Development Appraisals Level 2

Question 1

Defford - Worcestershire
What was the purpose of the valuation?

Answer 1

To evaluate if the development could provide a section 106 agreement of £51,666.

Question 2

Defford - Worcestershire
What are s,106 agreements?

Answer 2

A negotiation between the council and developer to make a development viable. Used to mitigate the impact of a development on the local community.
- Must be necessary, relevant and reasonable.

Question 3

Defford - Worcestershire
What fees did you include as part of your appraisal?

Answer 3

• Sales and letting fees
• Marketing fees
• Professional fees
• Contingency fees

Question 4

Defford - Worcestershire
What percentage of fees did you include? What range would you normally expect?

Answer 4

I used 10% of construction costs as the development was quite small and would not require too much in terms of professional fees.
I would expect a reasonable range to be 10-15%.

Question 5

Defford - Worcestershire
What are included in professional fees?

Answer 5

• Architecs
• M&E consultants
• Project managers
• Structural engineers

Question 6

Defford - Worcestershire
What was the affordable housing policy?

Answer 6

For the subject scheme the policy is:
Sites with 5-9 dwellings, 20% of the units should be affordable.
On sites of of 5 dwellings or less a financial contribution towards local housing provision should be made, based on the cost of providing the equivalent in value to 20% of the units as affordable housing on site.

Question 7

Defford - Worcestershire
Why did the scheme not conform to the affordable housing policy?

Answer 7

The subject was an exception as the scheme was part of a conversion so not all new houses.

Question 8

Defford - Worcestershire
What else does S.106 cover?

Answer 8

• Affordable housing
• Infrastructure costs
• New school (education)
• Health

Question 9

Defford - Worcestershire
How did you arrive at the S.106 figure?

Answer 9

I did not calculate the figure this was in the instruction from the client that a figure of £51,666 was being requested of the developer.
However, for the subject 20% of the value is the norm for affordable housing.

Question 10

Defford - Worcestershire
Why did you value the existing and alternative use value?

Answer 10

To ascertain the benchmark land value and if the alternative use would provide a greater yield compared to residential and public house.

Question 11

Defford - Worcestershire
Was this a Red Book valuation? What are the exemptions?

Answer 11

Yes, this was a red book report.
Exemptions from the red book are:
Agency valuations
Statutory valuation
Valuations for internal purposes
Valuation advice for advocacy, expert witness, litigation
Valuations for negotiations

Question 12

Defford - Worcestershire
Why did you determine the scheme was unviable?

Answer 12

I determined the scheme was unviable as the output of the appraisal resulted in a negative value based on the inputs at the valuation date. Largely this was due to the large developers profit required.

Question 13

Huntingdon - Cambridgeshire
What was the discount rate you applied for the affordable housing?

Answer 13

• I applied 65% of open market value to the affordable shared ownership units.
• I applied 40% of open market value to the affordable social rented dwellings.

Question 14

Huntingdon - Cambridgeshire
Where did you get your discount rates from?

Answer 14

I had advice from a senior surveyor and planning consultants working on the case.
The figure is derived from the market in the area and these properties being worth that percentage of OMV.

Question 15

Huntingdon - Cambridgeshire
What was included in the development costs?

Answer 15

Gross Development Costs consisted of:
- Construction costs
- Acquisition costs
- Legal and agent fees
- Sales and marketing fees
- Professional fees
- CIL
- Disposal fees
- Abnormal costs
- Contingency
- Developers profit
- Finance rate

Question 16

What abnormal costs did you include? How did you determine these?

Answer 16

Strategic infrastructure costs and investigations into the topography of the land.
NEED TO FINISH

Question 17

Huntingdon - Cambridgeshire
How did you calculate the Gross Development Value?

Answer 17

I had advice from planning consultants on the mix of the scheme and what the proposed development looked like.
I used the comparable method to ascertain the market value of each of the property types. I then adjusted for affordable housing.

Question 18

Huntingdon - Cambridgeshire
What assumptions did you make when valuing?

Answer 18

• Land was held on a freehold basis
• Free of any easements/title restrictions
• Development would be connected to all mains and services
• Planning permission for the development is granted
• Environmental factors
• Flood risk
• Asbestos

Question 19

Huntingdon - Cambridgeshire
What was the purpose of the valuation?

Answer 19

Purpose was to assess the land value assuming development potential for a 528 house scheme. This was part of a compensation claim to assess if the claimant should get increased compensation reflecting development potential.

Question 20

Huntingdon - Cambridgeshire
Were there any other CIL or agreements as part of the valuation?

Answer 20

Yes, there CIL agreements in relation to improvements to education, health and alike in the area.
There were also S278 agreements for improvements to the road network and roadworks in relation to the development.

Question 21

Huntingdon - Cambridgeshire
How did you calculate the CIL and contributions?

Answer 21

I obtained advice from my senior surveyor and planning consultants.
I also had regard to the local planning policy which had a schedule for charging CIL and S106 & S278 agreements.

Question 22

How did you calculate the finance rate for both developments?

Answer 22

I used the Bank of England base interest rate of 5.25% and increased to reflect risk to 6.5% and the lender having to make a profit also.

Question 23

Defford - Worcestershire
Can you give a breakdown of costings and the percentages used?

Answer 23

Total Development Costs:

• Construction costs - £3,100,000
• Professional fees 10%
• Sales and letting fees 1.25%
• Marketing fees 1.25%
• S.106 contribution
• Contingency 3%
• Developers profit 18%
• Finance rate 6.5%

Question 24

Huntingdon - Cambridgeshire
Can you give a breakdown of costings and percentages used?

Answer 24

Total Development costs:

• Construction costs - £42,500,000
• Professional fees 10%
• Sales and marketing fees 2.5%
• SDLT (5.2% of market value)
• Community infrastructure levy - £3,500,000 (£95/m2)
• Disposal fees 1.5%
• Acquisition costs
• Contingency 3%
• Developers profit 15%
• Finance rate 6.5%