Valuation of Special Properties: Teaching and Learning Module

TEACHING AND LEARNING MODULE
FACULTY OF ARCHITECTURE, PLANNING AND SURVEYING
REM311
VALUATION OF SPECIAL
PROPERTIES
Universiti Teknologi MARA Perak

TABLE OF CONTENTS PAGE
PREFACE iv
ENTRANCE SURVEY v
COURSE INFORMATION 1
LECTURE SCHEDULE 2
WEEK 1 9
WEEK 2 10
I.0 INTRODUCTION 10
2.0 PURPOSE OF VALUATION 10
WEEK 3 REVIEW OF THE VALUATION METHOD 11

3.1 APPRAISAL PROCESS 11
3.2 THE COMPARATIVE METHOD 11
3.3 THE COST METHOD 13
3.4 THE PROFIT METHOD 14
3.5 THE INVESTMENT METHOD 15
TUTORIAL EXERCISES 16
WEEK 4 VALUATION OF PETROL STATIONS 17

4.1 Introduction 17
4.2 Two common types of petrol stations; 17
4.3 The normal operation of a petrol station: 17
4.4 Layout of a Petrol station 19
4.5 Planning Criteria for Location of Petrol Station 24
4.6 Factors to be noted in the valuation of petrol station: 25
4.7 Methods of Valuation 25
4.8 Example Of Valuation For Different Interest In Petrol Station 26
4.9 Example of Valuation for Petrol Station By Cost Approach 27
TUTORIAL EXERCISES FOR PETROL STATION 28
WEEK 5 VALUATION OF CINEMA 33

5.1 Description 33
5.2 Factors to be noted (Factors affecting Value) 33
5.3 Sources of income from cinema: 33
5.4 Valuation Approach 33
5.5 Example of calculation of income for cinema: 33
TUTORIAL EXERCISES FOR CINEMA/CINEPLEX 34
WEEK 6 VALUATION OF HOTELS 37

6.1 Definition: 37
6.2 Types of Hotels: 37
6.3 Factors Affecting Value Of Hotel 37
6.4 Example of calculation of gross income from room rentals of a hotel; 38
TUTORIAL EXERCISES FOR HOTEL 39
ii
WEEK 7 VALUATION OF RESTAURANTS 42
7.1 Definition . 42
7.2 Characteristics: 42
7.3 Classifications of Restaurant: 42
7.4 Factors Affecting Value: 43
TUTORIAL EXERCISES FOR RESTAURANT 43
WEEK 8 VALUATION OF GOLF COURSES 47

8.1 Types of Golf Courses 47
8.2 The Golf Course consists of: 47
8.3 Things to Inspect At Golf Courses 47
8.4 Methods of Valuation 47
TUTORIAL EXERCISE FOR GOLF COURSE 49
WEEK 9 VALUATION OF AGRICULTURAL PROPERTIES 53

9.1 Characteristics of an Estate 53
9.2 Factors Affecting Value: 53
9.3 Oil Palm 53
9.4 Rubber 54
9.5 Valuation Approach for Agricultural Properties 55
TUTORIAL EXERCISE FOR AGRICULTURAL PROPERTIES 56
WEEK 10 VALUATION OF PRIVATE HOSPITALS 59
WEEK 11 VALUATION OF QUARRY 61

11.1 Introduction 61
11.2 Application Procedure For Quarry Operation 61
11.3 Factors Affecting Value 61
11.4 Valuation Methods 61
11.5 Example of valuation 61
EXIT SURVEY
iii
PREFACE
This manual is specifically designed for the use of final year students completing their Diploma in Estate Management,
Universiti Teknologi MARA Perak, Campus Seri Iskandar.
This core course introduces the application of principles into practice for the valuation of special properties. The students
have been exposed to the mainly theoretical components of the core course since their First Year and this course recaps
the diploma level requirements.
It is hoped that the publication of this manual will aid students in achieving the objectives of collating data and information
for the valuation of special properties; thus enabling them to have the skills to value special properties using different
valuation approaches. Adequate materials are also included to guide students in preparing valuation reports of special
properties for various purposes.
This manual is also hoped to improve the teaching and learning process of this critical course and better prepare students
for their next level of study which is the practical training module.
Teaching materials have been adapted from various sources mainly from books either locally or internationally. Materials
were also adapted from the relevant journals and seminar papers.
Rohaya Abdul Ghani

Noor Halil Ismail
Noraini Johari
iv
FACULTY OF ARCHITECTURE PLANNING AND SURVEYING
DIPLOMA IN ESTATE MANAGEMENT
COURSE ENTRANCE SURVEY FOR
VALUATION OF SPECIAL PROPERTIES (REM311)
NAME : __________________________________________________
STUDENT NO. : __________________________________________________
DATE : __________________________________________________
Please complete this inventory by circling the appropriate ratings:

5 – Strongly Agree
4 – Agree
3 – Mixed Feeling (note: most of time, you would have a stronger feeling)
2 – Disagree
1 – Strongly Disagree
 Collate data and information for the valuation of special properties
 Value special properties using different valuation approach
 Prepare valuation report of special properties for various purposes.
CO NO. ITEMS Your Rating
1. I can define special properties. 5 4 3 2 1
CO1
2. I am able to collate data and information of 5 4 3 2 1
special properties.
3. I am able to determine the basis of valuation 5 4 3 2 1
for special properties.
CO2 4. I am able to conduct the valuation of special 5 4 3 2 1
property according to Malaysian Valuation
Standard (MVS).
5. I am able to identify methods to be used in 5 4 3 2 1
valuation of special properties.
6. I can value special properties using 5 4 3 2 1
comparison method.
7. I can value special properties using profit 5 4 3 2 1
CO3 method.
8. I can value special properties using cost 5 4 3 2 1
method.
investment method.
10. I can prepare a valuation report of special 5 4 3 2 1
v
COURSE INFORMATION
DEPARTMENT OF ESTATE MANAGEMENT

FACULTY OF ARCHITECTURE, PLANNING & SURVEYING
UNIVERSITI TEKNOLOGI MARA PERAK, SERI ISKANDAR CAMPUS, PERAK
PROGRAM : DIPLOMA IN ESTATE MANAGEMENT

COURSE : VALUATION OF SPECIAL PROPERTIES
CODE : REM311
STATUS : CORE SUBJECT
CREDIT HOURS : FOUR (4)
LECTURERS : DR JUNAINAH MOHAMAD, PN NORAINI JOHARI, EN. MOHAMAD HAIZAM
MOHAMED SARAF
ROOMS : AC230, AC237, AC345
TELEPHONE NOs. : 012-7123044, 019-5118860, 013-3609828
E-MAIL I.Ds : mjunainah@uitm.edu.my, norai127@perak.uitm.edu.my, moham8841@uitm.edu.my
COURSE DESCRIPTION
The course introduces the application of principles into practice for the valuation of special properties.
COURSE OUTCOMES
At the end of the course, students should be able to:

1. Perform the valuation skills in determining valuation for special properties (P3)
2. Demonstrate an ethical value in valuation for special properties (A3)
3. Apply the appropriate valuation approach for special properties (C4)
Continuous Assessment: 50.00%
Assignment - 20% out of 100 on Week 14. Passing Mark(s): 40 Valuation Report and Tutorial Portfolio
CLO: 2
Presentation - 10% out of 100 on Week 14. Passing Mark(s): 40 Valuation Report
CLO: 2
Test - 10% out of 50 on Week 7. Passing Mark(s): 20 Test 1

CLO: 1
Test - 10% out of 50 on Week 7. Passing Mark(s): 20 Test 1

CLO: 3
Final Assessment: 50.00%
Final Examination - 50% out of 100 on End of Semester. Passing Mark(s): 40 Final Examination
CLO: 3
1
LECTURE SCHEDULE
WEEK LECTURE TOPICS LEARNING OUTCOMES
1 1.0 INTRODUCTION TO THE COURSE

Entrance Survey (iLearn V3) Students are expected to be able to
A Diagnostic Test demonstrate the understanding of basic
Formation of Groups for assignments/tasks. concepts of property valuation
Distribution of Task 1 and Task 2
2 2.0 INTRODUCTION TO SPECIAL PROPERTIES Students are expected to be able to :

Distribution and briefing of Task 3 a) Identify various types of special
properties
b) Describe the characteristics of
special properties
2 3.0 PURPOSES OF VALUATION Students are expected to be able to :

a) Apply different bases for various
A review on purposes and bases of valuation purposes of valuation
i) Sale and purchase
ii) Mortgage
iii) Land Acquisition
iv) Taxation
v) Rating
vi) Insurance
vii) Securities Commission
viii) Financial Reporting
3 3.0 METHODS OF VALUATION – A review Students are expected to be able to :

a) Describe the components in the
3.1 THE COMPARISON METHOD different methods of valuation
i) The elements of the method b) Collate data for the different
ii) Unit of comparison for different type of methods of valuation
properties
3.2 THE INVESTMENT METHOD

i) Determinants of value
ii) Lease terms
iii) Outgoings
3.3 THE PROFITS METHOD

i) Elements of the Profits Method
ii) Analysis of three years accounts
iii) Calculation
2
3.4 THE COST METHOD
i) Elements of the Cost Method
ii) Determination of land value
iii) The value of the building
iv) Depreciation
4 4.0 APPLICATIONS
4.1 PETROL FILLING AND SERVICE STATIONS
- Characteristics of the property
- Factors affecting the value
- Valuation
5 4.2 APPLICATIONS
CINEPLEXES
- Valuation
6 4.3 APPLICATIONS
HOTELS
- Valuation
7 4.4 APPLICATIONS
RESTAURANT
- Valuation
8 4.5 APPLICATIONS
GOLF COURSES
- Valuation
MID-SEMESTER BREAK
3
10
4.6 APPLICATIONS
AGRICULTURAL PROPERTIES
a) RUBBER ESTATE
- Valuation
11 4.7 APPLICATIONS Students are expected to be able to :

ENTERTAINMENT OUTLET a) Explain the factors affecting the
value of the different types of
special properties
Apply the appropriate methods for the
different types of special properties.
12 4.8 APPLICATIONS Students are expected to be able to :

PRIVATE HOSPITALS b) Explain the factors affecting the
QUARRIES value of the different types of
- Characteristics of the property special properties
- Factors affecting the value c) Apply the appropriate methods for
- Valuation the different types of special
properties.
13-15 5.0 PRESENTATION Students are expected to be able to :
PETROL FILLING AND SERVICE STATIONS a) Present the findings and valuation
CINEPLEXES of special properties for various
HOTELS purposes.
RESTAURANT
GOLF COURSES
ENTERTAINMENT OUTLET
AGRICULTURAL PROPERTIES –
a) RUBBER ESTATE
b) OIL PALM ESTATE
REVISION WEEK
EXIT SURVEY (iLearn)
17-20 FINAL EXAMINATION
21 SEMESTER BREAK
4
REFERENCES
1. Arthur E. Gimmy, MAI, and Buddie A. Johnson, Analysis and Valuation of Golf Courses and Country Clubs, Appraisal
Institute, ISBN: n/a
2. n/a, The Appraisal of Rural Property, 2nd edition, Appraisal Institute and the American Society of Farm Managers and
Rural Appraisers, ISBN: n/a
3. Arthur E. Gimmy, MAI, and Mary G. Gates, MAI, The Business of Show Business: The Valuation of Movie Theaters,
Appraisal Institute, ISBN: n/a
4. John A. Simpson, MAI, The Valuation of Marinas, Appraisal Institute, ISBN: n/a
5. Martin H. Aaron, MAI, SRA, and John H. Wright, Jr., MAI., The Appraisal of Religious Facilities, Appraisal Institute,
ISBN: n/a
6. E. Nelson Bowes, MAI, In Defense of the Cost Approach: A Journey into Commercial Depreciation, Appraisal Institute,
ISBN: n/a
7. Patrick H. Bond, Peter Brown, Rating Valuation, Principle and Practice, 3rd edition, Estates Gazette, 2010, ISBN: n/a
8. Rees.W.H, Valuation: Principles into Practice, Estates Gazette, 2000, ISBN: n/a
9. Eric Shapiro, Keith Davies, David Mackmin, Modern Methods Of Valuation, 10th edition, Estate Gazette London, 2009,
ISBN: n/a
10. Baum, A. and Macmin, D, The Income Approach to Property Valuation, Routledge & Keegan Paul, 1992, ISBN: n/a
11. Mani Usilappan, Real Estate in Malaysia Challenges, Insights and Issues, University of Malaya Press, 2006, ISBN: n/a
TASK 1
Identification and description of special properties
LEARNING OBJECTIVES
a) To enable students to identify different types of special properties.
LEARNING OUTCOME
The students are expected to be able to:

