The owner of the heritable interest of an office building, Mr Dawson, leases the building to a local business run by Mrs

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The owner of the heritable interest of an office building, Mr
Dawson, leases the building to a local business run by Mrs Grant,
on a 15 year FRI lease with no rent reviews. The lease has 9 years
remaining and the passing rent is £100,000 per annum. The property
consists of an open plan office with a total net lettable floor
area of 800 square meters. Mrs Grant is keen to purchase the
property and have asked your advice on the marriage value and the
maximum amount she should offer Mr Dawson. You have done some
research, and have the following information:
- Comparable evidence suggests that a market rent of £150 per
square meter should apply to the subject property.
- All Risks Yield for similar rack rented heritable interest is
5%.
- It is appropriate to use an annual sinking fund at 3%.
- The equivalent yield for heritable interest of similar
reversionary properties is estimated to be 8.5%.
You should explain the choice of yields applied in your
assessment of marriage value.