentleman It was also a great honour and privilege to be present when
with a shy smile approached me. It was a great surprise Mr Masuku and our President Patrick O’Connell signed the
THE SOUTH AFRICAN THE SOUTH AFRICAN
VALUER VALUER
4 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 5
V Northern Branch Country The Constitution
Section 23 of the Constitution states that an owner of affected
Purpose of the OVG
To provide for
Seminar 2016 land “shall be entitled to just and equitable compensation as
prescribed by the Constitution”.
• the establishment, functions and powers of the Office of the
Valuer-General;
• the appointment and responsibilities of the Valuer-General;
Section 25(3): The amount of compensation and the time • the regulation of the valuation of property that has been
T
his year the Northern Branch held its annual Country Seminar on and manner of payment must be just and equitable reflecting identified for land reform;
16 and 17 September at Faircity Roodevallei Hotel, north east of an equitable balance between the public interest and the • the regulation of property that has been identified for
Pretoria. The theme of the seminar was ‘adding value’. The seminar interests of those affected, having regard to all the relevant acquisition or disposal by a department.
was opened by Derrick Griffiths, chairperson of the Northern Branch, who circumstances, including (a) the current use of the property;
welcomed a record 180 delegates, some of whom had come from as far (b) the history of the acquisition and use of the property; (c) Functions of the OVG
afield as Botswana, Knysna and KwaZulu-Natal. the market value of the property; (d) the extent of direct state • To value properties for land reform
investment and subsidy in the acquisition and beneficial • To value properties for acquisition or disposal by
Friday morning’s first presentation was given by Christopher market value: estimated amount; valuation date; willing buyer; capital improvement of the property; and (e) the purpose of a department
Gavor, appointed South Africa’s first Valuer-General in willing seller; arm’s length transaction after proper marketing the acquisition. • For any other reason
August 2015. and where the parties had each acted knowledgeably, • To make recommendations to the Minister
prudently and without compulsion Introductory context - criteria for valuing properties for land reform
Background, purpose and functioning of provided that in determining market value for purposes Land Identification which is imperative for redistribution purposes;
the Office of the Valuer-General (Property of section 12(1)(a), prices paid by the state for any of (agricultural) land; the registry of all land made -
procedures and guidelines for the valuation of
Valuation Act No 17 of 2014). acquisition of property must be excluded: Provided available, eg ownership, size, location, land potential, land properties (excluding the methods for valuations);
(The Regulations to the Act are expected to come out soon further that in the event that no other credible data is utilisation, current value; for regulations/standards; different - a system to monitor compliance with the criteria
for public comment; the gazetting of these has been delayed.) available, prices paid by the State for any acquisition of methodologies and for the prevention of over-inflated and procedures;
property may be considered. land prices. • To determine matters that must be reflected in a
The practical problem valuation report.
The brief: ‘property’ means Some key challenges
Owner: John Memphis; Property: Portion 0 of farm … • immovable property registered in the name of a person; Lack of a nationwide comprehensive, reliable, collated hub of Role of professional valuers
•a
ny movable property which is contemplated to be acquired property data; not standardised in terms of valuation practice Whenever a property has been identified for
The following information is relevant: together with the relevant immovable property; and Conflict of interest and malpractice (a) purposes of land reform, that property must be valued
1. Land prepared and in line for 2016 planting: 38.4000 ha • a right in or to such property, including an unregistered right Registry of all land made available, eg ownership, size, by the Office of the Valuer-General in order to determine
2. Land under pineapples: 110.6300 ha recognised and protected by law; location, land potential, land utilisation, current market value the value of the property having regard to the prescribed
3. Mixed established dry land kikuyu pastures: 258.3000 ha Just and equitable value for property criteria procedures and guidelines; or
4. Bush and thick veld grazing: 403.5900 ha ‘valuation’ means Regulations/standards (b) acquisition or disposal by a department, for any reason
• the process of estimating the value for a specific purpose Potential and highest and best use other than that mentioned in paragraph (a), the market
This instruction is to value plant and crops only, ie 1 and 2 above. of a particular interest in property at a particular moment in SACPVP visibility in dealing with valuation malpractices. value of such property may, at the request of a department,
time; and be determined by the Office of the Valuer-General.
What was produced? There are few farms in the area where • the outcome or result of the process above. Reasons for the creation of an OVG
pineapples are produced; the majority of properties in To have an autonomous OVG Conduct of authorised valuers
the area are grazing and game farms. There are almost no ‘value’, for purposes of section 12(1)(a), means the value of To have a juristic person with full legal capacity • May not use the position of valuer for private use.
transactions in the market for pineapples. It is very difficult to property identified for purposes of land reform, which must To have an OVG who is impartial, and acts without fear, favour, • Must disclose any personal or private business interest.
value land fit for pineapples as well as pineapple lands under reflect an equitable balance between the public interest and or prejudice; and is accountable directly to the Minister • May not perform the valuation in which he/she has interest.
production. the interests of those affected by the acquisition, having For the enhancement of land market information analysis and • Must comply with the criteria and procedures to be set out
regard to all the relevant circumstances, including the – policy formation. by the OVG.
Summary: as mentioned previously, there are very few (a) current use of the property; (b) history of the acquisition
pineapple farms coming onto the market. The valuation and the use of the property; (c) market value of the The OVG Types of value
proves to be difficult as there are no guidelines that property; (d) extent of direct state investment and subsidy The OVG should be a balance between policy and regulatory • market value • use value • investment value
everybody agrees to. in the acquisition and beneficial capital improvement of the function and operational functions. There is a requirement • assessed value • going concern value • insurance value
property; and (e) purpose of the acquisition. to keep the OVG independent for operational reasons, while • fair value
Definitions ensuring that the OVG is able to render policy and regulatory
land reform means: land redistribution, land restitution, land advice effectively.
development and tenure reform;
THE SOUTH AFRICAN THE SOUTH AFRICAN
VALUER VALUER
6 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 7
Market value and use value Next Brian Jewell, national sales Ben Espach presented a Case Study: Serengeti golf Next will be the beautiful houses, those comma houses -
• price (amount) • date (point in time) • open market representative, spelled out the course & farm land. The purpose of this presentation R5,5 million, R6,5, R10,5…
• willing buyer • willing seller benefits of using the South was not to make delegates experts on MPRA valuations,
• utility • NPV • cash flow or other benefits • specific owner African Property Transfer but to share his experience with the valuation of this The property: remainder of portion 14 of the farm Witfontein
• specific use Guide (SAPTG) for up-to-date unique property. 16 IR; the diagram, which is not up to date as it does not show
data of property transfers in South all the subdivisions, suggests that there is a puzzle to be
Just and equitable Africa. The principles are also applicable to non-MPRA valuations. unravelled. The master plan is a result of the ROD, geological
“The price that would be received to sell an asset or paid to This Serengeti is not the Serengeti in Central Africa, but the conditions (dolomite), wetlands, etc.
transfer a liability in an orderly transaction between market After tea Marina Constas Serengeti next to the R21 on the way to OR Thambo, the
participants at the measurement date.’’ - FASB, RICS, 2012 addressed the delegates on the 27-hole signature course.
Sectional Title Amendment
“The estimated price for the transfer of an asset or liability Act. As predicted by Marina
between identified knowledgeable and willing parties that Constas, who had everybody in awe
It shows what has
reflects the respective interests of those parties” - IVS, 2011:3 of her knowledge of sectional titles,
been developed
the Ombudsman for community
and also what is
Fair value: estimation of fair price in exchange between two schemes has been appointed and the new Sectional Titles
planned for future
specific parties without disregard for market criteria. Schemes Management Act and Regulations will now come
developments.
into effect. Marina is a director at BBM Inc Attorneys, a Fellow
Closing comments of the Association of Arbitrators and an international mediator.
Use value as the basis of compensation for the “current use
of the property”; this provides the foundation for determining Adrian Vallun, director of Valquest,
just and fair and equitable compensation. The role of the then guided the delegates
OVG is to help define the meaning of “just and equitable through the SAIV Income
compensation”; to develop a framework to assist the process, Capitalisation Model.
balancing the private right to full compensation and meeting
the needs of land reform.
The Minister will pay just and equitable compensation as
SG overlay on Google
contemplated in section 25(3) of the Constitution to the
private landowners for the acquisition contemplated in clause
5 above.
...reasonable and determined jointly by –
• an appropriately qualified valuer of not less than 15 years’
experience agreed upon by the parties, or failing agreement,
appointed by the South African Institute of Valuers; and
• an accountant of not less than 15 years’ standing, either
agreed upon by the parties, or, failing that, appointed by
the chairperson of the South African Institute of Chartered
Accountants,
• provided that, failing agreement between the valuer and the
accountant, the opinion of the accountant will prevail.
Christopher Gavor was the Director of
Valuations for the City of Cape Town
before taking up the position of Valuer-
General; he is also Deputy President of
the SACPVP.
THE SOUTH AFRICAN
VALUER
8 NOVEMBER 2016, NO 126
Valuation roll entries
4. Open space corridors (golf course/natural veld/dams/
Roll Value Category Reason Effective Date Monthly rates 2016/17 Monthly rates (2016/17)
wetlands)
GV2013 44 000 000 Farms Agricultural 1/7/2013 R8 369.67 8 369,67
Not suitable for development; dolomite,wet lands. Developer
oblige to maintain golf course; subsidised by developer.
Valuation: nominal value; comparable sales.
GV & SVR1 was done by the same municipal valuer
SVR2 – new municipal valuer
The MV based his value on the depreciated replacement cost
of the golf course.
Components
MV based his value on the replacement cost of the 27 hole
No Extent (ha) Extent (ha)
course.
1 Undevelopable Remainder (Located outside of the Estate) 3,8436 3,8436
2 Ptn A (Undivided separate land situated 2 km north of site) 37,6615 37,6615
Golf course has been running at a loss since inception, at
3 Estate Management Centre (Operational & Security rooms) 3,951 3,9251 best there could be a beak even.
4 Open Space Corridors (Golf Course / Natural Veld / Dams / Wetlands) 173,8451 173,8451
5 Natural Areas set aside as conservation land due to wetland and urban edge 116,9436 116,9436
6 Proposed PWV 3 Road Reserve 12,0485 12,0485
Golf Estate Purchase Price Purchase Date Property Description
7 Proposed Agricultural Uses (stabling of horses & estate workshops) 8,6018 8,6018
Woodhill Golf Estate R2,029,000 2000/02/25 Erven 862 and 449 Pretorius Park Blair
8 Proposed Mixed Use Precinct 19,652 19,652
Atholl Golf Estate R10,000 2005/12/20 Rem of Erf 412 Blair Atholl Ext 4
9 Proposed Residential 2 / Group housing 30,0613 30,0613
Eagle Canyon Golf Estate R95,000 for golf course and 2010/06/30 Erven 1258, 1259 and 1260
10 Proposed Residential 1 / Single Erven 57,2355
Honeydew Manor Ext 7 R9,535,000 for clubhouse
Silver Lakes Golf Estate R10,000,000 2010/10/28 Rem extent of Erf 763 Silver Lakes
Dainfern Golf Estate R1,000,00 2000/06/06 Erf 631 Dainfern
1. Undevelopable remainder (located outside of the estate)
Advertising board: rental – R10 000 per month
Vodacom mast: rental – R5 000 per month
Valuation: income method
2. Ptn A (Undivided separate land situated 2 km north of site)
Encumbrances: power line servitude, Rand Water servitude,
dolomite, access
Valuation: comparable sales, dry land.
3. Estate Management Centre (operational and security
rooms)
Access control, estate management
Vodacom mast: rental – R5 000 per month
Valuation: nominal value; income method 5. Natural areas set aside as conservation land 6. Proposed PWV 3 road reserve
The MV valued the offices as an income producing property. due to wetland and urban edge Gauteng Infrastructures Act: demarcated and sterilised
The VAB did not agree with the nominal value for the EMS? Urban edge, wetlands Value: no value
Applied the tariff for farm land with potential. Valuation: nominal value.
THE SOUTH AFRICAN THE SOUTH AFRICAN
VALUER VALUER
10 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 11
VAB decision
No Component Extent (ha) Value (R)
7. Proposed agricultural uses (stabling of horses and estate 1 Undevelopable remainder (located outside of the estate) 3,8436 811 477
workshops) 2 Ptn A (undivided separate land situated 2 km north of site) 37,6615 941 538
Stabling: one dwelling and stables to add value
3 Estate Management Centre (operational and security rooms) 3,9251 1 624 758
Estate workshops to service the estate and golf course
4 Open space corridors (golf course/natural veld/dams/wetlands) 173,8451 97 000
Value: comparable sales, dry land, nominal value.
5 Natural areas set aside as conservation land due to wetland and urban edge 116,9436 2 000
6 Proposed PWV 3 Road Reserve 12,0485 1 000
7 Proposed agricultural uses (stabling of horses and estate workshops) 8,6018 185 398
8 Proposed mixed-use precinct 19,652 13 768 495
9 Proposed residential 2/group housing 30,0613 28 558 235
10 Proposed residential 1/single erven 57,2355 45 788 400
Total 91 778 301
Rounded to 92 000 000
Category
10. Proposed residential 1/single erven • 2014/15 Rates Policy
Potential – Res 1 • No Category for multiple purpose
Value: comparable sales • Two thirds dominant use
• Ratio regulation
• Agricultural property
• Farm Property not used for any purpose
• 75% of the property is not used for any purpose
• VAB
• Farms Other
8. Proposed mixed-use precinct
• SVR 5
Potential – offices: flood lines, wetlands
• Farms Agricultural
Valuation: comparable sales, nominal.
By Ben Espach (BSc), professional valuer
and life member of the SAIV, served on
the Northen Branch Executive from 1990
- 2014 and the National Executive from
1994 - 2013. He was president from
2007 - 2009 and is currently a Director of
Rates Watch (Pty) Ltd.
9. Proposed residential 2/Ggroup housing
Potential – Res 2
Value: comparable sales.
