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PROPERTY342 > 5. Commercial Assessment > Flashcards

5. Commercial Assessment Flashcards

1
Q

What are the 3 commercial assessment principles?

A

Cost, revenue, decision making

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2
Q

How is the go/no go decision made?

A

Assess whether development profit (costs - sale value) is okay

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3
Q

What are the 5 categories of cost?

A

Land
Design
Construction
Development
Financing

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4
Q

What are the 2 categories of revenue?

A
  1. Converting revenue from leased area to sale value using the cap rate
  2. Sum of outright sale prices
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5
Q

What 4 things are included in LAND costs?

A
  1. Land Cost - purchase value
  2. Legal - fees for due diligence/purchase
  3. Survey - surveyor due diligence
  4. Vacant Possession - cost to have occupants vacate
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6
Q

What 2 things are included in DESIGN costs?

A
  1. Design team
  2. Topo, geotech, specialists
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7
Q

What 5 things are included in CONSTRUCTION costs?

A
  1. Demolition
  2. Building
  3. Inflation up to construction
  4. Inflation during construction
  5. Contingency
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8
Q

What percentage of TPC is generally accounted for by the building cost?

A

60-70%

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9
Q

What 5 things are included in DEVELOPMENT costs?

A
  1. Holding costs
  2. Real estate fees
  3. Promotion/brochures
  4. Inducements
  5. Development fee/infrastructure/conditions
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10
Q

How is holding costs calculated?

A

Council rates per annum * development period in years

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11
Q

How are inducements calculated?

A

Subtotal revenue * inducement in years

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12
Q

How is design team cost calculated?

A

Percentage * building estimate

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13
Q

How is inflation up to construction calculated?

A

(demolition + building) * building cost inflation * (development period - construction period)d

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14
Q

How is inflation during construction calculated?

A

(demolition + building + inflation up to construction) * building cost inflation * inflation factor * construction period * 0.58

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15
Q

In the inflation during construction calculation, what is the inflation factor and 0.58 for?

A

Inflation factor - amount recovered as inflation not paid on developer’s profits
0.58 - cash flow factor as inflation wont apply to works that have been previously completed and paid

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16
Q

How is contingency calculated?

A

(demolition + building estimate + inflation up to construction + inflation during construction) * %

17
Q

How are real estate fees calculated?

A

Subtotal revenue * %

18
Q

What 3 things are in the FINANCING costs?

A
  1. Land
  2. Development
  3. Construction
19
Q

How do you calculate land financing cost?

A

Land cost * interest rate * [(deposit * development period) + [(1- deposit) * development period - settlement period)]]

20
Q

How do you calculate development financing cost?

A

0.5 * (design cost + development cost) * design and construction period * interest rate

21
Q

How do you calculate construction financing cost?

A

0.42 * construction cost * construction period * interest

22
Q

What do design team fees cover?

A

Core consultants, usually around 10-13%

23
Q

What is a topographical survey?

A

Land surveyor plan of levels and underground services

24
Q

What is a geotech investigation?

A

Report and ground drilling investigation analysis to determine foundation design concept and criteria

25
Q

How is the building estimate found?

A

(gross building areas * applicable rates) + external works; usually prepared by cost planner/QS

26
Q

How is contingency determined?

A

Based on the level of design developed at that stage eg. 10% at feasibility stage, 3-5% at construction stage

27
Q

What are 4 common infrastructure costs required under resource consent conditions?

A
  1. Upgrading underground sewer and stormwater pipes
  2. Public road widening for designated entry lanes
  3. Traffic lights to nearby intersections
  4. Acoustic barriers
28
Q

What % of building cost could specialist projects like supermarkets have for development fees and infrastructure?

A

30%

29
Q

What is included in the development period?

A

Buying land to construction completion

30
Q

How is revenue calculated?

A

(gross area * net/gross ratio * rental rates)
+ (number of carparks * rent per week * 52)
+ naming rights per year
= subtotal
- management costs (% * subtotal)
= total revenue

31
Q

When are feasibility reports done?

A

Indicative feasibility at the end of stage 2
Detailed feasibility at the end of stage 3
Updated at the end of stages 4 and 5

32
Q

What 9 things should be included in a feasibility report?

A
  1. Complete document describing project and findings
  2. Cover
  3. Executive summary
  4. Contents
  5. Brief/objective
  6. Needs/outcome/options - demonstrate maximised value
  7. Key criteria
  8. Conclusions and recommendations
    9 Appendix
33
Q

What 3 aspects is development profit most sensitive to?

A
  1. Sale cap rate
  2. Rentals
  3. Construction cost
34
Q

What is probability risk analysis?

A

Individually analysing each input variable for a statistical tolerance; plots possible outcomes and probabilities

35
Q

What is gearing?

A

Using a combination of debt and equity funds to increase developer return on equity but incurs debt risk

36
Q

What are transferrable development rights?

A

Heritage buildings that cannot be demolished can sell their right to others to develop on their land

PROPERTY342 (21 decks)

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