Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Development Appraisal NM > Development Appraisals > Flashcards

Development Appraisals Flashcards

1
Q

What is a ransom strip?

A

An area of land which provides the key to unlock the development potential of adjacent land by enabling satisfactory access to be provided.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Which case law is pertinent to ransom strips?

A

Stokes v. Cambridge 1961

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

How much costs should a developer factor in for a random strip from Stokes v. Cambridge?

A

1/3 of the increase in value of the adjacent (development) land provided by the random strip.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the two approaches to the valuation of development land?

A
  • Direct comparison with sale price of land for comparable development; or
  • Assessment of value of the completed scheme and deduction of costs to arrive at land value.
    *
    Valuer likely to use twin-track approach to cross check values*
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Valuation of development land: which approach will a valuer use?

A

Combination of direct comparison and residual valuation to cross check value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What does the residual method do?

A

Determines the price to be paid for a development site.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Residual Method basic overview

A

Value of completed development (GDV)
Less development costs
Less developer’s profit
Equals site value

When value of completed development site is greater than the cost of development, the difference is known as a residual site value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the Residual Method

A

Method of valuation determining the value of a development site which has potential for development, redevelopment or refurbishment.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Why use the Residual method?

A
  • Comparable land transactions are hard to analyse;
  • May be necessary to appraise value of land where there are no/few comparables;
  • May be necessary to appraise the viability of a specific proposal given a known purchase price for the land;
  • May be necessary to calculate the viability of a refurbishment.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the key periods of a development programme?

A

Pre-construction period;
Construction period;
Main build period; and
Post construction period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is involved within the pre-construction period?

A

Site assembly, getting VP, planning process, tender and contract negotiations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is involved within the construction period?

A

Site preparation
decontamination
archaeological works
infrastructure works.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is involved within the main build period?

A

Construction of the building(s), may be phased.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is involved within the post-construction period?

A

Completion of letting or sale.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a Gantt chart?

A

A diagram to show a proposed development programme.

As valuers we don’t delve into that level of detail but are interested in the duration of the scheme and the associated costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Do you use GDV as a special assumption?

A

Yes. On the special assumption that the development is completed reflecting market conditions as at the valuation date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is a special assumption?

A

An assumption that either:
* requires a valuation to be based on facts that differ materially from those that exist on the date of valuation; or
* is one that a perspective purchaser (exc.one with special interest) could not reasonably be expected to make at the date of valuation having regard to prevailing market conditions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What must a valuer do when providing a Market Value based on special assumptions?

A

Provide a Market Value based on the normal definition (RED Book).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is a Land Transfer Protocol?

A

A process to support land and property asset transfers/disposals between public sector bodies and partners in Wales.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are valuers expected to do with the market?

A

Reflect the market and not dictate the market.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Why use the residual method?

A
  • Few comparables
  • Land transactions are hard to accurately analyse
  • Appraise viability of specific proposal (known purchase price)
  • Calculate viability of refurbishment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What must a RICS valuer be mindful and compliant with for development appraisals?

A
  • Global Red Book 2022
  • Red Book UK Supplement 2023
  • Rules of Conduct
  • Property Measurement (interface between IPMS & CoMP)
  • Surveying Safely 2nd Edn
23
Q

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

A

A residual valuation is used to find the value of land.
A development appraisal is used to establish viability.

24
Q

What is the residual method?

A

Used to value land with development potential.

25
Q

Calculation for residual method?

A

Market value for completed development
less
developers costs and profit
=
residual sum to purchase property

26
Q

Calculation for development appraisal?

A

Market value for completed development
less
developers costs including site costs
=
developers profit

27
Q

What is the Gross Development Value?

A

Capital value of the completed scheme

28
Q

What does the investment method do?

A

Capitalises the market rent and market yield

29
Q

What is the Net Development Method?

A

GDV greatly reduced by the costs of disposing of the development via an agent to give a net development value.

30
Q

What is a sensitivity analysis?

A

A form of risk analysis for the valuation as many inputs are subject to change from the date of valuation to when the developer can acquire the site.

