Development Appraisals L1/L2

Question 1

Describe the land at 28 Kingsclere Close

Answer 1

surplus garden land, corner plot adjacent to 28 Kingsclere Close. Registered as a separate title in 2010, approx 290 sqm.

Question 2

Describe the background / history on the development site

Answer 2

The owner wanted to develop the site, prior to the announcement of the Alton Estate Regeneration Project. The owner had considered two main options

1. 15 unit student accommodation scheme (4 storey)
2. 5 unit assisted living scheme

They had produced architect drawings on both schemes but could not get planning consent due to the designation of the development scheme

Question 3

What was the purpose of your instruction

Answer 3

I had to value the land, to aid negotiations with the council with the landowner. Needed to decide whether to the land was to just get scrap land (existing use value), hope value or full development value

Question 4

How did you determine whether to undertake valuation on full development value or hope value

Answer 4

I instructed our internal planning team to undertake a planning appraisal on the site to see whether the development schemes outlined would have been possible in a no scheme world where the Alton regeneration project did not exist. The planning team concluded that the development plans fitted into the local planning policy and therefore, for the purpose of the valuation - based on the rule 2, market value of the land, assumed that planning permission would have been consented on the valuation date (Special Assumption). Assumes no scheme world

Question 5

What is an Certificate of Appropriate Alternative Development

Answer 5

outlined in s17 of LCA 1961 - when a CAAD is awarded, it assumes that planning permission would be granted if the land concerned was not proposed to be CPO’d. Determines whether development might have been permitted, if granted, full development of the site is awarded as MV.

In this case, the council decided that based on the planning advice given by CJ, that the development would have gone ahead.

Question 6

Why did you undertake two appraisals for the schemes

Answer 6

To decide whether both or either option would be viable on the site, to help determine the MV of the site

Question 7

How did you approach the appraisals

Answer 7

First calculated to GDV for each of the options, then minused the TDC and profit to work out the site value for the developments.

Question 8

Describe how you calculated the GDV for the student accomodation

Answer 8

Researched comparable sales of student accommodation blocks with sold yields and rental values for student units. I also looked at PBSA market reports to further back up my yield choices.

Used a rental value of £765 pcm and an adopted yield of 5.5%. Based on student capacity back to normal due to end of restrictions.

I capitalised the total rental income by the years purchase multiplier (1/i) to calculate the GDV at £2.5m (£166,000 per unit).

Also compared this to sales of other PBSA blocks, recent sales in london ranged between £205,000 and 180,000 per unit. My unit was a smaller scheme and further from London so I expected it to achieve a lower price per unit

Question 9

Describe how you calculated the GDV on a 6 unit assisted living scheme

Answer 9

I researched comparable sales of assisted living flats. I found comparable sales of property within retirement villages across London

Analysed the comparables and used a rate of £525/sqft over the development area. GDV calculated at £3.7m for 6 unit scheme

Question 10

Describe how you calculated the TDC for each developments

Answer 10

1. Construction costs gathered from BCIS for LBW Student Residences - £226 per sqft over area 4,638 sqft (GIA) or cost consultants are more accurate. GIA calculated from working out areas from scaled plans
2. Construction costs gathered from BCIS for homes for disabled. £317 per sqft over 7076 sqft
3. Developers profit on GDV – 15% - profit on GDV
4. London Mayors CIL Estimate (£80/sqft) = £35,360
5. SDLT, Agent fees (1%) and Legal fees (0.5%) on acquisition cost of site
6. Marketing fees (1.5%)
7. Professional Fees (12%) – usually 10%, but as smaller scheme I thought the costs are likely to be higher
8. Sale Agent (1%) and Sale Legal (0.5%) of sale costs of units
9. External Construction Costs (10%)
10. No demolition costs as garden land
11. Contingency Costs (5% of construction costs)
12. Finance rates – 6.5%

Question 11

How did the construction costs differ between developments

Answer 11

£226 per sqft for the student accommodation and £317 for the assisted living scheme for disabled

Question 12

Describe the comparison for the land development value for each scheme

Answer 12

£550k for the student accommodation (change value to 20% profit) vs £14,000 for the assisted living scheme. On this basis, decided that the assisted living scheme would probably not have been very viable and awarded market value, rule 2 value based on student accommodation value