Case Study Flashcards
What was the assumed value for the affordable units
40% of market value for social rent and 70% for shared ownership
Profit erosion
Length of time it will take for development profit to be completely eroded due to holding costs like interest post completion of the development
What was the scope of works?
Undertake financial analysis to test the viability of a residential development with 20% affordable housing
Report conclusions providing an overview of assumptions
You said there was limited evidence for flats. Did you only use one comparable?
There was only one new build comparable which was also the closest comparable to the subject. However, I cross checked with second hand sales close to the property. The value determined reflected a 20% premium for the new build subject property which I felt was appropriate given that the second hand comparables also had attributes that were superior to the subject such as larger size and greater outdoor amenity space
How did you reflect the grant funding in the appraisal?
On a golden brick basis as advised by my affordable housing valuations colleagues. A third in month 3 on construction and then spread evenly over the next 4 months (month 3 mirrors deposit paid by RP and held in escrow)
Which guidance did you adopt from valuation in development property 2019?
Seeking comparable land evidence
Risk analysis
Confirming grants with relevant government office
What might you have down differently if this had been a Red Book valuation?
The basis of value market value instead of investment value
Ensuring the client’s scheme was the optimum scheme
Why did you apply a 3% contingency
The low construction risk associated with the development being a greenfield fully serviced site
However if I was doing it now I would apply a higher contingency
How did you determine the finance rate?
Based on the 3-year interbank swap rate plus a margin. My firm and other firms communicate with banks to understand the rates. Currently swap at about 4.8% and bank lending margins on developments between 1.5% and 2.00% so around 6.3% to 7.00% depending on risk on the development (strength of location and developer track record)
What was in the consultancy agreement with the client
Properties
Scope of work
Reporting requirements
Termination within 10 business days notice
Fee basis - day rate
How did you cross check against BCIS
Build costs provided were £95 psf plus £12,500 for plot works and externals per unit. £95 was similar to lower quartiles of BCIS for Yorkshire and the Humber which made sense as this was a lower value area
What are commercial SDLT rates?
Zero up to £150,000
Then 2% up to £250,000
Then 5% above £250,000
What are professional fees made up of?
Architect (largest portion), QS, Engineer, PM, Planners
What was the housing shortfall for the authority?
510 new homes required each year and 200 being affordable. Shortfall averaging 205 per annum 2016 - 2021
Talk me through your inspection
Met the client on site to get access via primary school
Checked the site boundary in line with the title plan
Checking topography which was flat
Walking around the local area to check the types of housing around and amenities
Any environmental factors like water courses and power lines
Any rights of way or apparent use of the site
Ground condition whether overgrown
