Development Appraisals

Question 1

What is a Development Appraisal?

Answer 1

A development appraisal is a process undertaken to understand the viability and profitability of a project.

Question 2

How would you calculate the Gross
Development Value of a new residential
development?

Answer 2

The GDV of a new development can be
obtained gaining evidence of recent
sales transactions within the near
vicinity, and also be obtained from
market evidence.

Question 3

How would you reflect planning
requirements in your development
appraisal?

Answer 3

If I was undertaking a residential
appraisal I would take into account an
appropriate level of s.106 and s.278
costs, that I would find out about from
the relevant planning authority, and this
would be deducted from the GDV after
accounting for construction costs, and
a contingency.

Question 4

How do you estimate the total

construction cost for a scheme?

Answer 4

In order to assess the construction cost
of a scheme, I would look to use the
BCIS, to ascertain what cost levels are
on nearby schemes in the area.

I would check this level against with a QS to understand the appropriate level of costs to account for.

Question 5

What is the master plan?

Answer 5

A master plan is an overarching planning document and spatial layout which is used to structure land use and development.

Question 6

What is the difference between Development appraisal and residual land valuation

Answer 6

Development appraisal is to process used to assess the viability of a project using the clients input

Development Appraisal is calculated by
GDV - Development costs - Land costs = Profit
Used for internal purposes

Residual is a method of valuation which uses market inputs at a particular moment in time, on a valuation date to get a site value.
(USES MARKET INPUTS ON THE VALUATION DATE is typically carried out by a registered RICS valuer. The calculation is
GDV - Total Development costs - Profit = Site Value
Redbook Valuation

Question 7

What type of appraisal is Proval?

Answer 7

It is discounted cash flow

Question 8

When changing a unit mixes what other things you were checking and changing?

Answer 8

The grant (GLA) changing the tenure (Such as Shared ownership and affordable)
unit mix of affordable housing that affects planning

Question 9

1. What appraisal tool do you currently use

Answer 9

Bespoke excel based appraisal

Question 10

7. How do you carry out sensitivity analysis?

Answer 10

By changing the build costs and GDV in upward and downward 5% increments

Question 11

10. How do you get to the GDV of a site

Answer 11

By researching comparable sales values and an appropriate applying the £/sqft to each residential unit.

On commercial, this will involve researching comparable rents and sales comps and then capitalising the income using an All risk yield to get a capital value.

Question 12

12. How do you calculate s.106 costs ?

Answer 12

Review planning policy to see what the borough changes for key items i.e. playspace, transport and employment.
Speak to planning consultant
All s.106 costs are negotiated.

Question 13

What is the difference between sensitivity analysis and scenario analysis ?

Answer 13

Sensitivity changes the key variables- yield, GDV, build cost and interest, finance rate. (Rate of return)

Scenario analysis changes the tenure, timing, costs and phasing.

Question 14

What is BCIS ?

Answer 14

Build cost information Service part of the RICS

The leading provider of cost and price information to the construction industry and anyone else who needs comprehensive, accurate and independent data

Question 15

23. Why did you speak to a quantity surveyor to see if your build costs were sensible on your project?

Answer 15

A QS has live examples of similar schemes and will be able to give an indication on sensibility of assumptions based on recent projects.

Question 16

24. What is a s-curve cost profile and why would you use it ?

Answer 16

S curve is a mathematically calculated payment profile which shows the cumulative progression of costs during a construction project.

Question 17

What is NPV?

Answer 17

Net present value (NPV) is a method used to determine the current value of future cash flows

Net present value of a pound. In other words, comparing what it’s worth now to what it is in 20 years.

Question 18

Why wouldn’t there be no contingency in your appraisal ?

Answer 18

Contingency is assumed within the build costs and the development and other costs.

Typically ranging from 5-10% contingency is assumed but varies due to risk

Question 19

33. How could you make your scheme more profitable

Answer 19

Increasing density
Changing the design
Having a better specification

Question 20

34. Describe in its simplest form a development appraisal.

Answer 20

GDV-TDC-Site value = Profit

Question 21

55. What is CIL?

Answer 21

The Community Infrastructure Levy (CIL) is a charge that local authorities can set on new development in order to raise funds to help fund the infrastructure, facilities and services - such as schools or transport improvements - needed to support new homes and businesses.

Question 22

56. What is s278?

Answer 22

is a section of the Highways Act 1980 that allows developers to enter into a legal agreement with the council to make alterations or improvements to a public highway, as part of planning approval.

Question 23

What is a s106 agreement ?

Answer 23

It is an agreement between the Developer/landowner and the Local Authority under the Town and Country Planning Act 1990, which implies measures that the developer must take to reduce its impact on the local community.

These could be contributions made to :
Highways
Eductions
Financial contributions
Public Open Space
Affordable Housing
Town Centre Improvements
Health

Question 24

58. What’s the difference between CIL and s106?

Answer 24

S106 is negotiated whereas CIL is tariff based charging system

CIL could cover a whole areas whereas s.106 is a site specific charge.

CIL is tested at a district wide level whereas s106 is tested on a case by case basis.

CIL cannot be used for affordable housing but s.106 can.

Question 25

61. How do you find build costs?

Answer 25

Using BCIS or by instructing a quantity surveyor

Question 26

Is BCIS reliable?

Answer 26

Yes given the version but it is advised that a quantity surveyor is instructed to provide a more comprehensive build cost.

Question 27

What methods can you use to calculate build costs?

Answer 27

Spons

BCIS

Quantity surveyor

Question 28

What is a cash flow

Answer 28

A cash flow records the flows of cash in and out of the business/project in a period by period basis.

Question 29

What is a discounted Cash flow?

Answer 29

A method is used to find out the life cycle costs of a project for a period time.

To work out the present value on a period of time

Applies % uplift of each cash such as interest.
(Rate of return & elapse time)

Question 30

What is Sensitivity Analysis?

Answer 30

Type of analysis where you look at different combinations of assumptions or Scenarios and you examine the results.

What if analysis (excel)

Question 31

What is reserved matters?

Answer 31

Reserved matter application can be made after outline planning permission is granted and the principle of development established.

The full details of the proposed development can be considered under a reserved matters application.

In a housing development for example, this is where the exact details about such things as the design of the homes, the materials used, the road layout, utilities connections would all be determined.

Application form: Apply online using the Planning Portal online form
Fee: Check the list of planning application fees and charges
Location plan
Block plan
Elevations (existing and proposed)
Floor layout/plans (existing and proposed)
Section plans (existing and proposed)
Roof plans (existing and proposed)
Planning statement