THE SOUTH AFRICAN THE SOUTH AFRICAN
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12 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 13
Derrick Griffiths presented the next address, Subdivision Development Frameworks (SDFs) and Land Use After tea there were two presentations: the first was by Pieter • for calculations – Cougar; measurements feet to metre,
of agricultural land in three sections: Subdivision Management Schemes. Venter on ‘APP up your valuation’, valuations to help a etc; sketch up; AutoCAD;
of Agricultural Land Act, Act 70 of 1970 (SALA); Repeal of valuer improve the outcome of an instruction. • for storage – Dropbox; One Drive; offsite data storage;
Subdivision of Agricultural Land Act, ACT 64 of 1998 and THINGS TO LOOK OUT FOR: Google Drive;
Draft Preservation and Development of Agricultural Land Bill, • Taxation to discourage conversion of agricultural land to Pieter introduced his talk by saying that we are not living • for valuation systems/management - VA 3; Pro Valuer;
2015 (DAFF/PDALFA). other non-agricultural uses and to encourage the optimal in the dark ages any more nor the information age; we Ovvio; Cougar; Property Master.
utilisation of agricultural land for agricultural purposes. are currently in the beginning of the innovation age. The
Derrick deals in detail with Act 70 of 70 in two parts in the definition of innovation is “the process of translating an idea What are the questions you should ask?
Legal Beagle in the August issue of The South African Valuer • Scientific reports and agro-ecosystem reports compiled by or invention into a good or service that creates value or for Do you understand the app? Did you ask the right questions?
on page 34 and in this issue on page .., so only the second an agricultural scientist registered with the SA Council for which customers will pay”. (Business Dictionary 31/08/2016) Is there copy right? Plagiarism? Was the data analysed? Is
and third sections of his presentation will be mentioned here. Natural Scientific Professions (SACNASP). the data reliable? Who has the highest authority? Where
There are applications that could/would help the valuer to does the data come from? Remember that everything on the
Act 64 of 1998 Revised Draft DAFF/PDALFA – GG N 41247 – 2 Sept 2016 present a better product. What is a valuer’s job description? internet is NOT GOSPEL!
The Act was promulgated in 1998 as The Subdivision of Is it only to estimate value? (Caveat – Daniel Defoe said: “If
Agricultural Land Act Repeal Act, 1997 in Government DAFF/PDALFA [BXX-2016] Version 2.1: August 2016 the shoe fits, wear it!”) There are applications for research,
Gazette No 19294 of 28 Sept. 1998. Its purpose was to repeal photos, GIS, measurements, calculations, data storage, Pieter Venter (BEd BAHons), besides
SALA and all amendments and it was scheduled to come into Invitation to consultation workshops and public comments management systems, stats and databases: being a candidate valuer with Pierre
operation on a date fixed by the President by proclamation in Available at www.daff.gov.za • for research - deeds, surveyor general diagrams and Rynners Valuers, is a GISC technician
the Gazette. To date it has not been proclaimed. zoning information; and a member of the SA Council for
• for photographs - time stamp; date and coordinates; tools: Professional and Technical Surveyors
Preservation and Development of Agricultural GPS, phone, camera; time of day; Google street view?; (PLATO).
By Derrick Griffiths (BProc MAgric) is
Land (DAFF/PDALFA) Bill Google 3D Building View is much clearer.
a Fellow of the SAIV. After becoming
This bill addresses the preservation and/or sustainable • GIS/maps - Planet GIS; 1Map; Google maps; Google Earth;
a state prosecutor he worked as an
use of agricultural land with the Department of Agriculture, drones (up-to-date pics, easy access, recall and review,
attorney. He became a valuer in 1986.
Forestry and Fisheries (DAFF) as the custodian. Its purpose legislation, legal issues, safety); ArcGIS/ArcView/ArcMap;
He is the chairperson of the SAIV
is to regulate the subdivision and change of land use; the Northern Branch Executive and serves • for measurements - old faithful (wheel); laser (Leica,
recognition that ‘high value agricultural land’ is a scarce and on the National Executive. Bosch,Stanley, etc); Lidar; Leica Pegasus:Backpack;
non-renewable resource which needs to be protected. The
Minister can proclaim ‘Protected Agricultural Areas’ (PAA) for
the purposes of crop production or livestock production to Valuers Statistics
160
protect ‘high value cropland or high value rangeland’. PAAs
must be registered in the Deeds Office.
