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APC > MG - Dev apps > Flashcards

MG - Dev apps Flashcards

1
Q

WORCESTERSHIRE - How did you distribute your timescales?

A

Over 12 months

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2
Q

What did you assume as a sales rate per month in the current market for dev land in worcestershire?

A

2 sales a month

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3
Q

Why is there a lower sales rate at the moment?

A

High mortgage rates mean lending is less affordable

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4
Q

Whats included within professional fees and what makes up the highest %?

A

architect highest %

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5
Q

What is typical prof fees when no planning permisison?

A

12%

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6
Q

If there was planning permission what are typical professional fees?

A

8%

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7
Q

How did you consider your construction timescale?

A

Number of units, size of housebuilder and scheme (are there phases?)- don’t want to build units too quickly outpace with sales as they will be vacant and you will already have spent the money and be waiting for more money - sometimes should overlap or be seperate ?

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8
Q

What are prof fees charged on?

A

Build costs (inc externals)

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9
Q

How can profit margins be lower?

A

Larger housebuilders may have lower profit margins as they have in house experts and have quantum of sites

Smaller schemes may have decreased risk due to short timescales

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10
Q

How do build costs impact targeted profit?

A

High build costs = higher risk

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11
Q

What did you show in the Worcestershire sensitivity analysis?

A

we have prepared a sensitivity analysis, summarised below, demonstrating how the residual amount available for
purchase (LAND COST) would vary if sales prices and construction costs were to vary by 5% or 10%.

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12
Q

What is the difference between Residual Valuations and Development Appraisals?

A

A residual valuation will give you the value of the land (using market assumptions at a valuation date)

A development appraisal will be based on clients inputs and can establish the profitability and viability of the proposed scheme ie. can it provide the required profit, can it support the aff housing level?

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13
Q

What is the key points of the RICS global standard on the valuation of dev property in regard to secured lending residual valuation?

A

‘ … the valuer should apply a minimum of two appropriate and recognised methods to valuing development property for each valuation project … ’
RESIDUAL AND THEN CROSS CHECK WITH COMPARABLE AND SALES

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14
Q

Define a sensitivity analysis ?

A

A series of calculations resulting from the
residual appraisal involving one or more
variables (rent, sales values, build costs, etc.) that
are varied to show the differing results.

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15
Q

What type of risk analysis does the RICS global standard on the valuation of dev property recommend?

A

Sensitivity analysis

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16
Q

Please define GDV as per the RICS guidance

A

Value at the current date assumping the development has completed with present market conditions

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17
Q

What factors make up the Total Development Costs?

A

Acquisition Costs, Planning Obligations, Construction Costs, Letting Fees, Disposal Fees, Finance, Residual Site Value

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18
Q

What do you mean market trends might influence your appraisal?

A
  • Period of high mortgage rates and low activity in terms of residential might mean that I utilise longer sales period BUT does depend on the local market in that area
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19
Q

Is the RICS global standard on the valuation of dev property mandatory?

A

Yes

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20
Q

WORCESTERSHIRE -How did you calculate the Gross Development Value?

A
  • Had regard to previous phase which sold 1 year prior
  • Comparable evidence
  • Local agents
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21
Q

WORCESTERHSIRE - Where did you source your build costs?

A

Provided by the developer
Cross-checked with building surveying team

22
Q

Worcestershire - why were the build costs high?

A

Due to the spec of the scheme - high spec

23
Q

What does bcis stand for? 1 PRO AND 1 CON

A

Building cost information service
Quick
Backwards looking data

24
Q

What do BCIS costs include?

A

Construction cost of actual building including prelims?

25
Q

WORCESTERSHIRE - What kind of location was this?

A

Well positioned within an affluent town - proposed scheme in keeping with the architecture of the town and first phase sold well

26
Q
  • What is contingency and what are typical levels?
A

a contingency allowance for any unexpected increases in costs
due to unforeseen circumstances.

5-10% of base build cost depending on risk and market conditions

27
Q

WORCESTERSHIRE- what level of contingency did you adopt?

A

5% - lower risk site as phase 1 completed, same developer

28
Q

WORCESTERSHIRE - - What professional fees did you adopt? Why?

A

8% - Planning approved for the scheme

29
Q

WORCESTERHIRE - - What was your construction period? Why?

A

12 months - provided by the developer and was reasonable for the spec / house types

30
Q

What are key considerations when inputting construction timeframes?

A
  • no of units
  • size of housebuilder
  • multiple or singe phases
  • Cashflow - don’t want to build units too quickly outpace with sales as they will be vacant and you will already have spent the money and be waiting for more money
31
Q

Worcestershire - What finance rate did you adopt? Why?

A

8.0% debt finance - reflected market at the time of 5.25% base rate

32
Q

Worcestershire - why did your sensitivity focus on land cost and gross sales

A

Client wanted me to show the effect of sales and construction changing by 5% on the residual value which had been established within the appraisal

33
Q

Worcestershire - what profit level did you target and why?

A

15% profit on gdv- dev wanted us to target this level to see if residual land val was positive
small scheme of 21 dwellings and first phase sold well - lower risk so lower profit margin

34
Q

Worcestershire - did the site have planning?

A

Yes planning approved at reserved matters

35
Q

What is outline planning permission?

A

Outline planning applications are used to gain an understanding as to whether the nature of a development is acceptable, this can help ensure viability up front.

36
Q

What is reserved matters planning permission?

A

After approval of outline planning consent, reserved matters must be submitted to gain the right for development. This deals with the outstanding details which were omitted from the outline planning application. e.g. LAYOUT

37
Q

WARWICK - Why and how did you determine the appropriate price per sq ft?

A

To inform my opinion of GDV by using comparable evidence

38
Q

WARWICK - What was the purpose of the appraisal?

A

A client had aquired a site and wanted to explore the most viable and profitable use for the site- HIGHEST AND BEST USE OF THE SITE

39
Q

WARWICK - Was this a residential location?

A

Yes outside of warwick centre in a resi area

40
Q

WARIWCK - In your sales assumptions for the flats did you consider anything differently?

A

Block of flats need to be complete before sales start

41
Q

WARWICK - What level of bcis costs did you use?

A

I used the median costs - average scheme within this area

42
Q

Can you please explain an s curve in terms of development

A
43
Q

what is the irr and how do you calculate it

A
44
Q

WARWICK- What were the abnormal site costs for?

A

contamination - unusual ground conditions may mean that deeper and more expensive foundations are needed.

45
Q

WARIWCK - How do the abnormal costs affect the dev value ?

A

Higher dev costs which decrease reisudal value
Affected timescales - pre construction timescale provided by client to remediate the site

46
Q

Warwick - how did you determine your contingency rate?

A

5% contingency - cross checked with line manager that this was typical market assumption

47
Q

Warwick - what level of finance did you asusme?

A

8% debt finance - 5.25 base rate

48
Q

Warwick - you say that you used general market assumptions for marketing and legal fees- what are these?

A

Marketing & agent - 3% all in for disposal of site
legal -0.5% for solicitors fees

49
Q

WARWICK - How did the lack of planning affect your professional fees?

A

increased architect fees so used a totial of 10% of base build csost

50
Q

WARWICK - Which scenario was more profitable?

A
  • Housing, lower BCIS costs and higher gdv in this area - greater demand for housing compared to flats
51
Q
A

APC (33 decks)

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