THE TASK
Students are required to identify two types of special property:
Note:
a) You are to work individually
b) To be discussed on Week 3
ASSESSMENT
There will be no assessment for this task.
5
TASK 2
PURPOSE AND BASIS OF VALUATION
THE TASK:
Each group is required to prepare short notes on a particular purpose and basis of valuation.
LEARNING OBJECTIVES
To enable students to identify different bases for various purposes of valuation
LEARNING OUTCOME
ASSESSMENT;
There will be no assessment for the task but students shall compile the short notes prepared and presented by the group
as a form of reference for this topic, which is assessed in the final examination.
6
TASK 3
TUTORIAL PORTFOLIO
The Tutorial Portfolio will consist of two items:
1. TUTORIAL EXERCISES
Students will be asked to complete tutorial exercises given after each lecture.
These exercises will be discussed during tutorial classes.
2. REFLECTIVE REPORT
THE OBJECTIVE
A Reflective Report is a form of reflection in learning. Boud, Keogh and Walker (1985) suggest that reflection in
learning is a generic term for individuals to explore their experiences in order to lead to new understandings and
appreciation.
This exercise is to introduce the fifth semester student of Diploma in Estate Management to reflect on their
“experiences” and improve on their own learning and performance.
THE TASK
Students are required to write a Reflective Report, which should spell out what they have learnt during the
completion of the Module REM311 especially in completing the exercises and project/assignment. This should
consider the difficulties they have experienced and how they are resolved. The Reflective Report should include
critical analysis/comments of the student’s own learning approach in this subject.
ASSESSMENT
At week 13 of the Semester, the students are required to submit the Tutorial Portfolio comprising the exercises done plus
the Reflective Report for assessment.
The assessment contributes to 10% of the marks for this course.
FEEDBACK ON REFLECTIVE REPORT FOR REM311
Marks
1 Exercise portfolio
No of stamped exercises submitted/Comments 20
2 Report Content
a) Introduction 3
b) Content-Analysis and comments 20
- Critically analyzing the approach
- Cross referencing to (tutorial) evidences and
understanding the learning outcome
d) Conclusion 2
4 Overall presentation 5
TOTAL 50
7
DEPARTMENT OF ESTATE MANAGEMENT
UITM SERI ISKANDAR PERAK, SERI ISKANDAR CAMPUS, PERAK
VALUATION OF SPECIAL PROPERTIES
PROJECT WORK FOR REM311
THE TASK
Students are required to gather information and prepare a valuation report on a given special property.
THE OBJECTIVES
The objective of the assignment is to expose the students to the process of gathering information and finally prepare a
report and valuation of a specialised property:
GROUP THE TYPE OF PROPERTY PURPOSE OF VALUATION

1 Rubber Plantation/Oil Palm Estate Purchase
2 Petrol station Mortgage
3 Entertainment Outlet Sale
4 Hotel Rating
5 Cinema/Cineplex Renewal of rental
6 Newly Constructed Petrol Station Fire Insurance Purposes
7 Golf Course Security Commission
8 Restaurant Renewal of rental
OTHER REQUIREMENTS
a. Each group must be of a maximum 4 (four) members only.

b. The valuation report is to be in accordance with the Malaysian Valuation Standards 6th Edition 2019
c. Full calculation of the valuation is to be shown as appendices in the report.
d. Each group is also required to submit the work progress as in the schedule given below.
The schedule
4th week - identification of subject property /submission of

work schedule
5th – 9th week (BL Sessions) - weekly progress
10th – 13th week (Tutorial) - presentation of findings
12th week - submission of draft valuation report
13th week - final submission.
THE ASSESSMENT
The valuation report to be submitted for assessment 10%

Presentation of the information and valuation of subject property 10%
Total 20%
8
VALUATION OF SPECIAL PROPERTIES
WEEK 1
Introduction to the course. Suggest to start the module with a Diagnostic Test to identify the level of students’
understanding of basic valuation concept.
Distribution of Task 1
Identification and Description of Special Properties

The Task - Students are required to identify two types of special property:
Learning Objectives- To enable students to identify different type of special properties.
(To be discussed in week 2)
Distribution of Task 2
Purpose and Basis of Valuation
The Task: Each group is required to prepare short notes on a particular purpose and basis of
valuation.
Learning Objectives- To enable students to identify different basis for various purposes of valuation
Formation of Group for Assignment And Tasks
9
WEEK 2
I.0 INTRODUCTION
Malaysian Valuation Standards defines Specialised Properties as “those which due to their specialized nature are
rarely, if ever sold on the market for single occupation, for a continuation of their existing use, except as part of a
sale of the business in occupation. The specialized nature may arise from the construction, arrangement, size or
location of the property, or a combination of these factors, or may be due to the nature of the plant and
machinery, and items of equipment which the buildings are designed to house, or the function, or the purpose for
which the buildings are provided.
Special property refers to properties, which are not normally transacted in the market. These are properties
purposely built for that particular use. The properties are mostly heterogeneous than homogeneous. Most
common special properties are hotels, petrol station, cinema, purpose-built restaurant, golf courses and quarry.
It is not easy to find the comparisons for the special properties. Therefore, most common approach is the Profits
method and Cost Method.
2.0 PURPOSE OF VALUATION
Valuations for special properties are required for many different purposes. It is important to determine the
purpose of valuation before undertaking the valuation calculation.
The purpose of valuation and the basis of valuation must comply with the following unless specifically required;
Purpose of Valuation Basis of Valuation

Sale and purchase Market Value
Lending Purposes Market Value
Stamp Duty Market Value
Real Property Gains Tax Market Value
Land Acquisition In accordance with the appropriate Act-
Land Acquisition Act 1960 (as amended) or
Sarawak Land Code Or Land Acquisition
Ordinance (Sabah)
Rating In accordance with the appropriate Act – Local
Government Act 1976(as amended) or Local
Authorities Ordinance 1996 Sarawak or Local
Government Ordinance 1961(Sabah)
Fire Insurance Reinstatement Cost New or as identified by the
policy. (MVS Standard 16)
Financial Reporting Fair Value (Market Value) (MVS Standard 12)
Submission to Securities Commission As per “Guideline on Assets Valuation” issued by
- For acquisition of assets by public the Securities Commission. (MVS Standard 17)
Company
- Revaluation for financial reporting
Students are required to present the findings of Task 2.
10
WEEK 3
3.0 REVIEW OF THE VALUATION METHOD
3.1 APPRAISAL PROCESS

(Students are required to refer to the notes on Valuation Process in REM151)
 Physical and legal identification

 Identify property rights to be valued
 Specify the purpose of the valuation
 Specify effective date of valuation
 Data collection
i. Legal data the legal interest in the property
the area of the land
the rules and regulation that affect the operation of the property
ii. Physical data the location and surrounding
Location of property
Referencing the property
iii. Market data Sales comparison
Demand and supply
Last three years trading account
Construction cost
 Gather and analyse market data
 Apply techniques to estimate value
3.2 THE COMPARATIVE METHOD
The process:
1. Select several similar properties (comparables ) from among all the properties that have
recently been sold.
2. Since no two properties are identical - must adjust the selling price of each comparable to
account for differences between the subject property and the comparable,
 Positive features that comparables possess relative to the subject property require
negative adjustments;
 Negative features require positive adjustments.
3. Adjustments on differences in size, age, quality of construction, selling date, surrounding
neighborhood, etc.
4. Infers the current value of the subject from the adjusted sales prices of the comparables.
 Valuing properties using this method is a highly subjective process and should be
justified with evidence based on recent experience with highly comparable properties.
 The sales comparison approach is heavily dependent on the availability, accuracy,
completeness, and timeliness of sale transaction data.
11
Comparative :
 Widely used
 Depends on evidence
 Variation Size - Units of Comparison
 Other variation - Subjective opinion
 Changes in market - Subjective Opinion
 Requires skill and experience
Type of property
 Houses and Flats

 Agricultural properties
 Residential building land
 Shops
 Factories and warehouses
The Evidence The Market
Should be based on
Transactions of physically similar

Properties should be fairly stable
With similar legal interest

Underlying economic factors should be studied
In the same area
Obtained from
Recent records
Of many transactions
Comparative Valuation
12
3.3 THE COST METHOD
(CONTRACTOR’S METHOD, DEPRECIATED REPLACEMENT COST (DRC))
 Rationale of the Cost Approach:

Any informed buyer would not pay more for a property than it would cost to buy the land and build the
Structure
 For new property: The cost approach involves determining the construction cost of the building an
improvement and adding the market value of the land.
 In the case of an existing building, the valuer estimates the cost of replacing the building.
Value of the property =

Value of the site + Value of improvements
13
3.4 THE PROFIT METHOD
(Receipts and Expenditure Method, Accounts Method)
 An Accounts-Based Method
 Based on the assumption that the value of some properties will be related to the profits that can be made
from their use.
 Method rest on the theory that a hypothetical tenant would relate his rental bid to the profits he would be
likely to make on the premise
 Generally used where there is some degree of monopoly attached to the property (factual or legal).
 The method is to estimate the rental value of a property.
 Profit should be taken on annual basis, thus accounts should be on annual basis.
 Normally accounts for the past 3 years would be taken to give a better indication (accounts should be
audited and certified)
 Assumptions on the method :
- A reasonably skilled operator;
- A direct and indivisible link between the property and the business.
Gross Receipts (Income) XXX
Receipts should include all income

directly and indirectly derived from
occupation of the property.
Less Cost of Purchases XX

Net Receipts (Gross Profit) XXX
Less Working Expenses XX
Divisible Balance XXX
 The Divisible Balance is the sum available to be shared between the landlord and the tenant. It contains two
main elements:
I. The Tenant’s Share – To provide a return on any tenant’s capital employed and a reward to
the tenant for his venture reflecting the extent of the risk and the need for profit. This is deducted
from the Divisible Balance to leave:
II. The Landlord’s Share i.e. the rent payable (which becomes the rateable value).
Gross Receipts
• Receipts should include all income directly and indirectly derived from occupation of the property.
Working Expenses (amount spent on the BUSINESS)

• Expenditure to be deducted from gross profit may include:
• Salaries, wages, MPF
• Provision of services, e.g. gas, electricity and water
• Contracts, e.g. for supply of equipment
• Costs incurred in connection with:
– traveling - cleaning -repairs
– fees - printing and postage - advertising
– licenses - telephone
• Head Office expenses
 Outline of the method:-
14
Gross earnings a
Less purchases b
Gross profits a-b
Less working expenses/operating expenses d
Net profit/Divisible balance e
 Part of the net profit (e) should be allocated to:

- pay the tenant/entrepreneur for his work/risk in the business
3 normal ways of calculating entrepreneur/tenant share:
i) Taking percentage of the annual turnover
ii) Taking percentage of total capital invested
iii) Taking percentage of the divisible balance (40%-60%)
- allow for the interest on the capital he put in the business
- amount to pay for the use of the premise (rent)
 So the method continues with the following equation
Net profit/Divisible balance e

Less tenant/entrepreneur share
i) remuneration
(40%-60% of Divisible balance)
ii) interest on capital
(% of capital borrowed/invested)
f
Surplus available as rent /gross rent e-f
Less outgoings (amount spent on the OWNERSHIP/OCCUPATION
of the property) g
Net rent (e-f)-g
Net rent can be capitalized
to get the Capital Value x YP for uxt @ i%
Capital Value.
3.5 THE INVESTMENT METHOD
 An approach to determine the capital value of an interest whereby the value of a property is said to be
a function of the current (existing) income and a future stream of income
 Method commonly used to value income producing properties.
 Using the process of discounting i.e. finding out the present value of future income.
 Also known as the Income Approach or Years Purchase Method or Capitalisation Method.
 Capitalisation is a process of converting net income or rental into capital value.
 Rental Value is the net rent (Rent less outgoings)
Valuation
Net Income RM per annum net

X YP in-perpetuity @ i% 1/i
Capial Value RM
15
TUTORIAL EXERCISES
Determine the basis of valuation and identify the method of valuation adopted for the following types of property in
order to undertake the valuation.
TYPE OF PROPERTY BASIS OF METHOD

VALUATION
1 A Chinese Restaurant in Johor Bharu for rating purpose.
2 A car manufacturing plant located in Pekan, Pahang for financing

purpose.
3 A Cineplex located in Berjaya Megamall in Kuantan for rating
purpose.
4 A private hospital in Bukit Mertajam for sale purpose.
5 A petrol station located in Kangar, Perlis for fire insurance

purpose.
6 A private hospital located at the fringe of Ipoh City Centre for

mortgage purpose
7 A car manufacturing plant in the Jelapang Industrial Park for

purchase
8 A resort in Desaru, Johor for rating purpose
9 A 36-hole golf course at Mutiara Resort for sale purpose.
10 A restaurant in Seri Iskandar, Perak for rating purpose.
16
WEEK 4 VALUATION OF PETROL STATIONS
4.1 Introduction
Petrol station is a facility which sells fuel and lubricants for motor vehicles.
It is also known as gas station, fueling station, filling station, service station, petrol station, garage, gas
bar , petrol pump or petrol bunk (India).
4.2 Two common types of petrol stations;
i) Petrol station with basic facilities (Traditional petrol station)
ii) Petrol station with other facilities such as service bays, workshop, car/minimarket sales room,
etc (Modern Petrol Station)
4.3 The normal operation of a petrol station:
i) Owner-operator (Dealer Owned Dealer Operated Station)
The operators own the land and buildings. The oil company will contract to supply the petrol.
All maintenance and outgoing are borne by the owner.
ii) Dealer (Leaseback-operator)
The oil company leased the land (paying the ground rent) from the owner and develops it into a
petrol station. The company will then lease the station to an operator (known as dealer) or
lease back to the owner on a monthly rentals.
(Normally based on a % of gross income from sales of petrol and services)
iii) Lessee-operator
The oil company owns the land and building, leased it to an operator for a specific period,
paying an agreed rent.
Based on the guidelines issued by the Ministry of Housing and Local Government and the Local Authorities.
17
Petrol Stations can be divided into two characteristics:
i) Separate petrol stations
ii) Petrol stations at the strata building (still not being practiced in Malaysia yet).
It is placed at the basement in the strata building.
SEPARATE PETROL STATIONS
Three types of separate petrol station:

i) Cluster petrol station
 Normally can be found at the town centre

 Give convenient to the customer to make a choice
ii) Petrol station that locate side by side
 It is situated next to each other in parallel dimension.

 Normally located along highways where the demand for fuel is higher
18
iii) Separate location of petrol stations
 Located at lower density and no competitor

 Build only to serve necessary services to fulfill customer need and want
Sources: Guideline for Incorporate Petrol Station, Ministry

of Housing Development and Local Authority
4.4 Layout of a Petrol station
TYPICAL LAYOUT OF A MODERN PETROL STATION
TOILETS
CAR WASH-
SERVICE
SHOP/OFFICE AREA
AIR DIESEL
PUMP FORECOURT/CANOPY AREA PUMP
PUMP
ISLAND
ADVERTISEMENT
BOARD
IN OUT
MAIN ROAD
 Forecourt
19
– Large paved areas where petrol can be served.
– Petrol pumps are arranged on Pump Islands.
– A large canopy over the bays to protect vehicles from the weather.
 Logo and signage
 Mini market/showroom and office

- Sales of other items other than petrol.
20
 Pump island
- Is an area that provides petrol filling pump.
• A fuel dispenser is a machine at a filling station that is used to pump gasoline, diesel, CNG,
CGH2, HCNG, LPG, LH2, ethanol fuel, biofuels like biodiesel, kerosene, or other types of fuel
into vehicles.
• Types of fuel dispenser

• 1H1P (1 Flow meter).
21
 Service area
An area that provide service such as workshop, car wash and etc.
 Car wash area
22
 Water and air pump
• Underground Storage Tank (UST),

• This is a tank and any underground piping connected to the tank that has at least 10
percent of its combined volume underground.
• Each storage tank shall be installed underground.

The manufacturers of the storage tank shall satisfy the Authority that the construction
requirements meet the agreed standards.
The minimum volume of the underground tank is 15000 litres and the common volume is 27000
litres.
23
4.5 Planning Criteria for Location of Petrol Station
 Location
 Land area
 Zoning
 Petrol storage
 Safety measures
 Signage
 Access and egress
24
4.6 Factors to be noted in the valuation of petrol station:
(Factors affecting value- to be discussed and elaborated by students in class)
 Location
 Frontage
 Category of road (primary, secondary, highway)
 Competition in the vicinity – any new station established, renovated.
 Visibility of station and ease of access
 Proposed road construction – to check with the planning authority.
 Traffic volume – observe the volume of traffic passing through the road.
 Opening hours – 24 hrs or otherwise
 Facilities and services provided
 Trading Accounts
ECONOMIC LIFE
(PLANT & MACHINERY)
– PLANT, MACHINERY, TANK AGE, AND PIPELINE
3-20YEARS
– OFFICE EQUIPMENT, FURNITURE AND FITTINGS
5-6.7YEARS
– MOTOR VEHICLES
4 YEARS
– COMPUTER HARDWARE AND SOFTWARE
5 YEARS
4.7 Methods of Valuation
 Profits Method
 Cost method
Example of calculation to determine the gross receipts of a petrol station:

Average sales over the past 3 years are as follows:
Type Daily sales Purchase Selling price

Primax 97 8000 litres RM2.34 RM2.49
Primax 95 4000 litres RM2.06 RM2.19
Diesel 1500 litres RM2.00 RM2.17
Other income from sales of accessories and minimarket RM1200 daily (the profit is 40%)
Income from sales of petrol:
Primax 97 8000 X (2.49 – 2.34) = 1200
Primax 92 4000 X (2.19 – 2.06) = 520
Diesel 1500 X (2.17 – 2.00) = 255
1975 X 365 days = 720,875
add
income from the sales of accessories
and minimarket RM1200 x 40% x 365 = 175,200
Gross profits = 896,075 p.a
25
4.8 Example of Valuation for Different Interests in Petrol Station
1) Owner-operator (Freehold title)
Income from forecourt (less operating costs) (a)

Income from other area (less operating cost) (b)
Net income/divisible Balance (a)+(b)
Less
Operator’s share (40%-60%) of DB ( c)
Gross rent (a)+(b)- (c)
Add rentals from other area (d)
Total gross rent (a)+(b)- (c)+(d)
Less outgoings (e)
Net Rent
X YP in perp@ i %
Capital Value
2) Owner-operator (State Lease)

Less
Less outgoings (e)
Net Rent
X YP unexpired lease term
@i % + 3%(tax 30%)
Capital Value
3) Lessee-operator
i) Lessee’s Interest

Less
Less outgoings (e)
Net Rent
Less rent paid to the owner Rent paid
Profit Rent
X YP unexpired lease term
@i % + 3%(tax 30%)
Capital Value of Lessee’s interest
26
ii) Owner’s Interest (Lessor)
Rent Received from Lessee (f)

X YP unexpired term @ 9% YP YY
Reversion
FRV (from net rent above) Net Rent
YP in perp deferred uxt term @ 10% YP ZZ
Capital Value of owner’s
interest
4.9 Example of Valuation for Petrol Station by Cost Approach
Land
765 sm @RM450 smp RM344, 250

Building
MFA 108.63 sm @RM960 psm RM104,285

AFA 315.36 sm @RM480 psm RM151,373
RM255,658
Less Depreciation 25% RM 63,915
RM191,743
Tarmac 808.19sm @RM195 psm RM157,597
Underground
Tank 4 units @ RM65,000 per unit RM260,000
Pump Island 3 units @ RM3,000 per unit RM 9,000
Signboard 1 unit @RM23,000 per unit RM 23,000
RM449,597
Less Depreciation 25% RM112,399
RM337,198 RM528,941
RM873, 191
Say RM 873,000
27
TUTORIAL EXERCISES FOR PETROL STATION
EXERCISE 1
Mr. Jagdeev Singh, an owner-operator of a petrol station situated at Seputeh, Perak intends to secure a bank loan
to expand his business. The station comprises of a single storey building with car washing service facilities. It is
constructed of spandex steel roof, brick walls and concrete floor finished with heavy-duty tiles. Due to its prime
location, it has high volume of sales.
An analysis of the last three years trading accounts revealed the following: -
Petrol 2016 2017 2018

Super Unleaded 2,800,000 litres 3,000,000 litres 3,200,000 litres
Unleaded 500,000 litres 520,000 litres 450,000 litres
Diesel 2,100,000 litres 1,900,000 litres 2,000,000 litres
The purchase price and selling price of fuel are as follows:
Purchase price (Per litre) Selling Price (Per litre)

Unleaded RM2.57 RM2.70
Diesel RM1.93 RM2.00
Other Income:
i) Service and car wash - RM 2,100 per month.
ii) Average sales from kiosk - RM 1,850 daily (profit at 40%)
Operational Costs: (per annum)

i) Remuneration/salary - RM 112,000
ii) EPF & SOCSO - 10% of remuneration /salary
iii) Water and Electricity - RM 50, 000
iv) Fax/telephone - RM 2, 500
v) Stationery - RM 3,000
vi) Management - RM 7,000
vii) Advertisement - RM 2,200
viii) Business License - RM 3,500
Outgoings: (per annum)

i) Insurance - 1.5% of gross rent
ii) Quit Rent - RM 1, 750
iii) Rates/assessment - RM 5,900
iv) Maintenance/repairs - 15% of gross rent
Tenant’s/Operator’s Share:
i) Return on working capital @10% of RM 200,000
ii) Operator’s remuneration/share is 45%
Expected rate of return is 9% per annum.
28
a) You are requested to value the petrol station using an appropriate valuation method with reference to the data
given above.
b) Explain the information required to value the above property using the cost method of valuation.
EXERCISE 2
a) A prospective buyer has requested you to value a petrol and service station located at Jalan Ipoh-Lumut. The site
measures 30 metres wide and 39 metres deep. It is a freehold interest and the station has been in operation
since 2010.
The station comprises a single storey building with a car service annexe. The building has klip lock roof, brick
walls and concrete floor finished with ceramic and mosaic tiles.
The building accommodation has 110 sq.m office and sales area, 6.50 sq.m toilets. The service area is 195.50
sq.m.
The forecourt and its canopy with an area of 260.30 sq.m houses four pump islands, which consist of 7 unleaded
pumps, and one leaded pump. Other facilities include one open-air diesel pump and, 1 air pump, 2 logo signs
and 5 underground tanks each with a capacity of 15,000 litres.
The owner of the station has refused to furnish you with the accounts of the petrol station. Your investigations
have enabled you to acquire reliable data regarding the property.
The construction cost for this kind of station is as follows:
Office and sales area @RM900 p.s.m

