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Apc > Development Appraisal > Flashcards

Development Appraisal Flashcards

1
Q

What is CIL?

A

Community Infrastructure Levy - planning charge used to support development of local infrastructure. Charged per m2 in Leeds.

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2
Q

What is S106?

A

Section 106 of the Town and Country Planning Act 1990 allows local planning authorities to enter into legally binding agreements with landowners, to mitigate the impact of the development on the local community and infrastructure

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3
Q

What are the differences between CIL and S106?

A

They are separate infrastructure funding sources. S106 addresses site specific mitigation required to make a new development acceptable in planning terms. CIL addresses the broader impacts of the development.

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4
Q

How can a development appraisal be used in valuing developments?

A

Can be used where redevelopment is required to achieve the highest and best use, or where improvements are being contemplated

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5
Q

What is a Monte Carlo simulation?

A

A mathematical technique that predicts possible outcomes

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6
Q

What is a sensitivity analysis?

A

Shows how the outcome changes if an input is varied slightly

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7
Q

How do you carry out a sensitivity analysis?

A

Using Argus Developer software to make the adjustments to the inputs subject to sensitivity analysis

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8
Q

What variables might you change and why?

A

Build costs most commonly

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9
Q

What affects sensitivity of a development appraisal?

A

Sensitive to many factors, such as construction costs, rates of interest, yield and rent

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10
Q

Tell me about your understanding of RICS Professional Standard Valuation of Development Property

A

Outlines when development appraisal can be used and guidance in carrying them out

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11
Q

Tell me about your understanding of RICS Professional Standard Financial Viability and Reporting

A

Provides guidance for best practise when assessing Viability of a development, with 16 mandatory requirements for carrying out Viability assessments.

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12
Q

Tell me about incorporating affordable housing into developmental appraisals

A

There is GDV for the market value housing and GDV for the affordable housing, affordable housing GDV is calculated using affordability standards.
Leeds City Council uses a set rate per m2 reviewed regularly.
It also impacts the profit, which is blended to reflect separate profit for market value housing and affordable housing.

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13
Q

What is an S curve?

A

Shows progress of a project over time, costs start at a low level then rise throughout the construction process - like an s

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14
Q

Tell me about your due diligence when undertaking a development appraisal

A

Title plan, planning records, internal/client records, digital mapping software

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15
Q

What sources of information do you undertake when undertaking a development appraisal?

A

BCIS and building surveyor for construction costs, Costar EIG and internal database for comparable. More sources of info depending on site specific factors.

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16
Q

How do you calculate GDV?

A

Value of completed scheme based on market comparables

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17
Q

How do you calculate NDV?

A

Estimation of the amount of money a property development expects to make once all costs taken into consideration

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18
Q

How do you calculate finance costs?

A

Based on client figures or market rates

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19
Q

How do you calculate development period?

A

Depending on the scale of the project, condition of site as to how much site preparation needed

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20
Q

How do you calculate developers profit?

A

Depending on the risk of the scheme, higher profit to reflect higher risk.

21
Q

What other metrics can you produce from a development appraisal?

A

Return on Capital Employed (ROCE)
Profit erosion
Rent cover

22
Q

What is the difference between a residual valuation and a development appraisal?

A

The output of a residual is the value of the land whereas the output of a development appraisal is typically the profitability of a proposed development.
Residuals have one main purpose, development appraisals can have many.
Residual inputs are fixed, development inputs are variable
Residuals don’t have to involve precise cash flow whereas development appraisals do
Residuals don’t need specialist software but development appraisals do

23
Q

What are the procedural similarities between a residual valuation and a development appraisal

A

Both are used to find Residual Land Value

24
Q

If you do not have site specific figures, how would you account for professional, legal and marketing figures?

A

Consider the scale of the development and scale of work involved, check with a senior colleague.

25
Q

How can a development appraisal help inform a site acquisition decision?

A

By indicating profitability/feasibility/viability of proposed scheme, which helps purchaser determine whether they want to go ahead with the site acquisition.

26
Q

What do we mean by special assumptions?

A

Assumptions which have been assumed to be true

27
Q

Where would you source reliable saleswoman and value information?

A

Internally, or from published sources

28
Q

How can you use comparable dales information to inform a development appraisal?

A

To inform GDV and also as a sense check for land values

29
Q

What is IRR

A

Internal Rate of Return - the annual rate of growth that an investment is expected to return, sets the net present value to zero

30
Q

What is profit on cost

A

Selling price minus cost price

31
Q

What is the difference between a DCF development appraisal and a normal development appraisal?

A

More suitable for complex projects

32
Q

When inputting build costs, what measurement basis do you use?

A
33
Q

When inputting sales values, what measurement do you use?

A
34
Q

What is a typical contingency rate?

A
35
Q

How would you reflect the additional costs involved in building on contaminated or brownfield land?

A

Under abnormals

36
Q

Tell me about software you have used?

A

Argus Developer

37
Q

What are the differences between these and when may one be more suitable than another?

A

HCA DAT is used in some public sector organisations, it is a spreadsheet. Argus Developer is better as industry standard, can easily ask for applicant’s surveyors copy of their argus appraisal to go through and check details and look at their cashflow. And with argus developer you can change inputs really easily without running a whole new appraisal.

38
Q

Give me a limitation of a piece of software you have used

A

HCA DAT not as widely used as argus so harder to compare with agents.
Our version of Argus Developer assumes 100% debt borrowing which is unlikely to reflect the real world, we’re unable to alter this setting so that’s a limitation.

39
Q

What is profit on cost/ profit on GDV?

A
40
Q

When would you use one or both of these?

A
41
Q

What are the key viability benchmarks?

A
42
Q

When undertaking a local plan or CIL financial viability assessment, how is site value defined?

A
43
Q

What are the main forms of finance available to developers?

A
44
Q

What is mezzanine finance and how is it priced?

A
45
Q

Tell me about an external factor which influences the appraisal process

A
46
Q

What does the Golden Brick mean in relation to VAT

A
47
Q

What tools do National England set out to help developments achieve biodiversity net gain?

A
48
Q

Explain how the Residential Property Developer Tax works?

A

Companies undertaking uk residential property development with annual profits in excess of £25m will be taxed at 4% on the profits they make on UK residential property development, to help fund removal of unsafe cladding.
Would refer to policy paper for more info

49
Q

What is the normal car parking ratio required by local planning authorities?

A

Would differ for different locations, would check local plan

Apc (17 decks)

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