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Posted: 26 Apr, 2021

On 20th April TMA NextGen Bristol hosted a webinar in partnership with Lambert Smith Hampton where Jason Hall and Rachel Basset from the Asset Advisory Team reviewed some key factors impacting valuations and sales right now.

Thank you to TMA NextGen Bristol’s Sam Parsons for opening the webinar and to the panellists for giving us an insight into their methods and for sharing their thoughts on the market.

Asset Valuations – Jason Hall, Director, Asset Advisory South West & Wales, Lambert Smith Hampton

Beginning with an overview of the asset valuation market, Jason said that over the last 12 months his team has been busy across several sectors. In the first wave of the pandemic, they were called in to provide valuations on a lot of pubs, restaurants and retailers, following which they started to see a lot of businesses in connected industries such as hotels, marquee manufacturers and show stand designers. As the months went on, they saw more travel and tourism operators, schools, office fit out companies and those in the print industry being impacted by the effects of the current climate. In addition, there have been notable non-Covid related closures in sectors such as automotive, pharmaceuticals and biomass facilities etc.

To determine values Jason said his team have been using a variety of methods to combat the material uncertainty currently plaguing the market. Where applicable, he said comparable evidence is still the best method of valuation but isn’t enough to rely upon which is why they also utilise their industry experience, external and internal communication, and their knowledge of depreciation for different assets. And while some markets have remained fairly strong where good quality equipment has come to the market, others have proved volatile. In the travel industry, for example, coach operators have been significantly affected due to coach resale prices reaching rock bottom.

Post valuation, Jason also talked about some of the routes to market they use – online auctions, private treaty sales and business sales. Whilst it was initially feared that Covid-19 and indeed more recently Brexit border changes could impact the resale market due to cash flows, uncertainty and the inability to travel, Lambert Smith Hampton has actually witnessed an increase in bidding activity across a number of sectors. In addition business sales have been utilised for a number of companies faced with insolvency proceedings, and where successful provide an ability to maximise value for all the assets, IP and Goodwill as well allow for the continuation of employment, which commercially during the current climate does provide some positive news to the economy.

Touching briefly on the state of the resale market over the last 12 months, Jason said that while there was initial uncertainty over whether used machinery would retain its value, Lambert Smith Hampton’s analysis of its auctions over the last year indicate an increase in bidding activity with demand for insolvency assets at an all-time high. This will need to be closely monitored as we come out of the pandemic as should the market be flooded this could impact resale values on certain asset classes. In addition, border problems associated with Brexit could impact the export market. At present it is too early to assess, and Lambert Smith Hampton recommends regular monitoring of valuations be undertaken to take into account any sudden market changes that might impact value.

Property Valuations – Rachel Bassett, Associate Director, Asset Advisory South West & Wales, Lambert Smith Hampton

Giving an overview of the current market conditions, Rachel said that the insolvency market was in a quieter period with many lenders delaying taking action during the pandemic. But while appointment levels are down, Rachel’s team is busy giving pre-insolvency advice and conducting valuations. It’s expected that once the moratoriums lift there will be an influx of LPA appointments and in recent weeks Rachel has become involved in a number of monitoring exercise projects where lenders are nervous. While less properties are coming to the market right now, those that do are generally selling quickly and online auctions are seeing big success.

Moving on, Rachel gave an overview of the pandemic’s impact on valuations in different sectors. Arguably one of the biggest impacted sectors of Covid-19, Rachel said valuation levels in the retail sector have been difficult to judge because there have been fewer transactions to use as comparable evidence. Even prior to Covid-19 the retail market was struggling as seen by the large number of companies entering into high-profile administrations, most recently the Arcadia Group and Debenhams. While the impact of these ‘anchor’ stores exiting the high street has yet to be seen it is feared there will be a ripple effect that may further decrease footfall.

Offices, too, have seen fewer transactions while businesses wait to see what the future of work will look like. In the five years before the pandemic, Rachel said the office market was stable but with the working environment now unrecognisable, the future of the market is uncertain. Many companies will be tied into current leases but it is likely that their future plans will be to rework their office requirements once they are able to. It is, however, predicted that offices will withstand the downturn better than some other sectors.

The industrial sector is a sector that has thrived over the last 12 months with take up increasing and values remaining strong. The rise of online shopping has driven demand for warehouse space and properties coming to the market are being snapped up.

In the leisure sector, Rachel said it has been harder to determine values with little transaction activity and a largely unknown future. Many businesses have received grants that have secured or even boosted their position allowing them to stave off insolvency proceedings. For the valuations that are taking place, Rachel said that factors such as outside space and the ability to provide takeaway services are holding a lot more weight.

Finally, Rachel said that residential values in the South West and Wales have done well over the last 12 months. After an initial dip in sales, largely due to the logistics of the first lockdown, sales rebounded as people looked to move out of city centres.

Overall, the message from Jason and Rachel is that it is too early to assess the overall impact of the pandemic on values. With government support allowing many businesses to battle on, the recovery may not be as bad as first feared and many businesses will be hoping for a summer boom period following the easing of restrictions and the vaccine rollout. In certain property sectors there is material uncertainty and little comparable evidence from the last 12 months to show where current values lie. Valuation teams need to be robust in their information gathering, along with their experience within their wider teams, along with various valuation techniques to arrive at values with any degree of certainty.

Thank you to Lambert Smith Hampton, Jason, and Rachel for their insights into the factors currently impacting valuations. We hope you found this session useful and can join some of our upcoming webinars.

TMA’s Upcoming Webinars

28th April - The restructuring plan 10 months on. Register here.
5th May – What’s next? The Glasman Lecture 2021. Register here.
13th May – The Evolution of Consumer Brand Investments. Register here.

 

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