Service area @RM550 p.s.m
Toilet area @RM650 p.s.m
Underground tanks @RM55,000 each
Petrol pumps @RM4,000 each
Diesel Pump @RM3,000 each
Two logo signs and air pump RM20,000
Forecourt, underground pit, cables, piping and tarmac RM155, 000
An analysis of the market value revealed that vacant petrol station sites are being transacted in the region of
RM450-RM550 per sq.metre.
a) Based on the given information and using the appropriate method of valuation, determine the value of the subject
property.
b) The method used for the valuation of the petrol station above may not reflect the market value of the property.
Comment on the use of the method with regards to the valuation of a petrol and service station.
29
EXERCISE 3
The assessment charged by Majlis Perbandaran Kuala Kangsar on a petrol station is RM15,500 per annum which is
10% of its annual value. The owner is not satisfied and intends to object. He seeks your advice. The petrol station
(with freehold title) is owner operated. Other information furnished are as follows:
Site area : 1400 sm

Office/toilet/store : 60 sm
Service/wash area : 30 sm
6 petrol pumps
a) Petrol sales are as follows:
Type Monthly sales Purchase price Selling Price (RM/ litre)

(liters) (RM/litre)
Diesel 9,000 1.45 1.58
Unleaded petrol 134,000 1.72 1.80
b) Service and wash area is let out for RM1, 200 per month
c) Average sales from mini market is RM1, 400 daily with 40% profit
d) Operating costs are as follows;

i) Wages
6 workers @ RM300 per person per month
2 clerks @RM450 per person per month
1 security guard @ RM300 per month
1 Manager @ RM2, 500 per month
ii) EPF/SOCSO 11% of wages
iii) Water and electricity RM1, 500 pm.
iv) Stationery RM200 pm.
v) Management RM500 pm.
vi) Fax/telephone RM300 pm
vii) Business license RM2,000 pa.
viii) Advertisement RM1, 500 pa
e) Outgoings:
i) Insurance 2%
ii) Management 5%
iii) Repairs 5%
iv) Rates and quit rent 8%
f) Operator’s share is 60% of divisible balance

g) Expected rate of return 9% per annum
Using an appropriate method of valuation:
i) Value the property for rating purposes and advise the owner.
ii) If the owner needs to know the capital value of his interest in the petrol station, value his interest.
30
EXERCISE 4
Your client requests you to value his petrol and service station located along one of the commercial streets of Bandar
Utama. The site measures 48.76 metres wide and 45.71 metres deep. It is a 30 year State Lease and the station has
been in operation for 5 years.
The station comprises a single storey building with a car service annexe. The building has spandex steel roof, brick
walls and concrete floor finished with ceramic and mosaic tiles. The building accommodation has 18.58 sq.m office,
27.87 sq.m sales area and 4.64 sq.m toilets. The service area is 185.8 sq.m.
The forecourt and its canopy with an area of 185.8sq.m houses two pump islands, which consist of 7 unleaded pumps,
and one leaded pump. Other facilities include one open air diesel pump and, 1 air pump, 2 logo signs and 4
underground tanks each with a capacity of 15,000 litres.
The construction cost for this kind of station is as follow:
Office space @RM980 p.s.m

Sales area @RM800 p.s.m
Service area @RM550p.s.m
Toilet area @RM650 p.s.m
Underground tanks @RM25,000 each
Petrol pumps @RM10,000 each
Two logo signs and air pump RM30,000
Forecourt, underground pit, cables, piping and tarmac RM155,000
An analysis of the last three years trading accounts revealed the following:
Petrol Sales:
Super Unleaded grade sold at an average of 2,500,000 litres per annum

Unleaded grade sold at an average of 1,800,000 litres per annum
Diesel grade sold at an average of 600,000 litres per annum
The wholesale purchase price from the dealer and the retail price charged to customers averaged as follows:
Petrol Grade Wholesale price/litre Retail Price/litre

Super Unleaded RM1.82 RM1.92
Unleaded RM1.67 RM1.80
Diesel RM0.95 RM1.10
Sales of goods
Sales of goods from the shop counter averaged a gross profit of RM50,000 per annum.
Rental of service area

Rental received from the service area is RM3,000 per month.
Operating Expenses
The average operating expenditure is as follows:
a) Business Operating Expenditure

Salary,bonus,EPF, SOCSO RM60,000 per annum
31
Business insurance RM1,250 per annum
Water, Electricity RM4,500 per annum
Business license RM1,500 per annum
Audit and secretarial fee RM5,000 per annum
10% Interest on -stock RM10,000 per annum
- cash RM3 ,000 per annum
Administration expenses RM12,000 per annum
b) Property Outgoings
Repairs (External and internal) RM6,000 per annum
Fire insurance RM1,000 per annum
Assessment @ 8% on Annual Value of RM90,000
Quit Rent RM4,000 per annum
Management RM6,500 per annum
The operator bears all outgoings.
An analysis of the market revealed that freehold commercial sites were transacted at RM1,250 p.s.m whilst
industrial lots were sold in the region of RM650-800 p.s.m.
Using 2 (two) methods of valuation, determine the value of the subject property.
32
WEEK 5 VALUATION OF CINEMA
5.1 Description
Range from single screen cinemas in provincial towns to multi-screen facilities, sometimes set in a
large-scale leisure complex.
5.2 Factors to be noted (Factors affecting Value)

 location/context,
 construction –quality of building, interior finishes
 Facilities and services,
 number of screens, number of seats per auditorium,
 admission prices, number and time of showings,
 staffing levels,
 ancillary shop (noting if this exclusively services the cinema or other facilities too)
 car parking provision
 Trading accounts.
5.3 Sources of income from cinema:

 Sales of ticket
 Trailer
 Rental of kiosk
 Car parking
5.4 Valuation Approach

Comparison - valuation on a value per seat basis
Profits - as with most accounts based valuations, any first year trading figures obtained need
to be treated with the appropriate caution.
5.5 Example of calculation of income for cinema:
Showtime Total seats Ticket price (RM) Average occupancy

3.00 pm 300 7.00 45%
6.00 pm 300 7.00 60%
9.00 pm 300 7.00 80%
Saturday morning 300 8.00 85%
Sunday morning 300 5.00 60%
The entertainment tax on ticket sales is 20%.

Gross income from sales of ticket is:
Total seat each show x (ticket price – tax 20%) x occupancy rate x 365 days.
3.00 pm 300 x (7.00 –20%) x 45% x 365 days = 275,940

6.00 pm 300 x (7.00 –20%) x 60% x 365 days = 367,920
9.00 pm 300 x (7.00 –20%) x 80% x 365 days = 490,560
Saturday 300 x (8.00 –20%) x 85% x 52 days = 84,864
Sunday 300 x (5.00 –20%) x 65% x 52 days = 40,560
Income from ticket sales 1,259,844
33
TUTORIAL EXERCISES FOR CINEMA/CINEPLEX
EXERCISE 5
Mr. Kremer is interested in acquiring the leasehold interest of a cineplex located at the second floor of a shopping
complex in town. The cinema has 150 seats, an office, toilet, ticket booth and a snack kiosk. The cinema has
been in operation for 5 years and the remaining unexpired term of the lease is 25 years. The operator has sublet
the snack kiosk at RM500 per month.
a) Analysis of the last three years operating accounts revealed the following:
Showtime Total seats Ticket Price Average

(RM) Occupancy
3.00 pm 150 8.00 45%
6.00 pm 150 8.00 50%
9.00 pm 150 8.00 65%
Saturday Midnight 150 9.00 80%
Sunday Morning 150 6.00 70%
The entertainment tax on tickets sale is 20%. At every show, the gross receipt from trailer advertisements is
RM300.
b) Operating expenditure
i) Salary, EPF, Socso RM4,800 per month
ii) Electricity RM 700 per month
iii) Water bills RM 220 per month
iv) Film rental RM12,000 per month
v) Operation license RM 2,000 per month
vi) Advertisement RM 1,700 per month
vii) Business insurance RM 1,800 per month
ix) Projector Maintenance RM 2,000 per month
x) Management RM 1,800 per month
c) Capital outlay RM150,000

Bank’s rate of interest 10%
Operator’s share 45%
d) Outgoings
Repairs RM6, 500 per annum
Fire insurance RM 1,200per annum
Quit rent RM 2,000 per annum
Management RM 6,000 per annum
Assessment rate @ 12% of annual value.
e) Analysis from the market indicates that the All Risk Yield for freehold commercial property in the locality
is 9%. Based on the above information, advise Mr Joseph on the market value of the Cineplex.
34
EXERCISE 6
Silverscreen Cinema owns 3 Cineplexes located on the third floor of a shopping complex. The Cineplexes
occupy a total floor area of 730 sq. metres. Each Cineplex has 100 seats, built with high quality sound system,
well carpeted and air-conditioned. The cinema is equipped with 3 projectors and projection screens, an office,
ticket counter, toilets and a snack kiosk. The cinema has been in operation for 5 years and the property is
freehold. The operator has sublet the snack kiosk at RM500 per month.
An analysis of the last three years operating accounts revealed the following:
Show time No. of seats Ticket price Occupancy rate

11.45 am 300 RM8.00 45%
3.00 pm 300 RM8.00 50%
6.00 pm 300 RM8.00 75%
9.00 pm 300 RM8.00 80%
Saturday midnight 300 RM8.00 90%
Sunday morning 300 RM8.00 75%
A 20% entertainment tax is levied on ticket sales. Revenue from advertisement trailer is RM200 per show.
The operating expenditure and the outgoings are as follows:
a) Business operating expenditure:

Salary, wages, bonuses, EPF, SOCSO RM180,000 p.a.
Electricity RM2,200 per month
Water RM400 per month
Local film rental RM60,000 per month
Foreign film rental RM85,000 per month
Operating license RM4,000 p.a.
Advertisement RM4,000 per month
Business insurance RM5,000 p.a.
Projector’s maintenance RM1,500 per month
Audit and maintenance RM12,000 p.a.
Management RM36,000 p.a.
Interest on working capital 10% of RM400,000
b) Outgoings:
Repairs RM60,000
Fire insurance RM12,000
Assessment rates RM15,000
Quit rent RM5,000
Management RM6,000
Service charge RM104,000
The owner intends to dispose his property and seeks your advice. Rate of return for similar property is 10% per
annum. Value the property.
35
EXERCISE 7
Mr Mano owns a freehold interest in Tanjung Jublee Cinema, which is located on a site of 9200 square meter. The
cinema offers the following facilities:
Showtime Total seats Ticket Price (RM) Average Occupancy

