2013 An Introduction to Development Appraisal
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Simon Wainwright will present a lecture series on development appraisal and residual valuations. The series will include three lectures: an introduction to development appraisal and residual valuations focusing on cash flow techniques and sensitivity analysis; cash flow techniques and sensitivity analysis; and possession strategy. The lectures will cover terminology, the timeline and process for residual valuations and development appraisals, factors that influence development options, and guidance available for conducting appraisals. Sensitivity analysis will also be discussed to analyze how changes to variables impact project profit.
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2013 An Introduction to Development Appraisal
- 1. An Introduction to Development Appraisal & Residual Valuations Speaker: Simon Wainwright BSc FRICS 1
- 2. 2013 Lecture Series Lecture Date An introduction to development 7th February 2013 appraisal & residual valuations: Cash flow techniques and 13th February 2013 sensitivity analysis: Possession strategy : 25th February 2013 2
- 3. 9900 Wilshire Boulevard Beverly dfdf Hills 3
- 4. Valuation of Development Land Comparison Method or Residual Method? 4
- 5. Terminology • Residual Valuation • Comparable Valuation • Development Appraisal • Viability Study • Feasibility Study 5
- 6. Think Timeline 6
- 7. RESIDUAL VALUATION & DEVELOPMENT APPRAISAL 7
- 8. Residual Valuation Month • Value of Completed Development 12 Month • Less Development Profit 12 Month • Less Construction Cost 1 - 12 Month • Less Finance Cost% 1–12 Month • Residual Site Value 1 8
- 9. Development Appraisal Month • Residual Site Value 1 Month • Plus Construction Cost 1 - 12 Month • Plus Finance Cost% 1 - 12 Month • Less Capital Receipts 12 Month • Development Profit 12 9
- 10. Development Appraisal GROSS DEVELOPMENT VALUE COST HEADINGS • Site Cost • Construction Cost • Professional Fees • Marketing Cost • Finance Cost • Other Costs OUTPUTS • Development Profit • Profit on Cost % • Profit on Cost IRR (inc/exc finance) • Yield on Cost • Profit / Rent Cover • Profit Erosion / Dissipation 10
- 11. PLANNING & DEVELOPMENT RISK PROFIT
- 12. Land Speculation v Development Land Speculation Development • Agricultural Land • Development Land 1 • Planning Application 1 • Planning Permission • Development Land • Construction Finance 2 • Planning Risk 2 • Development Risk • Site Sale • New Building 3 • Speculative Profit 3 • Development Profit 12
- 13. Land Plotting & Urbanisation Urbanisation of Land 13
- 14. 14
- 16. Where do you start? 16
- 17. Sensitivity Analysis Letting Period -10% Letting Period +10% Construction period -10% Construction period +10% Pre-construction period -10% Pre-construction period +10% Variable Finance Rate -10% Finance Rate +10% Land Cost -10% Land Cost +10% Building Cost -10% Building Cost +10% Yield -10% Yield +10% Rent -10% Rent +10% -80.0% -60.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% % Profit Change 17
- 18. What guidance is available? • RICS Guidance Note • RICS Valuation Information Paper 12 • RICS Practice Standard UK 18
- 19. Follow Us J Peiser Wainwright Website Jpeiserwainwright.com Facebook /jpeiserwainwright LinkedIn Twitter @JPWNews Google+ 19
- 20. An Introduction to Development Appraisal & Residual Valuations Speaker: Simon Wainwright BSc FRICS 20
Editor's Notes
- ContentsTerminologyLand speculation vs Property DevelopmentRisk management and the necessity for profit.Purposes for which such studies are undertakenGood practice - What guidance is available?Where to obtain your data?Volatility and interpretation of results
- 9900 Wilshire Boulevard Beverley Hills LA235 Condominiums 17,000 sqft retail2004 $33.7mNew Pacific Realty2007 $500mCandy & CandyBancoInbursa took over from Kaupting for $356m loan2010 $148m Sale to Hong Kong Investor
- Differences between two sitesAccess – restricted headroomAccess – highways capacityServices availability – gas, water, electricitySoil conditionsLevelsContaminationImpediments e.g. Pylons, viewing corridorsListed buildingsMineralsArchaeologyFloodingOccupiersCovenants