Development Flashcards
What is a development appraisal?
A tool to financially asses the viability of a development scheme
What market conditions might you highlight to a client when undertaking a DA
- High borrowing costs impact upon return
- pull back of borrowing products
- Build costs remaining high
What are the outputs of a development appraisal?
Viability of different uses
Profitability
Sensitivity
Value
What are the current unit costs for the West Midlands?
BCIS- Estate Housing
Lower- £ 118
Median - £139
Higher- £152
What is included in site preparation?
Demolition
Remediation Work
Provision of Service
Levelling
Site Clearance
Do you assume site preparation costs?
No- need a contractors cost plan, however may reflect a high contingency
What costs related to planning are there
S106
CIL
Affordable Housing
Section 278
Planning Consultant
Specialist Reports
General steps of a development apprasial?
Depends on the purpose, viaiblity would be
GDV
-
Costs ( Site Prep, Planning, Build Costs, Professional Fees, Contingency, Marketing, finance)
= Land Value ( Compare to BLV)
What are building costs and how do you get these?
Total cost of building works
Souce:
BCIS
Client
Quantity Surveyor cost plan
Building Surveyor
Spons Architects and builders price book
Where does BCIS get their data from?
Obtained from BS and QS sources, recent contract prices/tenders agreed
Pros and Cons of BCIS
Advantages:
- Widely used and respected
- Provides good coverage of construction costs
Disadvantages:
- Can be out of date
- May not be relevant to your specific project
- Limited control over data
What measurement basis does BCIS use
Gross Internal Area
What are the time periods BCIS use?
Backward facing- quarters
What is commonly included in Professional Fees?
Architects - account for highest proportion
Project Managers
Structural Engineers
CDM principle designer costs - Health and Safety responsible
What are contingency costs?
Account for the level of risk and likely movements In building costs
What are marketing/sales fees?
Marketing Budget
EPC coosts
NHBC Warranty
What type of interest rate benchmark is used for development finance?
SONIA- Stering Overnight Index Average
Bank of England Base Rate plus premium
Developer own
What are the 3 elements developers can get finance on? and how are they shown?
1) Site Purchase (inc purchasers costs)- Straight Line- Compound Interest
2) Construction costs- S curve- half costs over the length of build
3) Holding costs to cover voids- Stright Line- Compound interest
What does Argus assume in terms of dev finance ?
Assume 100% debt finance
What are the two methods of development finance?
1) Debt Funding- Money from a bank or institution
2) Equity Funding- Selling shares in a company, own money or JV
What are the levels of Debt Funding
What is a swap rate?
The market interest rate for a fixed rate or fixed loan term
What are other methods of arranging finance?
Joint Venture- 2 or more parties join to develop
Forward Sale- Where completed schemes are presold to either an investor or developer
What do you understand by overage/clawback?
Arrangement for sharing of recipients over and above original profits expected, shared between vendor and developer in pre arranged apportionment.
e.g. Plot Sales- where a developer acquires land for residential development for a fixed sum and agrees to pay the landowner a further sum if the aggregate revenue realised from the residential plot sales exceeds a certain threshold figure.