3.00 pm 350 7.50 45%
6.00 pm 350 7.50 75%
9.00 pm 350 7.50 75%
10.00 am Sunday 350 8.50 65%
The entertainment tax on ticket sales is 20%. The gross receipt from trailer advertisement is RM500 for every
show.
The average operating expenditure is as follows:
i) Staff Remuneration RM35,000 per month

ii) Water, electricity and telephone bills RM7,500 per month
iii) Operating License RM1,500 per month
iv) Office management RM3,500 per month
v) Quit Rent and assessment RM25,000 per annum
vi) Premium for Insurance RM30,000 per annum
vii) Building Maintenance RM6,000 per annum
Operator’s remuneration is 45% and interest on capital expenditure is 10% of 100,000.
The rate of return for similar investment is 7%.
a) Value the freehold interest of the cinema. You may use assumptions where necessary.
b) Due to its strategic location, Mr. Mano intends to redevelop the site. The redevelopment report offers
the following valuation:
Gross development Value RM35,000,000

Less Development Costs RM15,000,000
RM20,000,000
PV RM1 for 3 years @7% 0.8163
Residual site value RM16,244,000
Comment and advise Mr Mano comparing the existing use value as in (a) and the redevelopment value in (b).
36
WEEK 6 VALUATION OF HOTELS
6.1 Definition:
Commercial establishment that provides lodging, food and other services to the public.
6.2 Types of Hotels:

Hotels can be classified according to location, facilities, services offered and clientele served.
i. Hotels for travelers

a. For travelers stop-over, bed and breakfast type
b. Located within city boundaries and caters to people traveling for business or pleasure.
c. A good example is motel or motor hotel, normally situated near major highways and low
rise.
ii. Convention Facilities Hotels

a. Normally in major town, for business or seminars
b. Assure steady income from both sleeping accommodations and conference rooms for
meeting and lectures. Dining facilities may be additional revenue.
iii. Resort Hotels

a. Usually located at the seaside, lake or mountain areas and cater for tourists.
b. Provides all hotel services plus recreational activities.
iv. Residential Hotels

a. Caters to permanent residents. Similar to apartments but provide services of a hotel (valet
service).
b. Lodgings are available on weekly, monthly or yearly basis.
6.3 Factors Affecting Value of Hotel
During inspection a note should be made of: -
• Location
• Site layout/access
• Adequacy of car parking
• Physical characteristics
• Type of construction
• State of repair
• Star rating, or rating applied for
• Design, layout and quality of interior
• Nature and extent of entertainment, function rooms etc
• Additional facilities such as shops, leisure clubs and fitness suites.
• Number and type of bedrooms
• Room tariff
• Management capability
 As much information should be gathered and proprietor/operator should be interviewed to ascertain

operating functions of hotels.
37
 Take note of type of rooms provided, standard of facilities, rates of rooms with different views such as
golf course view, sea view, lake view, etc.
 Be aware of the legal constraints, purpose of valuation and date of valuation in determining the
method of valuation.
 Understanding the physical attributes (through inspection)
 Floor area for rooms is not essential but for other facilities, such as business units, conference rooms,
etc, net area is to be taken for calculation/estimation of rent.
 Value as a “going concern”. Valuation should be based on what a potential purchaser could expect to
earn in the hotel as it stands.
6.4 Example of calculation of gross income from room rentals of a hotel;
Room Type No of Room Rate Occupancy Occupancy Occupancy

Rooms (RM/day) Rate 2006 Rate 2007 Rate 2008
Executive Suite 15 1030 50% 45% 65%
Family Room 50 820 60% 65% 60%
Deluxe 100 460 75% 70% 70%
Superior 140 380 90% 85% 85%
To calculate gross income from the rooms :

Number of rooms x Room rate x (Average of occupancy rate) x 365 days
Executive Suite
15 x RM1,030 x 53% x 365 days = RM 2,988,803
Family Room
50 x RM820 x 62% x 365 days = RM 9,278,300
Deluxe
100 x RM 460 x 72% x 365 days = RM12, 088,800
Superior
140 x RM380 x 87% x365 days = RM16, 893,660
Total gross income from rooms RM41,249,563 per annum
38
TUTORIAL EXERCISES FOR HOTEL
EXERCISE 8
The owner of Hotel De Tambun, Ipoh gave you the following information.
Facilities provided are as follows:
Room Number of rooms Rates(RM/day)

Suite 10 450
Super Deluxe 60 250
Deluxe 110 180
Superior 150 120
Other rentals
i) Banquet Halls RM365,000 per annum
ii) Souvenir shop RM 7,200 per annum
iii Travel Agency RM 9,600 per annum
iv) Mini Market RM 7,800 per annum
Other Income
Parking fees RM2500 p.m
Food and beverages 50% of total room rates
Occupancy Rate (The 2013 is the Visit Ipoh Year).
Type of Room 2011 2012 2013 2014

Suite 70% 70% 90% 80%
Super Deluxe 75% 68% 95% 75%
Deluxe 75% 80% 95% 85%
Superior 75% 80% 100% 80%
The average expenditures are :
i) Salary inclusive of EPF/SOCSO RM3,900,000

ii) Food and Beverages RM 600,000
iii) Laundry RM 200,000
iv) Water/Electricity/Telephone RM1,500,000
v) Quit Rent RM 75,000
vi) Assessment 10% of annual value
vii) Repairs and maintenance 5% of gross rent
ix) Insurance 3% of gross rent
Annual purchases
Mattress/pillow/linen RM50, 000
Electrical items RM40,000
Capital outlay RM500,000

Operator’s Share is 45%
Bank’s interest rate is 9%
39
The following data is the information regarding the hotel property in the locality:
Name of Hotel Capital Value (RM) Net income (RM/Annum)

Hotel De Meru 12,340,000 950,000
Hotel Canning 15,000,000 1,110,000
Hotel Sunnyway 18,000,000 1,345,000
Based on the given information, value the freehold interest of the property.
EXERCISE 9
Your client has requested you to value its hotel which is located in a city centre, for rating purpose.
The property is freehold with a land area of 4,000 sq meters. The building is of high quality construction with
good quality finishes and facilities including a swimming pool.
An analysis of the last three years operations revealed the following: -
Particulars/Year 2016 (RM) 2017 (RM) 2018(RM)
Revenue
Room revenue 22,100,700 23,679,375 24,626,550
Food & beverage 11,050,375 11,839,688 12,313,275
Telephone, telex and internet 114,200 118,500 121,000
Other revenues 430,750 451,220 480,000
Gross revenue 33,696,025 36,088,783 37,540,825
Cost of sales 7,413,357 7,939,532 8,259,147
Hotel Operating Expenses

Salaries, bonus, EPF, SOCSO 4,250,000 4,500,000 4,800,500
Electricity and water 952,000 1,100,00 1,200,000
Laundry and Linen 152,000 175,000 210,000
Taxes 118,000 119,000 120,000
Operation Insurance 12,000 17,000 21,000
Telephone 200,000 205,000 220,000
Promotion, landscaping and
General expenses 150,000 170,000 200,000
Repairs and Renewals

Building and machinery 980,000 1,100,000 1,200,000
Furniture, soft furniture,
crockery, glass and cutlery 42,000 44,000 49,000
Working Capital 4,000,000 4,500,000 5,000,000
Room Occupancy rate 74% 75% 78%
The room tariffs range from RM250 to RM 500 per night depending on the room type.
Based on the information provided, determine the annual value of the subject property.
40
EXERCISE 10
Sunrise Group Malaysia, a public listed company owns a chain of resort hotels throughout Malaysia. The
company has appointed you to value one of its hotels in Pulau Pangkor for the purpose of restructuring, which
requires the approval of Securities Commission.
The tenure is freehold and the hotel is built on a 2.5 hectares site. The building is of high quality construction and
finishes, with stylish designed rooms and luxurious suites. Facilities provided include swimming pool, fitness
centre, tennis courts and spa.
The Hotel Management has furnished you the following information:
Room Type No. of rooms Room rate

Superior 150 RM190
Deluxe 150 RM260
Suite 15 RM600
Average occupancy for the past three years are as follows:

Weekends 80%
Weekdays 50%
An analysis of the trading operations for the past three years revealed the following:
Other income
Food and beverage 30% from room revenue
Telephone and fax RM70,000 per annum
Banquet hall RM350,000 per annum
Income from rental (gross)

Souvenir shop RM400 per month
Travel agency RM300 per month
Mini market RM550 per month
Restaurant/Coffee house RM2, 000 per month
Annual Purchases
Pillows and mattress RM200, 000 per annum
Furniture RM500, 000 per annum
Bed sheets RM100, 000 per annum
Average Expenditure
i) Salary and wages RM600,000 per annum
ii) EPF and Socso 11% of salary and wages
iii) Electricity and water RM500, 000 per annum
iv) Laundry RM300, 000 per annum
v) Stationery RM 25,000 per annum
vi) Telephone RM110,000 per annum
vii) Promotion and advertisement RM200,000 per annum
viii) Landscaping RM20,000 per annum
ix) Fire Insurance 3% of gross rent
x) Building maintenance/repairs 5% of gross rent
xi) Management 3% of gross rent
xii) Quit rent RM70,000 per annum
41
On investigation, other information obtained is as follows:
Capital invested was RM1.5 million.The Annual Value based on the current valuation list is RM8,000,000.
Assessment rate charged by Majlis Perbandaran Manjung is 7% per annum. Bank interest rate is 9% per
annum.
Assuming the operator’s share is 45%, determine the market value of the hotel for submission to Security
Commission. You may use assumptions only where necessary.
a) The Guidelines on Asset Valuation issued by Securities Commission has been formulated with the
principal objective of setting out the requirements that must be complied with by valuers when carrying
out valuations of property assets. Among the guidelines is that valuers are to use at least two methods
of valuation in their valuation report.
Explain the requirements of one other method that is appropriate to be used in valuing the above
property.
WEEK 7 VALUATION OF RESTAURANTS
7.1 Definition: Commercial establishment that serves food to customers for a payment.
7.2 Characteristics:
 Physical design reflects its function as a restaurant

 Professionally managed as a restaurant
 Facilities and services
7.3 Classifications of Restaurant:
 Location
Roads and highways
Shopping complexes
Recreational/Amusement Parks
Hotels
Residential neighbourhood
 Type of food served

Malay
Chinese
Indian
Western
Seafood
 Type of services
Fast Food
Drive in
Self-service
42
7.4 Factors Affecting Value:
 Location
 Competition
 Demand
 Menu served and presentation
 Design of the restaurant
 Services and facilities
 Ancillary facilities
 Franchise
 Management capability
 Prospect
TUTORIAL EXERCISES FOR RESTAURANT
EXERCISE 11
Encik Kamil owns a freehold interest in a restaurant located at Teluk Batik. The property is leased to En
Bustaman for 10 years since a year ago on FRI basis.
The restaurant is producing a gross profit of RM420, 000 per annum to the operator.
The annual operating expenses, outgoings and other particulars are as follow:
Wages, EPF, Socso RM170,000

Utility bills RM10, 850
Advertisement RM12,000
Entertainment RM48,000
Transportation cost RM4, 750
Other general expenses RM50,000
Premium for building insurance RM3, 500
Building Repairs and maintenance RM4,200
Quit Rent and Assessment RM3, 200
Rental paid for the building RM24,000
Interest payment on capital purchases RM15,000
Operator’s share is 45% of divisible balance.
The ARY for similar freehold property is 9%.
Based on the above information, determine;
i) The value of En Bustaman’s interest.

ii) The value of En Kamil’s interest.
43
EXERCISE 12
Muhibah Restaurant is offering 3 menus (Malay, Chinese and European cuisine) and is located in a well known
town. The single storey restaurant was built on a freehold land approximately 10,000 sq. ft with a built up area of
5,500 sq. ft. Accommodation in the restaurant includes eating hall with 200 person capacity, kitchen and food
preparing room, bar,office space, utility room, store and toilet/w.c’s. Part of the land is for car parking.
Muhibah restaurant has been in operation for the past 7 years. Similar land in the vicinity has been transacted at
RM58.00 psq.ft. The value of furniture and cooking utensils in the restaurant is worth RM65,000.
From the last 3 years analysis, we have gathered this information:
Tariff Normal Sat/ Other

Holidays Total
Per head days Sunday Holidays
Total customers 75 225 600 1050
Daily
Total days in year 248 10 104 3 365
18,600 2,250 62,400 3,150
Foods RM10.00 186,000 22,500 624,000 31,500
Beverages RM2.50 46,500 5,625 156,000 7,875
Total Per year 232,599 28,125 780,000 39,375 1,080,000
Salaries
Waiters
Beverages
Malay /European /Chinese Section
Store
Karaoke RM13,950 X 12 RM167,400
Security
Supervisor
Cashier
Office
Manager
Operational cost
Uniform/dobby
Linen/Glassware/Kitchen utensils
Napkin/Lists of menu and beverages
Dry Cleaning /Decorations
Transport RM19,400
Advertisements/Promotion RM15,120
Utility RM10,800
Repair and maintenance RM32,400
Entertainment and music RM48,000
General expenses RM21,600
Interest on Stock RM300,000

RM100,000
RM400,000 @ 12% RM48,000
With appropriate method and assumptions, value Muhibah Restaurant.