140
The National Agricultural Land Register is an electronic-based
120
geo-referenced register of all agricultural land to manage,
administer and monitor the use, preservation and loss of 100
agricultural land. It will contain:
• s patial information, including capability, suitability, potential 80
and status of the natural agricultural resources; socio-
economic information and land use; 60
•o
wner information, including nationality and gender;
40
•p
lanning authorities and municipalities must classify
agricultural land in terms of the Act, ie 'high' or 'medium'
20
value agricultural land;
• 'Agricultural Sector Plan' (ASP) for the preservation
0
and development of agricultural land; ASP guides 15-192 0-24 25-293 0-34 35-394 0-44 45-495 0-54 55-596 0-64 65+
every province and municipality on provincial Professional Valuer Professional Associated Valuer
development plans or frameworks, municipal Single Residential Property Asessor Candidate Valuer
integrated development plans (IDPs), Spatial Candidate Single Residential Property Assessor
THE SOUTH AFRICAN THE SOUTH AFRICAN
VALUER VALUER
14 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 15
Although Huxley Reynolds, MD of Precision Device The “Standard”? New technology
Distributors (PDD) was given the last slot of the day, his • Today – There is no specific published accuracy 'STANDARD' • First ever continuous 2D scanner
presentation, Measuring efficiently, was delivered so to which any structure must be measured (why?) ie you • Simply walk around the building – the instrument will capture
enthusiastically and persuasively that everyone woke up and must measure to within 2% of the total etc. and plot the shape
paid attention. • There is a fiduciary onus on the 'measurer' to use their 'best • Output is DXF point cloud, CAD compliant
efforts', which (by implication) requires a combination of the • Cm accurate
Huxley aimed to give a simple explanation of efficient correct knowledge and applicable instrumentation. • Very fast
measuring practices and said: “We recognise that measuring • Your measured task can be disputed and be arbitrated • 800m²
is not the only thing you do, however, it is a critical part of against • 15 minutes
the valuation process. We hope that by the end of this very • Just how much ERROR is acceptable? - to which • Less than 0.1% error
quick presentation you will have a greater awareness of role-player? • All features captured
measurement and its effects.” • Electronic file, date and time stamped
Tolerance? Practicality • Share with multiple users
FACTS - Do you know? • “The measurement tolerance is to be specified in the scope • Reality bites – it’s not always so easy • EXACT!
• The correct 'measuring tool' for a particular task is not of work and report. The service provider should provide an • Curves, intrusions, extrusions, skew walls, obstructions,
always the same. appropriate degree of tolerance, having regard to the nature slopes, no easy access, TIME! et al Where are we headed?
• Any manual measurement tool does not guarantee accuracy of the instruction, the equipment available and conditions at • People have different 'ways' of doing things • Inertial Measurement Units (IMU)
– the user defines performance. the time of measurement”* • Instrument + person = 'system' • Simultaneous localisation and mapping (SLAM)
• Tolerance is an 'allowance' for application accuracy/human • ADVICE - Agree on the scope of work, upfront, before • How do we ensure consistency? • Point Clouds - PLY / DXF / LAS / RAR formats
interface with technology. you start • “The processing and algorithms you won’t ever see.”
• Are you being held liable for your measurements? *International Property Measurement Standard: Office buildings Shapes
1. Consider manual methods vs automated for bulk/detail, • We’re going to plot our manual measurements in CAD?
draughting and attestation. • How are we going to get the angles which give us Huxley Reynolds
2. Like wheels, tapes, laser distance meters etc, the user the shape?
defines performance. • It’s not so important?
3. It is not possible to measure everything accurately, but • Automation is far easier and much more accurate.
can be limited – 5% industry tolerance? – less than 0.1%
technology performance – room to improve Personal management devices (PMDs) – Minimum
4. Financial implications – incorrect measurement – future specification
values, one party loses, the other gains framework. For valuers' daily tasks – our suggestion:
• 100m x 100m Commercial building • LASER based of at least 100m range or more (not 'ultrasonic')
• @ 5 Degree linear (Hz slope) error on two lengths • Accuracy = +-1mm linear and +-0.2 degree angle accuracy
(L x B) • Certification/calibration
• Sqm = 10 000 SQM + 0.4% = 10 080m • Built in tilt sensor (180 or 360 degrees)
• @ GLA rental of R80.00 p/sqm = R6’400.00 error • Live view display for outdoor conditions
• Excludes term and escalations • Valid warranty with local service centre
Excludes multiple, compounded, errors. • Good build quality and great internal components - they are
not cheap!
Laser distance meters (PMDs)
• Personal measurement devices
• Specifications and certifications
• Functionalities
• Correct use?
• PMDs – personal – must trust them, my user settings.
The delegates who stayed overnight enjoyed a dinner/braai that evening.