31
Q

What factors would be subject to change within a sensitivity analysis?

A
  • Current market baseline;
  • GDV;
  • Build costs.
32
Q

What would a client do with a residual land value?

A

This amount is the starting point for negotiations to bid for the land.

33
Q

What comes under developers costs?

A
  • Construction costs;
  • professional fees and charges;
  • contingencies;
  • finance;
  • advertising and marketing;
  • agency fees;
  • planning gain.
34
Q

What is the latest RICS guidance for development appraisals?

A

RICS Professional Standard:
Valuation of development property
1st edition
effective 01 February 2020

35
Q

What does the ‘valuation of development property’ professional standard contain?

A

Sets basis for which the valuation of development property should be aligned with (VPS 4) and recommended approach for the development valuation process.

36
Q

Valuation of development property is undertaking in which 2 ways?

A
  • Market comparison approach
  • Residual method
37
Q

Which valuation approach should be used for the valuation of development property?

A

Combination of both market comparable approach and residual method. No reliance should be on just one approach.

38
Q

How is residential GDV calculated?

A
  1. unit values (£/house or flat x number of units); or
  2. GIA x rate sqm (sq ft) sales price.
39
Q

How is commercial GDV calculated?

A

Estimated Rental Value (ERV) x yield
Purchasers costs deducted by convention

40
Q

Pre-development costs: planning

A
  • planning permissions & appeals
  • S.106 or CILs
  • Surveys e.g. archiological, wildlife
41
Q

Pre-development: site related costs

A

Before main construction can commence
* Environmental
* Site/ground works
* Infrastructure/highways
* H&S compliance
* Securing full vacant possession of site

42
Q

Pre-development: acquisition costs

A
  • SDLT
  • Agents fees
  • Legal fees
43
Q

Building costs

A
  • Major component of residual
  • Expressed as cost per sqm or sq ft based on GIA
  • Based on BCIS/Sponds cost database
  • Contingency - % of build costs. Quantum dependent on nature of development. Typically 3-5 %.
44
Q

Typical profit costs of development

A
  • Commercial: 20% of costs
  • Residential: 15% of GDV
45
Q

What is the starting point of negotiations for a ransom strip?

A

50%

It is reasonble to assume that the starting point for the calculation of ransom payment for the grant of access would be that the parties would be willing to share any increase in value resulting from the grant of access to the development land equally

46
Q

What are the 5 common basis of value?

A
  • Market Value
  • Market Value with special assumptions
  • Fair Value
  • Market Rent
  • Investment value/worth
47
Q

What is fair value?

A

IFRS 13:
The price that would be recieved to sell an asset or paid to transfer a liability inan orderly transaction between market participants at the measurement date

48
Q

What is investment value?

A

The value of an asset to an owner or a prospective owner for indiviual investment or operational objectives.
Also known as worth

49
Q

What must you also provide when providing a market value with special assumptions?

A

A market value based on the normal definition.

50
Q

Examples of special assumptions

A
  • Anticipation of planning consent
  • Anticipation of physical change
  • Anticipation of a new letting
  • Existance of a special purchaser
  • Anticipation of new economic of environmental designation
  • …
51
Q

What is a market value with special assumptions?

A
  • Requires valuation to be based on facts that materially differ from those that exist at the date of valuation; or
  • Is one that a prospective purchaser (excluding purchaser with special interest) could not reasonable be expected to make at the date of valuation having regard to prevailing market conditions.
52
Q

IVS 410 (development property) definition.

A

‘an interest where redevelopment is required to achieve the highest and best use, or where improvements are being contemplated or are in progress at the valuation date’.

53
Q

What does development property definition include?

A
  • The construction of buildings
  • Previously undeveloped land, which is being provided with infrastructure
  • The redevelopment of previously developed land
  • The improvement or alteration of existing buildings or structures
  • Land allocated for development in a statutory plan, and
  • Land allocated for a higher value use or higher density in a statutory plan’.
54
Q
A

Development Appraisal NM (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions