Case Study Questions!

Question 1

What was the valuation date?

Answer 1

6th June 2022

Question 2

Do you have the proposed loan terms and what were they?

Answer 2

£1,600,000

Max 60% loan to Cost
Max 50% loan to GDV

24 month term

Question 3

Appraisal what were the time scales?

Answer 3

Purchase 1 month
Pre-construction 1 month
Construction 9 months
Sale 6 months (3 off plan)

Total = 14 months

Question 4

Why have you allowed only 1 month for pre-construction?

Answer 4

Set up an on site office for etc..

Question 5

What is IRR?
What was the IRR?

Answer 5

The the investors rate of return

Can’t remember - would expect for a scheme of this nature 25 - 30%

Question 6

What did you advise with regard to the proposed loan?

Answer 6

I advised that the property was suitable to act as security

Question 7

What bases of value did you report?

Answer 7

The Market Value

The Market Value on the special assumption the scheme has been built out to a high specification (The GDV)

Question 8

What is a special assumption?

Question 9

What is a service level agreement?

Question 10

Who did you undertake conflict checks on?

Answer 10

The property
The borrower

Question 11

What statutory due diligence did you undertake?

Question 12

During your inspection what were you looking out for and what did you note?

Question 13

Where there any planning conditions?

Question 14

What were the access arrangements?

Question 15

What is a neighbourhood plan?

Question 16

Why have you allowed for a 1 month purchase?

Question 17

What did each bungalow include?
What was the parking?

Question 18

Which way did the gardens face?

Answer 18

1. East
2. East
3. South
4. South

Question 19

Why did you rely on the sale of second hand property?

Answer 19

RICS guidance note on valuing new build homes
1. New build on site
2. New build off site
3. Resale

Question 20

What did local agents report?

Answer 20

Upper end of the market was very active

Very few new build bungalows sold/ high end new build units in Emsworth

Anticipated a high demand

Question 21

Looking at the Gables they averaged £546 psf

Your scheme averaged £609 psf

Why Is yours so much higher?

Answer 21

Conversations with local agents who advised they felt a 10-15% premium would feel appropriate.

• Better location
• Smaller scheme
• Higher quality finish
• Absence of age restriction

Question 22

The gables comparable what were the details?

Answer 22

Small scheme In Fishbourne
5x 3 bed bungalows
Sold in Q1 2022
Age restriction to those over 55+
Av 1,100 sq ft
Av £605,000
Av £545 psf

Flats at the front not age restricted

Question 23

2 Clovelly Road

Answer 23

March 2022
£800,000
Three bedrooms
Chalet bungalow (two bedrooms upstairs)
£468 psf
Larger at 1709 sq
Fronts the road

Question 24

14 West Road

Answer 24

Sold in March 2022
£775,000
£494 psf
Three bedrooms
1,568 sq ft
Dated in part
Aesthetically less appealing

Question 25

27a Clovelly Road

Answer 25

Sold February 2020
£785,000
Three bedroom
£517psf
1,517 sq ft
High specification
Old transaction

Question 26

Why did you adopt a higher build cost than your clients forecast construction cost?

Question 27

Your BCIS sample size was 22 is this enough?

Question 28

Development land comparables

Answer 28

Lavant Road March 2022
£327,000 x 4
(4x 4b)

Guildford Road May 2022
£225,000 x 4
(2x 4b) (2x 2b)

Runcton August 2020
£176,000 x 4
(3x 3b) (1x 4b)

Question 29

What is included with BCIS?

Answer 29

The House
Garden
Drive / Parking
Road / Drainage / Services (Only 1/2M)

*
No infrastructure cost
No landscaping cost
No public space cost
No highway cost etc..

Question 30

The extra £12 psf you have adopted totals £65,000. Is this reasonable?

This was to take into account

Externals
Surfacing the road
Electric gates at the front
Removal of a brick shed

Question 31

Why have you assumed professional fees at 8%?

This is £90k

Answer 31

6 -8% (site with planning)

Banks appetite for risk was very low as you can see with the contingency
- Project management
- QS
- Building Monitoring
- Procuring plans from architect

Question 32

What is the function of an S curve?

Answer 32

Distributes build costs across the appropriate periods of the development

Question 33

What is VPGA2?
What is IVS 410?

Answer 33

Valuations for secured lending
Development property

Question 34

What did your sensitivity analysis show?

Answer 34

5% step up and down in BC and Sales

Question 35

What did the sensitivity analysis show

Answer 35

10% decrease in sale and 10% increase in cost = £830,000

10% increase in sales and static build costs = £1.4m

Question 36

What was the land value?

Answer 36

£1.2m

Question 37

SWOT of the scheme?

Answer 37

S - Location, CIL paid, planning implemented

W - Possible road noise

O - Strong residential market

T - Rising build costs

Question 38

How did you demonstrate good client care?

Answer 38

Completed within the agreed timescales

Regular update provided

Question 39

What could you have done better?

Answer 39

Taken better photos
Engaged with local agents sooner

Question 40

What have you learnt?

Answer 40

Better understanding of the requirements set out under the red book.

Question 41

Did you undertake a peer review?

Question 42

Where would your finance costs be now?