THE SOUTH AFRICAN THE SOUTH AFRICAN
VALUER VALUER
16 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 17There were four presentations on Saturday 17 September. The assumes that you have checked that the hospital or hotel THE DISCOUNT RATE Year ended
first was given by Tom Bate and was titled Demystify the is in fair condition and properly equipped. This should equate to the market cap rate plus the assumed 30 June 2013
valuation of trade related properties (TRPs) 2. Determine the “fair maintainable operating profit” (FMOP), growth rate. No. of rooms 213
with reference to hotels and hospitals. defined as the level of profit, prior to depreciation and Occupancy 45.24%
finance costs, that the (REO) would expect to derive from ARE THERE ANY CROSS CHECKS OR ALTERNATIVE Rack Rate Single (incl. VAT) R 767.50
Introduction the (FMT); this should include an allowance for periodic METHODS? Revpar R 277.11
Achieved room rate ADR (excl. VAT) R 632.22
The presentation focused on the value of the PropCo (land expenditure such as decoration, refurbishment and Comparative valuation approach
F&B revenue as % of rooms revenue 9.75%
and buildings) of both hotels and hospitals. It excluded renewal of the trade inventory The measure of comparison is based on a value per bed
EBITDA (Pre internal rental) R 10,917,499
boutique hotels or B&B establishments, that are often a labour (referred to as key in the case of hotels). The market/ Rooms Revenue R 21,544,012
of love with uncertain accounts and little space to separate HOW DO YOU FIND THE FMOP? comparative approach is likely to be a poor indicator of Restaurant Revenue R 1,715,447
the business from the property interest. It also excluded REFER TO THE EBITDA market value, as you are not comparing ‘like with like’. Each Bar revenue R 395,636
specialist hospital operations and hospitals with less than • The EBITDA is effectively the FMOP defined as the Earnings hotel or hospital has its own unique circumstances. It plays Total revenue R 23,655,095
100 beds. The aim was to set out the key factors behind the Before Interest, Taxes, Depreciation and Amortisation. If a role as a cross check to the income approach in terms of
principles and how to put them into practice. the term EBITDA excludes a deduction for rental, the providing a value range. UNDERSTANDING THE MARKET
abbreviation changes to EBITDAR • The hotel industry is cyclical. The key drivers being
THE STARTING POINT • It may need to be adjusted to reflect the trading potential of HOTELS national and global economic trends, rising operating
As members of the SACPVP valuers need to remind a reasonably efficient operator (IVS GN12 5.3). • A rental at 50% of EBITDA will equate to approximately 12% costs, occupancy levels, ADR and the level of growth in the
themselves that the SACPVP as a member of the IVC is • The IVS clearly states that the rental should be derived by - 20% of the gross turnover assuming adequate profitability room inventory.
required to follow the International Valuation Standards; the taking a % of the EBITDA (IVS GN12 C6). and true accounts. • Compare hotel data with STR stats.
RICS considers the Red Book as compliant with the IVS. • In reality one needs to have good reason to assume that the • The core range is between 15% and 16% for adequately • Understand where the hotel fits into the market. Is the driver
current operator is not an efficient operator, which means profitable ‘full service’ hotels, with a higher percentage tourism, business or a portion of both?
KEY REFERENCE DOCUMENTS using the actual accounts. sometimes applicable for ‘minimum service hotels’. • A single year’s figures can be misleading.
• The IVS Manual and guidance notes (in particular IVS • One can look at the income from the F&B/other revenue • One needs to ensure that the assumed rental based on the
GN 12-2007) PRACTICAL APPLICATION separately. EBITDA/turnover is not at the top or bottom of the cycle.
• The Red book and guidance notes (in particular GN2-2012) One needs to refer to 'best practice' both internationally • There are numerous leases to support the percentage of • Kamil Abdul-Karrim, in his Pam Golding presentation
• The IVS and RICS define hospitals and hotels as Trade and locally. turnover figures. to the SAIV in 2012, demonstrates the cycle well in the
Related Properties (TRPS). graphs below.
Definition of TRPS: Any property designed for a specific type Lease assumptions HOSPITALS
of business where the property value reflects the trading • The definition of market rent states willing lessor and willing • A rental at 45% to 50% of EBITDA will equate to
potential for that business. In other words, the profitability of lessee on appropriate lease terms: FRI (full repair and approximately 10% - 14% of the gross turnover assuming
the TRP will determine the levels of rental that it can afford to insurance) and 10- to 15-year lease with annual escalation. adequate profitability and true accounts and occupancy
pay and hence the price a buyer will be prepared to pay. • Splitting the net profit between the PropCo and OpCo; draw above 55% to 60%. The percentage of turnover estimate is
from the UK and South African experience; with a mature very general, as the percentage has varied over time.
