Practice Notes

Approved for Publication 03.08.2004

COMMERCIAL PROPERTIES COMMITTEE

Practice Note 34

REVALUATION 2005

Valuation of Theatres

1.0 INTRODUCTION

This practice note applies to traditional theatres

2.0 BASIS OF VALUATION

Theatres are valued by application of the Comparative Principle by reference to rent as a percentage of Gross Receipts (excluding V.A.T).

For analysis purposes the Gross Receipts considered were those for the previous year or the nearest accounting period to the year of the rent or rent review.

3.0 ADJUSTMENT OF GROSS RECEIPTS

All sources of Income taken should be totalled without adjustment except for the following:

3.1 Artistes Costs

Where the Artistes Costs exceed the box office and grant income then consideration may be given to an allowance to the box office element only. The amount of adjustment to box office receipts will depend upon the amount by which the artistes costs exceed the total of box office and grant income. Under this heading an allowance of 15% would be the maximum.

3.2 Lets to Production Companies

Where the theatre operator lets the premises to production companies the amount taken at the box office from these productions will not be reflected in the total income returned as the production companies will normally retain box office receipts. Adjustment will therefore be required to ensure that the gross receipts adopted for valuation purposes reflect the annual hypothetical achievable receipts.

3.3 Lets & Franchise of Refreshment Areas

Where income is generated from any café, restaurant or licensed bar and this part of the premises is in direct competition with nearby licensed premises and/or restaurants, consideration should be given to excising this element of income from the total receipts and valuing this part of the premises in comparison to similar subjects in the vicinity. In such cases resultant valuations may require adjustment to reflect the composite nature of the subject valued.

Where income is received from any sublet or franchise of the café, restaurant or bar further investigation may be required to ensure that details of income from such sources are obtained and added to total receipts. Care should be taken in such cases to excise the income from the sublet or franchise to avoid any double counting.

4.0 VALUATION

Certified Gross Receipts exclusive of V.A.T should be examined for the 5 year period to 2003 to establish the hypothetical achievable turnover for the property in the year to 31 March 2003.

To this figure, the appropriate percentage from Table 1 should be applied.

Table 1