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Mia Bourne APC Revision > Development Appraisals Level 1 > Flashcards

Development Appraisals Level 1 Flashcards

1
Q

What is a Section 106

A

A site specific legally binding agreement with a landowner as part of the grant for planning permission

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2
Q

What is a CIL?

A

A tariff based charge set by local authorities on new development

can contribute to schools, health services, tansport improvement

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3
Q

What is the difference between CIL and S106

A

S106 is negotiable and decided on case by case basis where CIL is a fixed charge

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4
Q

What costs are associated with a development appraisal?

A

Site Preparation
Planning Costs
Building Costs
Professional Fees
Contingency
Finance
Developers Profit
Marketing

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5
Q

What is included in site preparation?

A

Demolition
Site Clearance
Levelling

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6
Q

What is included in Planning costs?

A

section 106
CIL
planning application
local planning policy

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7
Q

What is market standard for professional fees?

A

10-15%

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8
Q

what is market standard for contingency?

A

5%-10%

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9
Q

Why does contingency vary?

A

reflects risk of the project, for example if site didn’t have planning permission / movements in build cost

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10
Q

What are the three elements a developer might need finance for?

A

Site Purchase
Total Construction
Holding Costs - voids until disposal of scheme (rates s/c)

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11
Q

How is financing calculated for a site purchase?

A

straight line basis using compound interest
finance is spread equally over development

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12
Q

How do you calculate finance required for construction period

A

assume total construction costs over half of the time period using S curve

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13
Q

What is an S curve?

A

reflects when monies will be drawn down, assumes total costs over half time period reflected in S curve, beginning of the development costs will be lower as planning permission and design is undertaken, then peaks through construction and comes down nearer to completion.

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14
Q

How do you calculate finance for ongoing holding costs?

A

From completion to disposal, straight-line and compounded

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15
Q

What is developers profit?

A

the percentage of the GDV that developer requires as a return

if a project is more risky - higher return for taking on more risk.

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16
Q

What level on debt finance is assumed and why?

A

100% debt finance because we can’t assume clients equity because each borrower will borrow at different rates

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17
Q

What are the main two methods of funding?

A

Debt financing - loaning money from bank

Equity - own money used

18
Q

What is the typical Loan to Value ratio (LTV)?

A

60:40

19
Q

What are the different types of Loans?

A

senior debt - first level loan

mezzanine finance - additional finance (higher interest)

20
Q

What is the Bank of England base rate?

A

5.25%

21
Q

What is a swap rate?

A

Fixed rate with profit margin on top

22
Q

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

A

development appraisal establishes viability

residential valuation to assess market value of site

23
Q

What is the RICS VIP 12 Valuation of Development Land?

A

Provides a framework for a consistent approach to the valuation of development land

covers site inspection
- extent of site
- flood risk
- shape of site
- any matters that could increase costs such as poor access
- party wall / boundary issues

  • variables that can influence site value
  • market demand
  • supply
  • competing developments
  • build costs

development programme assessment
- pre construction
- construction
- post construction

24
Q

What variables can influence site value?

A

market demand
location
supply
competing developments
environmental factors
build costs
planning
timescales

25
Q

What is affordable housing

A

local planning authority makes provisions to meet local demand and need for affordable housing

26
Q

Why is affordable housing important?

A

Improves quality of life, better health, financial stability and population diversity

27
Q

How is CIL calculated?

A

multiplying the new floor space that a development will be creating by the relevant CIL rate

28
Q

What is a sensitivity analysis?

A

re-calculate the appraisal with different assumptions on inputs, for example an increase in build costs or a decrease in gross development value, and seeing what effect this has on the profit measures.

29
Q

What are the different types of CIL?

A

Mayoral CIL - finance the Elizabeth line
Borough CIL -support local infrastructure

30
Q

what are the key components of a residual appraisal?

A

Site preparation, planning, build costs, professional fees, contingency, developers profit, marketing fees, finance

31
Q

What is the difference between MCIL and CIL?

A

MCIL is charges on top of CIL for the up keep of the Elizabeth Line.

32
Q

what stages of the development process might the developer need finance for?

A

Purchase of the site, construction and holding of the site

33
Q

What were the tariff rates for your residential development?

A

£50 sq m MCIL
£500 sq m CIL

34
Q

When might mezzanine finance be used?

A

to fill the gap between a developer’s equity and senior debt.

For example, a senior debt lender is able to lend 70% of the cost of a project, but the developer may only want to put 10% of their own equity into the project. The remaining 20% can be provided by a mezzanine lender.

35
Q

If all the build costs were at the start over the same time how would this affect finance?

A

finance would be higher because you would be paying more interest.

36
Q

What are the different types of sensitivity analysis?

A

simple sensitivity - key variables (GDV, costs, finance)

scenario analysis - change scenarios, development content, timings, phasing.

37
Q

What is yield on cost?

A

rental income divided by costs (build costs plus site costs) expressed as a percentage

38
Q

Developers profit?

A

GDV less costs = profit

profit as a percentage of the profit.

will vary depending on risk / planning.

39
Q

would a geared or ungeared IRR be higger?

A

geared as uses debt

40
Q

what does straight line basis mean?

A

costs are evenly spread over time

Mia Bourne APC Revision (36 decks)

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