DETERMINING THE MARKET VALUE OF A TRP FMOP, 45% to 50% of the EBITDA can be taken as the
Hospitals and hotels tend to be sufficiently unique that rental. Beyond this point, it can spell disaster! UNDERSTANDING THE HOTEL MANAGEMENT
comparison as a method of valuation is inappropriate. •E
xample – A number of flagship hotels agreed rentals shortly PERFORMANCE DATA
This requires the valuer to revert to the income approach before the 2008 crash at a level above 50% of projected • Key indicators
by capitalising the landlord’s portion of the net operating EBITDA. The contractual rentals have in many cases • Occupancy - rooms sold expressed as a percentage of
profit, which represents the rent, at an appropriate rate, by escalated above 80% of EBITDA. Similar experiences have rooms available
either using a DCF or cap rate approach, depending on the been seen in the UK with listed hospitals. • Rack rate - the full room rate before any discount
circumstance. • ADR (average daily rate) - room revenue generated
THE CAPITALISATION RATE expressed as the average rate per room sold per day
DETERMINING THE MARKET RENT – APPLY THE There are generally only a limited number of sales with many • RevPar (revenue per available room) - average daily earnings
PROFITS TEST comprising the sale of the PropCo and Opco. One therefore for total number of rooms available. In other words, if one
RICS GN2:3.1 sets out a number of key steps in the Profit needs to separate out the Opco component in any analysis. multiplied the RevPar by the total number of rooms and then
Test approach: In the absence of direct sale evidence it is often argued that by 365 days, one would arrive at the total room revenue.
1.
Determine the Fair Maintainable Turnover (FMT) that a the cap rate range for the office sector provides a benchmark.
“reasonably efficient operator” (REO) could generate; it
THE SOUTH AFRICAN THE SOUTH AFRICAN
VALUER VALUER
18 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 19Occ % - annual STR statistics
4 Star Hotels
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Ave
Cape Town 68.30% 69.90% 69.10% 67.50% 60.70% 57.30% 56.10% 61.10% 62.90% 67.20% 62.60% 63.88%
Sandton 69.30% 78.50% 75.40% 72.80% 63.50% 62.00% 57.10% 63.20% 63.10% 62.90% 66.40% 66.75%
Pretoria 71.00% 74.00% 70.60% 70.90% 54.70% 52.20% 48.60% 52.50% 61.81%
Durban 74.60% 73.00% 69.00% 67.80% 64.00% 56.00% 56.80% 57.60% 64.85%
South Africa 67.90% 69.40% 69.30% 68.50% 58.90% 56.70% 53.40% 58.70% 60.60% 59.90% 60.30% 62.15%
THE SOUTH AFRICAN THE SOUTH AFRICAN
VALUER VALUER
20 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 21A MARKET OVERVIEW cost! Even developers/corporates misjudge the market. Dawie Roodt’s presentation, advertised as ‘The chilling in Europe, China’s standstill, and the looming market
A valuation based on a 2008 EBITDA with occupancy levels •O
ften there is a shortage of information. Turnover is a good economic climate’, was renamed This is us – a corrections. The answer to many of these economic
above 80% would have led to a potential over-valuation. alternative basis. demographic overview. As the presentation felicities is, however, simple: maintain positive interest
•W
hat if the hotel or hospital is not profitable? This makes for concluded, one could clearly see how both topics came rates, continue with prudent fiscal management, don’t
You need to understand where we are in the cycle: Has the a highly subjective valuation! together to underpin the current economic environment. mess with markets, and never waste a good recession!
industry recovered from the 2007/2008 level? Will it ever •B
e aware of the condition and future potential spikes in In his inimitable way and with innumerable graphs and
return to the same level of corporate spend? Occupancy the expenses. tables, Dawie ran through the global macro economy and Turning to South Africa, Dawie explained how the
levels at 72% in 2007 are now around 64%. ADR levels at •C
heck that the accounts have adequate reserves to cover that of South Africa. ideologically confused tri-partite alliance was causing
R671 in 2007 now at R1,086. RevPar level at R484 in 2007 refurbishment/replacements and maintenance. The general political instability, which in turn causes policy uncertainty,
now at R691 (the growth has been below inflation). minimum guide with hotels is around 4% of turnover for Dawie explained how his values revolve around personal which finally hampers economic growth. No wonder we’ve
replacements and around 3% for repairs and maintenance, freedom. Central to this value are those of private property seen the economy preform worse and worse since 2009
We are perhaps at ‘20 to’ on the clock; 25% to 30% to go giving an overall allowance of 7%. rights and the right to trade, move, contract, speak, and – or as he likes to refer to it, the ‘Z-period’. In this context
before we start to see new builds - perhaps in 20017/18. to be successful and rich. He maintains that rich and and with the support of facts, statistics and graphs, Dawie
Nothing substantial currently going up, but proposed WORKED EXAMPLE – Percentage EBITDA successful people make for rich and successful countries. discussed South Africa’s macro economy. He focused on
Raddison Red and Blue at the V&A Waterfront and Tsogo Rand In this environment of freedom one does, however, have interest rates, food price inflation, the historic Rand/US
500-bed hotel in Cape Town, Marriot hotel in Melrose Arch EBITDA as at Yr end March 2015 R 20,000,000 responsibilities, all of which come down to honouring and Dollar undervaluation, unemployment (which is fuelled
and Sun International hotel in Polokwane in 2017/18. add: say 7% to project EBITDA to 30 May 2016 R 21,400,000 protecting others’ property rights; or honour my contracts by weak growth, skewed labour legislation, and a lack
EBITDA as at 30 May 2016 R 21,400,000
Propco rental @ 50% of EBITDA R 10,700,000
and never steal from me. of skills).
