Development Appraisals

Question 1

Define Development Property

Answer 1

Property where redevelopment is required to achieve best value- or where works are already in place as of valuation date

Question 2

Where is development property defined?

Answer 2

RICS Guidance Note: Valuation of Development Property 2019

Question 3

What is the BEAMS teams?

Answer 3

Built Environment and Mineral Surveyors

Internal VOA building and quantity surveyors team

Question 4

Under what methods are valuations usually undertaken for development property?

Answer 4

Residual and comparable

Question 5

What is the key RICS guidance for development appraisals?

Answer 5

Valuation of Development Property 2019

Question 6

What is the methodology for a residual?

Answer 6

GDV
less costs
less developers profit
less finance
= amount to purchase land

Question 7

How is CIL calculated?

Answer 7

Price per additional square metre
Paid upfront
Rises with indexation

Question 8

When is CIL payable?

Answer 8

Upfront at the start of the scheme

Question 9

What does BCIS stand for?

Answer 9

Building Cost Information Service

Question 10

Where else could you source build costs apart from BCIS?

Answer 10

Cost schedule
Building surveyor

Question 11

What were the build costs for the Bournemouth scheme?

Answer 11

£1900 per m2 - used upper quartile from BCIS due to higher end development

Question 12

What were the build costs for the Wantage scheme?

Answer 12

Approximately £1500 per m2

Question 13

How is GDV calculated?

Answer 13

Capitalization of projected rent/ sales

Question 14

What is the RICS Guidance for viability work?

Answer 14

RICS Professional Statement: Financial Viability in Planning 2019 - lays out 16 mandatory requirements

RICS Guidance Note: Assessing Viability in Planning under the NPPF effective July 2021

Question 15

How did you value the affordable housing?

Answer 15

Affordable rent and social rent- Capitalised using investment method
80% market value or would look at housing allowance in the area
Typically 45-55% market value

Shared ownership- assume 50% capital outlay then capitalize 2.75% rent on remaining share
Typically 60-80% market value

LOWER developer profit as considerably less risk

Question 16

Why did you use ARGUS developer?

Answer 16

• I could do the development in stages
• It allowed me to run the cash flow in the background
• Can easily adjust a single input for sensitivity analysis

Question 17

What are the constraints of using ARGUS developer?

Answer 17

• More inputs mean more sensitive
• Tailored to larger developments

Question 18

What is developers profit a percentage of?

Answer 18

Residential- GDV
Affordable Housing- Cost
Commercial- Cost
Mixed Use- blended

Question 19

What is the PPG?

Answer 19

Planning Policy Guidance-
Introduced in NPPF
Lays out recommended approach for viability

Question 20

What is a section 106 agreement?

Answer 20

An agreement between the planning authority and developer which can be attached to planning permission

Question 21

What are the different forms of sensitivity analysis?

Answer 21

• Simple: adjust key variables such as GDV
• Scenario: adjust content or timing
• Monte Carlo: using software

Question 22

What is included within the RICS Professional Statement: Financial Viability in Planning 2019?

Answer 22

Mandatory requirements for surveyors undertaking viability work:
- sensitivity analysis
- timeliness
- transparency
- justification of evidence

Question 23

What type of sensitivity analysis did you use for Millbrook Square?

Answer 23

Simple- adjusted GDV based upon values of units
Scenario- adjusted number of units and timescale

Question 24

What is Benchmark Land Value?

Answer 24

Used for viability
Value of land in its existing use plus a landlords premium
or
Alternative use value as long as planning allows