Development Appraisals - L2 Flashcards
(Fulham) Can you talk me through from top to bottom how you did your development appraisal here?
1) Competent, conflict of interest check, ToE
2) Cost of land was an input and profit on cost was an output
3) Collated Market Rent and Investment Evidence
4) Capitalised my opinion of market rent by the capitalisation rate and calculated GDV
5) Deducted purchasers costs (6.8%) and the cost of land which was in input, to arrive at NDV
6) Deducted all other costs
7) Profit on cost was 18.5% and unviable as my clients target profit on cost was 20%
How did you know what the site value was?
My client bought the site a few months prior to me running the appraisal
(Fulham) Why was the scheme not viable?
Did not reach my clients target profit on cost
(Fulham) What was your clients target profit on cost and what was the output?
20% and 18.5%
(Fulham) Why is sensitivity analysis important?
Required for key variables such as build costs and market rent to show a range of values and show the worst case scenario.
(Fulham) What are the three forms of sensitivity analysis?
1) Simple Sensitivity - analysis of key variables
2) Scenario Analysis - change of scenarios for the development content/timings
3) Monte Carlo Simulation - using probability theory, using software such as Crystal Ball
(Battersea) What is Article 4?
A tool used by the council to restrict permitted development rights within specified areas.
(Battersea) Was your site in an Article 4 area?
Yes, therefore my client had to obtain planning permission to convert the offices to residential.
(Battersea) Did the scheme have planning permission?
Yes the client obtained planning permission before I undertook the appraisal.
(Battersea) What are S106 costs?
Legally binding agreements between developers and local planning authorities to mitigate the impact of development by ensuring the provision of infrastructure and services to securing specific community benefits.
Subject to negotiation between the developer and local planning authorities.
(Battersea) How did you incorporate the fact planning permission had already been granted?
I reduced the contingency levels to reflect this and am aware you can also alter the profit on cost to reflect that planning has already been granted.
(Battersea) What are permitted development rights?
When you don’t need planning permission to convert offices to residential.
(Battersea) Why do developments get charged S106 costs?
Help offset the impact of development on the local community, ensuring that sufficient infrastructure is in place.
(Battersea) How does S106 differ to CIL?
CIL - rate per sq m of any additional floors based upon the Borough which is fixed.
S106 - the costs can vary depending on the development and this can be negotiated.
(Battersea) Give an example of S106 agreement
Increased traffic on roads as a result of new development, developer to contribute money towards the roadway to support this.
