Development appraisals

Question 1

Difference between residual and Dev appraisals

Answer 1

Residual assumes market standard inputs to calculated the RLV or MV
Dev Appraisals use developer specific inputs to assess the profitability of a scheme

Question 2

Emsworth, why did you apply a 20% profit on GDV?

Answer 2

I was aware of rising build cost pressure and rising cost of debt at the time

Question 3

Limitations of residual and using Argus?

Answer 3

The inputs are highly sensitive to change and assumes 100% debt finance

Question 4

Emsworth - Did you use the costs by the build contractor?

Answer 4

I cross checked these costs with BCIS and building surveyors in my office. They were in line with both so I adopted

Question 5

Andover Pitch Letter - how did you determine what scenarios to test?

Answer 5

I looked on the Test Valley Housing Supplement to the Local Plan which determined the AH threshold and housing types and Mixes.

Question 6

Andover Pitch Letter - why could you deduct the CIL and how did it change for the scenarios?

Answer 6

The liability is on net additional floor place per sqm. You can deduct assets that have been in use for a 6 months over a 3 year period.
CIL is not liable on AH so the fully private scheme has more to pay

Question 7

Car Park Southampton - did you GDV the hotel?

Answer 7

My licensed measure team advised me on the necessary inputs. Assessed on a per key basis (£7k) and multiplied by a yield (5%)

Question 8

Car Park Southampton - why residential over the other options?

Answer 8

Resi - £3m
Office - £2.5
Hotel - £1.7
Produced the greatest LV and the demand and Market sentiment at the time was the strongest

Question 9

Mixed Use Portsmouth - what discount factors did you apply?

Answer 9

Increasing the dev profit to 20%, increased the pre construction time scales to account for planning, increased the contingency to 10%, adding separate planning costs to the profession fees

Question 10

Mixed Use Portsmouth - what additional requirements are there for high rise?

Answer 10

Over 6 stories, additional costs for safety features, professional fees for additional surveys and professional work.

Question 11

What variables did you test in the sensitivity analysis?

Answer 11

5% step up and down increments on the construction costs and sales values and what effect it would have on the LV

Question 12

What does Valuation of Development Property 2019 set out?

Answer 12

• Definition of GDV, RLV and DA
  Guidance on:
• Assessing Dev potential
• produce sensitivity analysis to manage risk
• not only one method should be relied on

Question 13

How to undertake residual without Argus?

Answer 13

Deduct all development costs from the GDV. Finance the whole of the development - (TC/50% finance ratedev period)

Question 14

What do you look for when collecting BCIS data?

Answer 14

Location and sample size