44
EXERCISE 13
Puan Jamilah, owner of Famili Restaurant intends to expand her business by mortgaging her freehold property.
The restaurant is located in a prime area of Ipoh town on a 1000 sq. metre site. The building accommodates a
dining area for 250 people, a kitchen, food preparation area, an office, store and toilets. The restaurant, which
offers local and western food, has been in operation for the past 6 years and opens 7 days a week from 11 am to
11 pm.
An analysis of the last three years trading operation revealed the following information:
Particulars Ordinary working Saturdays Public Holidays

day Sundays
Total customer per day 100 350 280
Total days per annum 251 104 10
Total Customers 25100 36400 2800
Average sale per pax is as follows:

Food RM12.00
Drinks RM2.50
Cost of food and drink is 50%
Average annual operating expenditure:

i) Wages/ Salaries RM170,000
ii) Direct operating costs:
Laundry
Decorations RM 19,500
Transportation
iii) Promotion and advertisement RM 15,700
iv) Utilities:
water
electricity RM 11,000
telephone
v) Repairs and maintenance RM 32,500

vi) Entertainment and Music RM 48,000
vii) General expenses RM 21,800
viii) Bank interest of 12% on:
Stock RM300,000
Cash RM 50,000
Freehold rate of return for similar property is @ 15% p.a.
Determine the value of the property for mortgage purpose.
45
EXERCISE 14
The owner of Restaurant Lai Lai in Lumut seeks your advice regarding the valuation of his property for rating
purpose.
You were given the following details.
Average customer : 200 per day

Charges : RM18 per customer
Operation day : 23 days a month
Other income
i. Car parking - RM200 per day
ii. Karaoke - RM100 per day
iii. Stall rental - RM1000 per month
Details of expenditure are as follows:
Purchasing of raw materials - RM38,000 per month

Salaries and wages - RM15,000 per month
Utility bills - RM4,000 per month
Premium for Fire insurance - RM1,500 per annum
License (MP Manjung) -RM850 per annum
Licences – signboard -RM750 per annum
Sundry Expenses -RM 1,500 per annum
Rubbish disposal -RM980 per annum
Transportation -RM500 per month
Assessment -RM4,000 per annum
Cleaning - RM700 per month
Interest on capital - 12% per annum
Purchase of fixtures - RM100,000
Operator’s share - 40%
Determine the Annual Value of the property.
46
WEEK 8 VALUATION OF GOLF COURSES
8.1 Types of Golf Courses
 Daily fee Courses

 Private Courses
8.2 The Golf Course consists of:
 Holes
 Tee – starting point at each hole
 Fairway – main part of the course, a carefully tended strip of land, on which the grass has been cut to
provide good playing surface
 Rough – areas covered with long grass, bushes or trees and sometimes sandy, rough or marshy areas.
 Bunkers- or traps, which are hollows dug in the earth and usually filled with loose sand, mounds and
other earthen embankments; and water hazards
 Putting green – area with closely cropped grass surrounding a hole
8.3 Things to Inspect At Golf Courses
 Location
 Course Design
 Drainage
 Water
 Soil
 Topography
 Title search
 Buildings
 The Course
 Hole Design
 Night Play Facilities
8.4 Methods of Valuation
 Comparison
 Cost Approach
 Profits Approach
8.4.1 COMPARISON APPROACH
A recent sale of a 18 hole golf course in similar neighbourhood indicated value of about RM1, 000,000 per hole.
All factors are comparable to subject property except it is without sprinkler system.
Adjustment:
18 holes @RM1, 000,000 RM18, 000,000
Add
Cost to upgrade sprinkler system RM 1,080,000
Therefore adjusted value RM19, 800,000
47
8.4.2 COST APPROACH
Land Value
(Vacant land on highest and best use basis, by comparison) RM3,969,000
Building Value (Club House) RM2,880,000

Less depreciation 20% RM 576,000 RM2,304,000
Golf Course
 Putting Green @ RM50 psf RM5,650,000
 Sand traps (RM8,000 each) RM 250,000
 Elevated tees (RM30 psf ) RM2,376,000
(Depreciation 25%) RM6,259,000
 Fairways and shrubs RM4,500,000
 Ponds RM1,000,000
RM5,500,000
 Bridges RM 175,000
 Cart paths RM1,050,000
(Depreciation 40%) RM 735,000
 Sprinkling system RM1,800,000
(Depreciation 40%) RM1,080,000
 Parking bays RM 960,000
(Depreciation 40%) RM 576,000
TOTAL VALUE RM20,423,000
8.4.3 PROFITS APPROACH
Gross Receipts
Golf department RM2,328,000
Food and beverages RM 560,000
Others RM 182,000 RM3,070,000
Less
Operating expenditure
Golf department RM 893,000
Food and beverages RM 352,000
Administrative RM 330,000
Utilities RM 17,000 RM,1592,000
Divisible balance RM1,478,000
Less
Interest on working capital
13% of RM 400,000 RM 52,000
Operator’s remuneration RM250,000 RM 302,000
Gross Rent RM1,176,000
Less outgoings
Repairs and maintenance RM 15,000
Insurance and rates RM 40,000
Management RM 30,000 RM 85,000
Net rent RM1,091,000
YP in perp @ 11% 9.09
Capital value RM9,917,190
48
TUTORIAL EXERCISES FOR GOLF COURSE
EXERCISE 15
Senayan Golf and Country Club is an 18-hole golf course located in Segari, Perak. The club is owned by
Mamumi Holding, a public listed company. The 130 acre lot of freehold interest comprises of a golf course and a
club house building.
The golf course with mature trees and bushes, covered with well-kept grass, 40 sand traps and 8 ponds is well
maintained. Fairways, tees and greens are in excellent condition. Floodlights are installed for night play. Other
facilities provided at the club include 3 squash courts, 50 metre swimming pool, 4 tennis courts and a
gymnasium.
Other information provided by the management is as follows:

1. Lifetime membership fees
Individual RM10,000
Government servant RM4,000
An average of 100 individuals and 70 government servants registered as new members annually for the
past 3 years.
2. Monthly subscription
Currently there are 800 club members of which 300 are government servants and the rest are
individuals from private sector. The fees are as follows:
Individual RM250
Government servant RM120
3. Green fees for non-members/guests

Weekdays RM66 per day
Weekends RM98 per day
An average of 30 guests a day on weekday and 50 guests a day on weekends were recorded. The
course is closed every Monday for maintenance purposes.
4. Pro shop
Average sales of RM 900 per month with 60% profit.
5. The operator has spent RM500,000 on capital expenditure.
6. Average monthly expenses incurred are as follows :
i. Wages, EPF and SOCSO RM25,000

ii. Stationery and printing RM1,500
iii. Electricity bills RM3,000
iv. Water RM800
v. Telephone RM1,500
vi. Maintenance and repair of buggy RM1,500
7. Annual expenses
i. Quit rent RM6,000
ii. Assessment RM22,000
iii. Building maintenance RM10,000
iv. Course maintenance RM55,000
49
v. Fire insurance premium RM4,000
8. The owner expects 40% for risk and remuneration. An analysis of rate of return of leisure properties is in
the range of 8% per annum. Borrowing rate is at 9% per annum.
Based on the above information, determine the market value of the golf course for sale purpose.
EXERCISE 16
Teluk Bayu Golf Club is an 18-hole golf course located in the fringe of Lumut Town, Perak.
maintained. Fairways, tees and greens are in excellent condition. Floodlights are installed for night play.
The following accounts statement is made available for you:
2012 2013 2014

REVENUE
Lifetime membership fees 1,300,000 1,500,000 1,250,000
Annual subscription 300,000 320,000 340,000
Green fees for non-members/guests 2,550,500 2,000,000 1,850,000
Sales from Pro shop 1,050,000 1,450,000 1,205,000
COST OF SALES 650,000 710,000 680,000
PROMOTIONAL/MARKETING EXPENSES
Wages, EPF and SOCSO 90,000 92,000 95,000
Insurance for vehicles 16,000 15,000 18,000
Transportation 15,000 18,000 20,000
Stationery and printing 30,000 25,000 28,000
ADMINISTRATIVE OVERHEAD/EXPENSES
Wages, EPF and SOCSO 310,000 320,000 350,000
Electricity bills 50,000 52,000 58,000
Water 21,000 20,000 20,000
Telephone 15,000 11,000 14,000
Maintenance and repair of buggy 18,000 16,000 20,000
Quit rent 11,500 11,500 11,500
Assessment 23,500 23,500 23,500
Building maintenance 12,000 15,000 18,000
Course maintenance 50,000 45,000 55,000
Fire insurance premium 5,000 5,000 5,000
Depreciation of machine 7,350 7,500 7,500
Cost of finance for capital outlay 45,000 42,000 40,000
The operator requires 40% of net profit as his share of risk and remuneration. The market rate of return for similar
properties is 9%.
Using profits method of valuation and with appropriate assumptions, value the golf course for rating purposes.
50
EXERCISE 17
Havana Golf and Country Club owned by Syarikat Majujaya a public listed company, is an 18-hole golf course
located in Cameron Highlands. The 147 acre lot of freehold interest comprises a golf course and a clubhouse
building. The 5-year old building, which is generally constructed of RC framework, accommodates a restaurant,
kitchen locker room, toilets, changing rooms, reception, administrative office and a pro shop.
maintained. Fairways, tees and greens are in excellent condition. Floodlights are installed for night play. Other
facilities provided at the club include 3 squash courts, 50 metre swimming pool, 4 tennis courts and a
gymnasium.
Other information provided by the management is as follows:
GOLF DEPARTMENT
1) Lifetime membership fees:

Individual RM10,000
Government servant RM4,000
An average of 100 individuals and 70 government servants registered as new members annually for the
past 3 years.
2) Monthly subscription
Currently there are 800 club members of which 300 are government servants and the rest are
individuals from the private sector. The fees are as follows:
Individual RM250
Government servant RM120
3) Green fees for non-members/guests

Weekdays RM66 per day
Weekends RM98 per day
An average of 30 guests a day on weekdays and 50 guests a day on weekends were recorded.
The course is close every Monday for maintenance purposes.
4) Pro shop
Average sales of RM8000 per month with 60% profit.
5) The operator had spent RM400,000 on capital