The market is not even: Less: 0.75% management fee R 80,250
There is strong tourism growth potential in Cape Town with Net adjusted rental R 10,619,750 In the context of a free world, two major entities often To wrap up, he turned to fiscal finance, his speciality.
Capitalised at: 9.25% R 114,808,108
24 million visitors to the Waterfront annually. The cheap Rand intervene to make life better for us all, or so they claim. He explained how the South African spending ‘problem’
Value per key - 229 rooms R 501,345
and revised visa requirements both affect tourism. In the rest These entities include central banks and ministries of originated from the ideologically confused tripartite
of SA minimal economic growth is projected. There are weak finance which are in their turn responsible for the monetary government. Its confused nature led to weak policies,
commodity prices and policy uncertainties. WORKED EXAMPLE – Percentage turnover and fiscal policy of a country. What we’ve seen since the weak implementation, social rather than economic
Rand
early 2000s is how the world we live in has been driven by upliftment, and unsustainably high spending on
HOSPITALS Gross annual turnover yr end March 2015 52,000,000 monetary madness and fiscal follies. Monetary madness, government employment and grants.
The granting of bed licences is critical to controlling supply. Project turnover March 2016 by say 7% 55,640,000 caused by omnipotent central bankers, drove nominal
Net rental @ 20% of gross turnover R 11,128,000
Medical aid tariffs determine the gross revenue. Potential rates negative through exotic measures – quantitative The solution he offered went as follows - government
Less: 0.75% management fee R 83,460
political interference adds to the risk. There is concern Net adjusted rental R 11,044,540 easing (QE). This has lead the world down the rabbit hole efficiency would be improved in two ways: first by
over the future capacity to recruit quality doctors and Capitalised at: 9.25% R 111,280,000 of a virtual and real divide. No wonder populist parties are decreasing the size of government; then by having all civil
nurses and the Competition Board is starting to threaten Value per key - 229 rooms R 485,939 gaining so much favour. servants resign and reapply for their jobs; servants, which
strong intervention. they should be, would then be re-employed based solely
Fiscal follies occurred when governments used counter- on their ability; costly state-owned enterprises should
SUMMARY Tom Bate (MSc, BSc, Land Econ (UK), cyclical measures to try to save their economies from a be privatised; anti-job legislation should be scrapped
•T
he presentation was a brief overview – you need to refer to MRICS, MIV (SA)) is a partner with Mills global meltdown. Instead of curbing back on expenditure and a world-class skills development system should
IVS / RICS guidance notes. Fitchet and has been in the valuation once the threat had gone, they just kept on spending. Now, be established. Companies should not waste a good
• Ensure you have taken out any notional building rental when profession for 35 years. He acts for City many countries, including South Africa, are at record high recession, should stop protecting failures, and should not
using the EBITDA to establish a market rental. Lodge and carries out periodic work for debt levels. Because of this mad world they have created, rely on protecting exchange rates.
• The accounts are your key guide to value. If they are not most of the major hotel groups and listed governments are paying record low interest rates, for
achieving better figures, why should anyone else? funds that retain hotels as part of their record high debt levels. That does not make sense in any Dawie looked at the evolution of human development
• Be cautious of using a DCF – you risk making unrealistic portfolio. practical context: if you could borrow any amount you from Blombos to artificial intelligence and tied this into
projections particularly in our current economic times. wanted, and the more you borrowed the lower interest global demographics. Demographics, the changes in
• Try to establish a mid cycle sustainable EBITDA. rates got, the result would be that if you borrowed enough, human statistics, drive politics, economies, markets, and
• The exception - new developments when it may take several the interest rate would become negative! everything else. He mentioned that China would be the
years to arrive at a mature figure. first country to be old before it gets rich; and then turned
•T
he OpCo may ignore the short-term loss of income if they Dawie went on to discuss the current macro outlook. to South Africa’s demographics, giving key forecasts
are optimistic in the longer term. Important drives of the current global economic outlook on the population statistics, dependency-ratios and the
•C
ost does not equal value. The market value could be below are politics, US interest rate decisions, the lowflation economic distribution of wealth. He argues quite rightly
that demographics are doing the job of BEE.
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VALUER VALUER
22 NOVEMBER 2016, NO 126 NOVEMBER 2016, NO 126 23You can also read
