Value the freehold interest in a modern office block situated at no 4. Briton Road. Two years ago, the property was let at a rent of £220,000 pa. The lease contains a five yearly upward only rent review clause. The current market rent is £260,000 pa. Comparable property investment disposals have achieved an all risks yield of 5.5% and the equated yield is set at 10%.
You are required to value the property using the following:
The traditional Investment Method
The Short-Cut Discounted Cash flow Method (Please note that you are required to calculate the growth rate)
Identify areas where there are differences in value in the two methods used and explain why these differences may occur