Average monthly expenses incurred are as follows:
i. Wages, EPF and SOCSO RM25,000
ii. Stationery and printing RM1,500
iii. Electricity RM3,000
iv. Water RM800
v. Telephone RM1,500
vi. Maintenance and repair of buggy RM1,500
51
RESTAURANT
The restaurant operates 7 days a week and opens from 10.00 am to 11.00 pm. It offers buffet menu with the
following rates:
Breakfast RM8.00 per pax
Lunch RM25.00 per pax
Dinner RM30.00 per pax
The owner had spent RM300,000 on furniture and cooking utensils at the beginning of the business.
An analysis of the past three years account revealed the following:
2012 2013 2014

Gross receipts RM RM RM
Breakfast 71,800 75,600 83,100
Lunch 177,600 187,000 205,700
Dinner 332,500 350,000 385,000
Total gross receipts 581,900 612,600 673,800
Annual expenses
i) Purchases of raw materials for food 116,400 122,500 135,000
preparation 161,500 170,000 187,000
ii) Wages 18,500 19,500 21,500
iii) Transport 14,900 15,700 17,000
iv) Advertisements/promotion 15,200 16,000 17,500
v) Utility 22,800 24,000 26,400
vi) Entertainment 2,850 3,000 3,300
vii) Replacement of crockery
Total expenses 352,150 370,700 407,700
Other information obtained:

1) Annual outgoings
a) Quit rent RM8,000
b) Assessment RM22,000
c) Building maintenance RM17,000
d) Course maintenance RM60,000
e) Fire insurance premium RM4,500
2) Owner expects 40% for risk and remuneration from both golf department and restaurant.
3) An analysis of rate of return of leisure properties is in the range of 8% per annum
4) Bank interest rate is 9% per annum.
Based on the above information, you are required to determine the following:
i) The rental of the restaurant with owner bearing all outgoings.
ii) The Market Value of the whole property for the purpose of financial reporting.
You may use assumptions where necessary.
52
WEEK 9 VALUATION OF AGRICULTURAL PROPERTIES
Section 115 of NLC stipulates the category of use and conditions of agricultural land.
Classification of agricultural land:
i) Smallholding ( < 40 hectares)

ii) Estate (> 40 hectares) subject to Sec.214A of NLC
9.1 Characteristics of an Estate
 Large in size
 Managed by professional managers
 Systematic management
 Self-contained with facilities and residential units
 Small community in an estate
9.2 Factors Affecting Value:
 Physical factors
- Location and accessibility, contour, weather, soil type, road network within the estate,
fencing, amenities.
 Economic factors
- Size of estate, demand and supply of crops, price of
agricultural product, production costs, demography
 Legal factors
- NLC (sec 214A)
- Government incentives
- Price control and taxation policies
 Agricultural/Agronomic factors
- Type of species
- Plant diseases
- Planting system
- Pests
- Fertilizing system
- General agricultural husbandry
9.3 OIL PALM
 Palm oil is produced from kernel

 Species: DxP, DxD, DxT, (D= Dura, T=Tenera, P=Pisifera)
 DxP produces optimum oil
 Economic life of oil palm is 23-25 years.
 Oil palm starts producing at the age of 3 with production of 6.2 tons/hec from year 3 to 20 tons/hec
at the age of 7 and subsequently 25 tons/hec for 12 years.
 Oil palm is marketed in the form of FFB (Fresh Fruit Bunches) and palm oil
 Production costs include management expenses, fertilizers, harvesting and transportation.
53
9.4 RUBBER
 Species: RRI 600, 700,

 Starts to produce after 5 or 6 years of age
 Economic life is about 30 years
 Production increases for the first 4 years, stabilizes for 15 years and begins decreasing after that for the
last 10 years
 Rubber price fluctuates (as any other agricultural commodities)
 Cost of production includes management, fertilizer, weeding, transportation, etc.
54
9.5 Valuation Approach for Agricultural Properties
9.5.1 Comparison Method

9.5.2 Investment Method (Based on income)
9.5.1 COMPARISON METHOD
Example 1.
Valuation of an estate planted with oil palm of different ages.

Valuation:
Mature:
Oil Palm 5-7 yrs 200hec @RM20,000 per hec RM

Young :
Oil Palm 1 yr 150hec @RM15,000 per hec RM

Others :
Building Site 10hec @RM25,000 per hec RM
Uncultivated area 5hec @RM1,200 per hec RM
Total RM
The rate used for each category of age should reflect:

i) Location iv) Land area
ii) Soil type v) Yield from the age group
iii) Tenure
9.5.2 INVESTMENT METHOD
 This method is better known as “productivity method” or “capitalization of profits method” or Years
Purchase method”
 It involves 2 stages of valuation
i) Present value of the right to receive net profit from the remaining economic life of the crops
ii) Present value of reversion to bare site value ( with uneconomic crops)
 This method has been accepted by court in the case United Temiang Rubber Estates vs CLR Muar.
 Steps involved when applying this method :
1. Determine the remaining economic life of crops(economic life less age of trees)
2. Determine average yield from past records
3. Determine average price per unit
4. Multiply yield by price and less whatever costs incurred to obtain the net income
5. Multiply net income with YP (dual rate with tax)
6. Value of vacant agricultural land derived from comparables and discount at present value
deferred period
7. Sum up both values to get the value of estate.
55
Example
Estimated average yield (a)

X Profits per unit (average price less cost) (b)
Total net profit (a)(b)
YP remaining economic life @ i%& sf tax 35% (c)
abc
Reversion to bare site value:
Area x RM per hectare (d)
PV (uxt economic life ) @ i% (e)
de
MARKET VALUE OF ESTATE (abc)+(de)
TUTORIAL EXERCISES FOR AGRICULTURAL PROPERTIES
EXERCISE 18
a) Explain two physical factors that affect the value of an oil palm plantation.
b) Explain two economic factors, which may affect the value of an oil palm estate.
c) Discuss the effect of Sec 214A National Land Code, 1965 (amended) on the value of an estate land.
EXERCISE 19
Subur Hijau Plantation Sdn Bhd intends to dispose of its freehold interest in an oil palm estate with an area of
350 hectares. The estate is cultivated with 10 years oil palm of DxP species. The land is generally undulating
located in Ulu Piol Kuala Kangsar, fronting a laterite service road. The property has good irrigation and drainage
system. The average fruit produced is 30 tonne FFB per hectare per annum.
Information from the production accounts are as follows:

Market price for FFB is RM450 per metric ton.
Production cost per tonne is:
Maintenance and manure RM35.00
General overhead RM28.00
Harvesting and transportation RM32.00
Taxes RM 5.00
The price of vacant land suitable for oil palm is RM23,000 per hectare.
Advise the owner on the market value of the plantation for the sale purpose. You may use assumptions where
appropriate.
56
EXERCISE 20
The owner of Lampong Estate has requested you to value his oil palm and rubber estate for securing loan
purposes. The 650 hectares estate is a second layer lot to Jalan Kampong Champong, Kuala Kangsar.
The following information was extracted from the estate record:
BLOK A B C
Cultivation Oil palm Rubber Oil palm
Species DxP RRIM 600 Chemara
Land Area 230 hec 210 hec 210 hec
Year planted 2011 2007 2009
Production 30 ton 2900 kg 35 ton

(hect/ year)
Average Price RM300/ton RM2.50/kg RM300/ton
Average Cost RM75/ton RM1.20 kg RM75/ton
The overall terrain of the estate is flat and slightly undulating towards the eastern portion. The estate road and
drainage are fairly managed.
The workers are residing in the surrounding village. There are no buildings in the estate. Market study indicates
that vacant road frontage agricultural lands are being transacted in the range of RM25, 000 – RM28, 000 per
hectare whilst interior lots are @ RM20, 000 per hectare.
Value the estate. Use assumptions where necessary.
EXERCISE 21
Syarikat Kurnia Maju intends to purchase the Mahsuri Plantation located fronting Jalan Kampong Nibung Buntar ,
Bandar Bharu Kedah. The company has requested you to determine the market value of the estate for the
intended purchase.
The estate is a freehold oil palm land with a titled area of 550 hectares. The terrain is generally undulating and
the estate is fairly maintained. There are no dwellings on the estate. All the workers tending the estate are on
contract basis and reside at the nearby Kampong Nibung.
The following information is made available to you:
Field Area(hectare) Cultivation Year Planted

Field A 300 Oil palm (DxP) 2006
Field B 250 Oil palm (DxP) 2001
57
Productions for the past 3 years are as follows:
Cultivation 2012 2013 2014

(metric ton) (metric ton) (metric ton)
Field A 9,000 9,200 9,050
Field B 6,000 5,820 5,840
Average price for oil palm is RM650 per metric ton and the production costs, which include export duty,
transportation and marketing is RM160 per metric ton.
The surrounding areas are predominantly kampong and agricultural lands .Market study indicates that vacant
road frontage agricultural lands of about the same acreage are being transacted in the range of RM25,000 –
RM27, 000 per hectare whilst interior lots are at RM20, 000 per hectare.
Value the estate using the appropriate method. You are allowed to make assumptions where necessary. Advise
the purchaser if he is offered the estate at RM 74,000 per hectare.
EXERCISE 22
Jenderatah Plantation Sdn. Bhd. is proposing to purchase a piece of estate land known as Almada Estate. The
780-hectare estate is located in the northern region of Perak accessible by a secondary road. The nearest town
is located about 15 kilometres to the west of the estate. The property is a relatively flat plantation having good
drainage and irrigation system together with a well-maintained network of laterite road.
Details of the estate are as follows:

Tenure : Freehold
Total area : 780 hectares
Location : Fronting a secondary metaled access.
Cultivation : Oil Palm
Species : DxP of various ages.
Expected economic life : 30 years
Terrain : Generally undulating
Upkeep/maintenance : fairly good
Details of production for the past 3 years are as follows:
Block Area Age of trees Average production per hectare per year (metric
(hectare) (Years) ton)
2016 2017 2018
A 230 11 28 30 35
B 250 14 30 34 38
C 300 15 30 35 40
Market analysis for the past three years shows that the average selling price is RM450 per metric ton and the
average cost of production is RM150 per metric ton.
58
Comparable market value for vacant agricultural land in the vicinity with road frontage is between RM27,000 –
RM28,000 per hectare whilst interior lots are between RM20,000 – RM25,000 per hectare.
The estate has been in the market for over a year and the price offered is RM 42,000 per hectare. Your firm
has been appointed by the company to carry out a valuation on the estate.
Using an appropriate method, determine the market value of Almada Estate and advice Jenderatah Plantation
Sdn. Bhd on the price for the intended purchase.
WEEK 10 VALUATION OF PRIVATE HOSPITALS
 A hospital owned by a for-profit company or non-profit organization privately funded through payment for
medical services by patients themselves or by insurers.
 Governed by the Private Hospital Act 1971- An act to provide for the registration and inspection of private
hospitals, nursing homes and maternity homes.
 Common Medical Facilities / Services
(1) Beds- no of beds provided
Example:
Type of Room No. of Room No. of Bed
ICU 1 4
HDU 1 3
VIP Rooms 3 3
Private Rooms 20 20
Two-bedded Rooms 12 24
Four-bedded Rooms 8 32
Total no. of existing beds 86
Less : Beds reserve for lodger 3
Total no. of beds under license 83
 The occupancy rate of the hospital for year 2005, 2006 and 2007 as provided by
the client are 60%, 80% and 90% respectively.
(2) Medical services

Example:
The hospital also provides the following services:
 24 Hours Accident and Emergency Services

