Case Study Questions (Refer to APC 1) Flashcards
How big is the Silvertown Masterplan?
27 hectares
Did you formalise the instruction in any way?
Written confirmation in an email
How many units are there in the project?
599
How many BTR units are there in the project?
423
How many affordable units are there in the project?
176
What was the affordable tenure split?
What is RIBA Stage 2?
Concept Design
- Architectural concept developed and approved by the client
- Aligned to the Development & Project Brief
What is a RMA?
SAALL
- Scale
- Access
- Arrangement
- Layout
- Landscaping
How many phases are there in the masterplan?
5
What is the role of the GLA in the scheme?
- GLA are the landowner
- Strategically, GLA are responsible for the strategic administration of Greater London, including regeneration
What is a Registered Provider?
- Organisations that provide social housing
- Three types
- Not for profit (housing associations)
- For profit
- Local authorities
Overseen by the Regulator of Social Housing
What are the different types of affordable housing?
RENT:
- Affordable / Intermediate Rent (20% lower than market rent)
- Social Rent (50%lower than market rent)
E.g. London Affordable Rent (20% lower than market rent)
BUY:
- Affordable / Intermediate Sale (20% lower than market value)
E.g. Shared Ownership (20% lower than market value)
Also First Homes Scheme (30-50% lower than market value)
How can an amenity offer support rental values?
A rental premium can be charged where developers have a suite of amenities
How did you determine what rental values would be attractive to target tenants and the investor market?
Tenants:
- As can be seen in the appendix, I undertook thorough investigation to understand what demographic the plot should be looking to attract
- I also referred to residential agents
Investors:
- Investors will look at the financial performance of an asset, so ensuring there is strong revenue and cap value, it ensures the IRR is higher
What are key metrics that investors would look at?
IRR
(Check with James??)
Why did you discount Option 1 - No / limited amenity offer?
Positives:
- Reallocate amenity spaces to units
Negatives:
- Not attract target tenants who would expect onsite amenity
- Not attract investors if rental values weren’t attained
Why did you discount Option 3 - Premium amenity offer?
Negatives:
- Not attractive target tenants due to unaffordable rent
- Not attract target investors due to increased operational expenditure
Why did you advise to proceed with Option 2 - Standard amenity offer?
Positives:
- Attract target tenants who are likely to be working a desk based job and could utilise the co-working space / enjoy the convenience of an onsite gym, but not be willing to pay higher rent for amenities they wouldn’t utilise
- Attract target investors as operational expenditure would not be increased through additional amenities
What is operational expenditure?
Typically 21.5 - 24.5%
Void of 4%
What does op ex include?
Op ex:
- Staff costs
- Security
- Cleaning and refuse
- Utilities
- Repairs and maintenance
- Property admin expenses
- Health, fire and security
- Lift servicing
- Landscaping / external management
- HVAC
- Insurance and fees
- Property manager fee
- Individual flat refresh allowance
Leasing ex:
- Leasing staff and admin
- Advertising, website and promotions
Capital ex:
- Sinking fund provision
- Total capital expenditure
Please explain the comparable method of valuation?
The comparable method can be used where there is a good body of recent, reliable comparable rental, yield or sales evidence
- Find comps
- Find headline rent to give a net effective rent (as appropriate)
- Assemble in schedule
- Adjust using hierarchy of evidence
- Opinion of value
- Report value and prepare file note
Please explain the hierarchy of evidence?
A - Direct comps (completed transactions / asking)
B - Market data (commercial databases/indices/historic evidence/market demand)
C - Other sources (locations/assets)
Why did you discount option 1? Achieved rents within 2 miles
- Royal Wharf - 2020, comparable location, but more premium offer, higher rents due to premium amenity offer
- Fizzy East 16 - 2022, less comparable location, limited amenity offer, higher rents due to location
Negatives:
- Insufficient to base market rents on two sources with different amenity offerings
Why did you discount option 3? Expand search area and utilise achieved rents within 5 miles
Negatives:
- Discounted due to less comparable locations
Why did you advise to proceed with option 2? Utilise achieved and asking rents within 2 miles
- Millet Place - 2002, comparable in terms of location, inferior amenity offer, inferior rents to project
Positives:
- Achieved rents in Option 1
- Asking rents from additional scheme
What were the projects rents in the end?
Studio: £1,670
3b6p: £3,350
What were the projects rents per sq ft?
Studio: £40psqft
3b6p: £32
Have these rents increased from the time of instruction?
By about £100pcm (£6/7 more psqft)
Studio: £1,772 (£47)
3b6P: £3,481 (£38)
What yield did you apply?
4.5%
What void period did you apply?
2%
What purchaser’s costs did you apply?
1.8%
What inflation did you apply?
2.2% at the time
What was the GDV of the scheme?
£327m
What was the value of the BTR?
£251m
What were the total development costs?
£287m
What was the profit of the scheme?
£40m
What was the MoC of the scheme?
14.19%
What is a planning risk?
Potential issue or uncertainty that can arise during the planning / implementation stage.
- Unrealistic programme / budget
- Lack of stakeholder buy in (insufficient engagement or agreement)
- Regulatory / legal issues (changes in regulation / unforeseen legal challenges)
- Other challenges include misunderstandings, misinterpretations, incomplete applications, payment of fees, timing of committee meetings
What is compliance?
Alignment to legal and regulatory standards
Why does your client use MoC, what else could they use?
Talk me through Option 1 - Increase massing
- Add storeys to increase number of apartments to improve GDV
- Reviewed max building heights plan, dictated by safeguarding of LCY, to establish project already at its max height
- Breaching consented parameter plan is failure to comply with S171A of T&P
What does the Town and Country Planning Act (1990) set out?
Act of Parliament that regulates land development in England and Wales - it is planning law
What does Section 171A of the Town and Country Planning Act (1990) set out?
“carrying out development without the required planning permission, or failing to comply with any condition or limitation subject to which planning permission has been granted constitutes a breach of planning control”
Talk me through Option 2 - Switch tenure
- Switching affordable to private to improve GDV
- Reviewed MA with the RP to understand commitment
- Certain number of AH have to be delivered in Phase 1
- Not delivering this would breach MA
How many homes have to be delivered in Phase 1?
721
Actually stipulates how many per plot
Talk me through Option 3 - Value engineering
- Work with quantity surveyor to undertake VE
- Identified:
- Switching to aluminium to composite windows
- Switching from bespoke to standardised balconies
- Cheaper façade treatment
- Reviewed RPs design spec to check these were acceptable, which they were
- Engaged with DP9 to check if they posed a planning risk, which they did not
- Reduced CC which increased MOC to 14.19%, threshold is 14%
What is included in a Cost Plan?
How did you adhere to the Rules of Conduct?
Seeking advice from:
- Residential agents
- Quantity Surveyor
- Planning Consultant
What does the PS: Comparable Evidence in Real Estate Valuation (1st Edition, 2019) set out?
- Principles of comparable evidence
- Sources of comparable evidence
- Recording of comparable evidence
- Recording comparable evidence
- Analysis of comparable evidence
- Dealing with a shortage of comparable evidence
What else would you have considered in the sensitivity analysis?
Other development costs:
Reviewed:
- Marketing fees
- Planning fees