 Specialist Outpatient Services
 Dietician Services
 Diagnostic Imaging:- X-Rays, CT-Scan, MRI.
 Fluoroscopy, Mammogram, Ultrasound
59
 Occupational Risk Assessment Services
 Physiotherapy and Rehabilitation Services
 Special Diagnostic Services
 Laboratory
 Pharmacy
 Lithotripter Services
 Intensive Care Unit
 Cardiac Intensive Care Unit
 Operating Theatre Services
 Delivery Room and Maternity Ward
 Medical, Surgical, Paediatric Ward
 Cardiac Catheterisation Laboratory
3) Consultants
Example:
The hospital is presently supported by 25 Resident Admitting Consultants and 6 Visiting
Consultants. There are 18 Consulting Clinics and is currently 90% occupied.
 Appropriate method -Depreciated Replacement Cost Method

.
This method is based on an estimate of the current Market Value of the land for its existing
use plus the current gross replacement costs of improvements less allowances for physical
deterioration and all relevant forms of obsolescence and optimization.
- The Profit Method entails estimating the gross annual income that can be derived
from the running of the property as a business concern. The net annual income is then
arrived at by deducting therefrom the operating costs and outgoings incidental to the running
of the business and ownership of the property, and allowing a margin of profit for the running
of the business. The net annual income so arrived at is then capitalised at a suitable rate of
return consistent with the type and quality of investment to arrive at the market value.
THE REVENUE
1) Hospital Revenue
(a) Inpatient
(b) Outpatient
(c ) Others
2) Consultant Revenue
(a) Inpatient
(b) Outpatient
3) Other Income
OPERATING COSTS / EXPENSES
COST OF SALES
Total Material Costs
Direct Staff Costs
Operating Overhead
ADMINISTRATIVE EXPENSES
Indirect Staff Costs
Administrative Overhead
Marketing and Promotion
60
WEEK 11 VALUATION OF QUARRY
11.1 Introduction
• Quarrying is basically the extraction of rock material by various forms of drilling, blasting
materials handling and processing to produce end products for construction, building and
manufacturing industries.
• The product may vary from granite and marble blocks for the production of polished materials to
aggregates for the construction work and powdered materials for chemical industries including
production of ceramics.
• The word quarry is not clearly defined by any law in Malaysia except the newly introduced State Quarry
Rules. Technically, quarrying and mining are similar in many respects. The methods and equipment
employed in quarrying of rock or excavating sands and gravel are similar to those used in surface
mining operations.
11.2 Application Procedure for Quarry Operation
• Before operation application of suitable land to be made to the State Authority

• Quarry can be operated for land alienated under the following 4 categories:
i) State Lease for a period of 30 years (Sec 42(1) (a) NLC)
ii) Special permit (sec 69 NLC (TOL) –issued for a period of not more than 5 years.
iii) Alienated under State Mineral Enactment – similar to mining lease
iv) Land licensed under Sec 15(1) and 16 National Forestry Act 1984
• However for land alienated under (i) and (iii) the lease is not inclusive of extraction of raw material.
Application is required under Sec 70 of the NLC.
11.3 Factors Affecting Value

• Location
• Deposit reserves
• Capital and Manufacture requirement
• Product output and marketing
• Management Capability
11.4 Valuation Methods
• Profits Method
11.5 example of valuation
Description
i) Land is State lease with an unexpired term of 55 years and area of 11.5 hectares.
ii) The company has obtained a 7 year permit to operate a quarry
iii) Geological report showed that there is still 4,000,000,000 tons of granite rock deposits. The maximum
production capacity is 37000 tons per month. Therefore estimated working life of quarry is:
Deposit 4,000,000
Production capacity 444,000 per annum
= 9 years
61
Quarry has been in operation for the past 3 years and product composition is as follows:
Product type
Year 1 Year 2 Year 3
¾ “ aggregate 50% 50% 50%
3/8 “ aggregate 5% 5% 5%
1” aggregate 5% 5% 5%
3” crusher run 30% 30% 30%
Sand dust 10% 10% 10%
Total Production 360,000 tons 400,000 tons 410,000 tons
Average selling price of quarry product:
Aggregates Crusher run Sand and Dust
¾ “ @RM10 per ton 3” @ RM15 per ton RM10 per ton

3/8 “ @RM12 per ton
1 “ @RM14.00 per ton
Average product sales for the last 3 years
Year 1
Aggregates
¾“ 50% x 360,000 tons = 180,000 tons @RM10 = RM1,800,000
3/8 “ 5% x 360,000 tons = 18,000 tons @RM12 = RM 216,000
1“ 5% x 360,000 tons = 18,000 tons @RM14= RM 252,000
Crusher run
30% x 360,000 = 108,000 tons @RM15= RM1,620,000
Sand and Dust
10% x 360,000 = 36,000 tons @RM10= RM 360,000
Total Sales RM4,248,000
Year 2
Aggregates
¾“ 50% x 400,000 tons = 200,000 tons @ RM10 = RM2,000,000
3/8 “ 5% x 400,000 tons = 20,000 tons @ RM12 = RM 240,000
1“ 5% x 400,000 tons = 20,000 tons @ RM14= RM 280,000
Crusher run
30% x 400,000 = 120,000 tons @ RM15= RM1,800,000
Sand and Dust
10% x 400,000 = 40,000 tons @ RM10= RM 400,000
Year 3
Aggregates
¾“ 50% x 410,000 tons = 205,000 tons @ RM10 = RM2,050,000
3/8 “ 5% x 410,000 tons = 20,500 tons @ RM12 = RM 246,000
1“ 5% x 410,000 tons = 20,500 tons @ RM14= RM 287,000
62
Crusher run
30% x 410,000 = 123,000 tons @RM15= RM1,845,000
Sand and Dust
10% x 410,000 = 41,000 tons @RM10= RM 410,000
Average Production cost for the past 3 years:
Particulars Year 1(RM) Year 2(RM) Year 3(RM)

1. Bore and explosives 90,848 108,388 109,303
2. Wages,overtime,EPF,SOCSO 153,468 179,201 193,500
3. Repairs of buildings, plant and 87,048 110,387 98,000
machinery and equipment
4. Petrol and engine oil 44,048 48,800 48,200
5. Spare parts 79,248 106,137 100,000
6. Insurance 32,000 32,000 35,000
7. Royalty 360,000 400,000 410,000
8. Operating license 2,500 2500 2,500
9. Administration & Marketing 100,000 220,387 221,000
10. Interest on working capital 60,000 72,000 70,000
Total operating expenses 1,109160 1,279,800 1,287,503

Percentage of cost on sales 26% 27% 26.6%
VALUATION
Assumptions:
1. Operating license is renewable until rock deposits is exhausted
2. Remaining quarry operating life is 9 years
3. Vacant land value is RM50,000 per hectare
4. Operator bears all outgoings
Average annual production sales RM 4,838,000

Less average operating expenses RM 1,225,488
Divisible Balance RM 3,612,512
Operator’s share @40% RM 1,445,005
Net income p.a. RM 2,167,507
YP 9 years @ 15% & 3% tax 40% RM 3.1841
RM 6,901,559
Reversion to vacant site value 11.5 hec. @ RM50,000 = RM 575,000
PV 9 yrs @ 15 % 0.28426
RM 130,760
Capital Value of interest RM 7,032,319
Say RM 7,032,000
63
FACULTY OF ARCHITECTURE PLANNING AND SURVEYING
DIPLOMA IN ESTATE MANAGEMENT
COURSE EXIT SURVEY FOR
VALUATION OF SPECIAL PROPERTIES (REM 311)
NAME : __________________________________________________
STUDENT NO. : __________________________________________________
DATE : __________________________________________________
Please complete this inventory by circling the appropriate ratings:

5 – Strongly Agree
4 – Agree
3 – Mixed Feeling (note : most of time, you would have a stronger feeling )
2 – Disagree
1 – Strongly Disagree
 Collate data and information for the valuation of special properties
 Value special properties using different valuation approach
 Prepare valuation report of special properties for various purposes.
CO NO. ITEMS Your Rating
1. I can define special properties. 5 4 3 2 1
CO1
2. I am able to collate data and information of 5 4 3 2 1
special properties.
3. I am able to determine the basis of valuation 5 4 3 2 1
for special properties.
CO2 4. I am able to conduct the valuation of special 5 4 3 2 1
property according to Malaysian Valuation
Standard (MVS).
5. I am able to identify methods to be used in 5 4 3 2 1
valuation of special properties.
comparison method.
7. I can value special properties using profit 5 4 3 2 1
CO3 method.
8. I can value special properties using cost 5 4 3 2 1
method.
investment method.
10. I can prepare a valuation report of special 5 4 3 2 1
64

Valuation of Special Properties: Teaching and Learning Module

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Valuation of Special Properties: Teaching and Learning Module

Uploaded by

Copyright:

Available Formats

TEACHING AND LEARNING MODULE

FACULTY OF ARCHITECTURE, PLANNING AND SURVEYING

Universiti Teknologi MARA Perak

WEEK 3 REVIEW OF THE VALUATION METHOD 11

WEEK 4 VALUATION OF PETROL STATIONS 17

WEEK 5 VALUATION OF CINEMA 33

WEEK 6 VALUATION OF HOTELS 37

WEEK 8 VALUATION OF GOLF COURSES 47

WEEK 9 VALUATION OF AGRICULTURAL PROPERTIES 53

WEEK 10 VALUATION OF PRIVATE HOSPITALS 59

WEEK 11 VALUATION OF QUARRY 61

Rohaya Abdul Ghani

COURSE ENTRANCE SURVEY FOR

VALUATION OF SPECIAL PROPERTIES (REM311)

Please complete this inventory by circling the appropriate ratings:

CO NO. ITEMS Your Rating

1. I can define special properties. 5 4 3 2 1

DEPARTMENT OF ESTATE MANAGEMENT

PROGRAM : DIPLOMA IN ESTATE MANAGEMENT

At the end of the course, students should be able to:

Continuous Assessment: 50.00%

Test - 10% out of 50 on Week 7. Passing Mark(s): 20 Test 1

Test - 10% out of 50 on Week 7. Passing Mark(s): 20 Test 1

Final Assessment: 50.00%

WEEK LECTURE TOPICS LEARNING OUTCOMES

1 1.0 INTRODUCTION TO THE COURSE

2 2.0 INTRODUCTION TO SPECIAL PROPERTIES Students are expected to be able to :

2 3.0 PURPOSES OF VALUATION Students are expected to be able to :

3 3.0 METHODS OF VALUATION – A review Students are expected to be able to :

3.2 THE INVESTMENT METHOD

3.3 THE PROFITS METHOD

11 4.7 APPLICATIONS Students are expected to be able to :

12 4.8 APPLICATIONS Students are expected to be able to :

13-15 5.0 PRESENTATION Students are expected to be able to :

17-20 FINAL EXAMINATION

Identification and description of special properties

a) To enable students to identify different types of special properties.

The students are expected to be able to:

Students are required to identify two types of special property:

There will be no assessment for this task.

PURPOSE AND BASIS OF VALUATION

To enable students to identify different bases for various purposes of valuation

The Tutorial Portfolio will consist of two items:

FEEDBACK ON REFLECTIVE REPORT FOR REM311

GROUP THE TYPE OF PROPERTY PURPOSE OF VALUATION

a. Each group must be of a maximum 4 (four) members only.

4th week - identification of subject property /submission of

The valuation report to be submitted for assessment 10%

Identification and Description of Special Properties

Formation of Group for Assignment And Tasks

2.0 PURPOSE OF VALUATION

Purpose of Valuation Basis of Valuation

Students are required to present the findings of Task 2.

3.0 REVIEW OF THE VALUATION METHOD

3.1 APPRAISAL PROCESS

 Physical and legal identification

3.2 THE COMPARATIVE METHOD

 Houses and Flats

The Evidence The Market

Transactions of physically similar

With similar legal interest

(CONTRACTOR’S METHOD, DEPRECIATED REPLACEMENT COST (DRC))

 Rationale of the Cost Approach: