Case Study Questions (Refer to APC 1) Flashcards
1
Q
How big is the Silvertown Masterplan?
A
27 hectares
2
Q
Did you formalise the instruction in any way?
A
Written confirmation in an email
3
Q
How many units are there in the project?
A
599
4
Q
How many BTR units are there in the project?
A
423
5
Q
How many affordable units are there in the project?
A
176
6
Q
What was the affordable tenure split?
A
7
Q
What is RIBA Stage 2?
A
Concept Design
- Architectural concept developed and approved by the client
- Aligned to the Development & Project Brief
8
Q
What is a RMA?
A
SAALL
- Scale
- Access
- Arrangement
- Layout
- Landscaping
9
Q
How many phases are there in the masterplan?
A
4
10
Q
What is the role of the GLA in the scheme?
A
- GLA are the landowner
- Strategically, GLA are responsible for the strategic administration of Greater London, including regeneration
11
Q
What is a Registered Provider?
A
- Organisations that provide social housing
- Three types
- Not for profit (housing associations)
- For profit
- Local authorities
Overseen by the Regulator of Social Housing
12
Q
What are the different types of affordable housing?
A
RENT:
- Affordable / Intermediate Rent (20% lower than market rent)
- Social Rent (50%lower than market rent)
E.g. London Affordable Rent (20% lower than market rent)
BUY:
- Affordable / Intermediate Sale (20% lower than market value)
E.g. Shared Ownership (20% lower than market value)
Also First Homes Scheme (30-50% lower than market value)
13
Q
How can an amenity offer support rental values?
A
A rental premium can be charged where developers have a suite of amenities
14
Q
How did you determine what rental values would be attractive to target tenants and the investor market?
A
Tenants:
- As can be seen in the appendix, I undertook thorough investigation to understand what demographic the plot should be looking to attract
- I also referred to residential agents
Investors:
- Investors will look at the financial performance of an asset, so ensuring there is strong revenue and cap value, it ensures the IRR is higher
15
Q
What are key metrics that investors would look at?
A
IRR
(Check with James??)
16
Q
Why did you discount Option 1 - No / limited amenity offer?
A
Positives:
- Reallocate amenity spaces to units
Negatives:
- Not attract target tenants who would expect onsite amenity
- Not attract investors if rental values weren’t attained
17
Q
Why did you discount Option 3 - Premium amenity offer?
A
Negatives:
- Not attractive target tenants due to unaffordable rent
- Not attract target investors due to increased operational expenditure
18
Q
Why did you advise to proceed with Option 2 - Standard amenity offer?
A
Positives:
- Attract target tenants who are likely to be working a desk based job and could utilise the co-working space / enjoy the convenience of an onsite gym, but not be willing to pay higher rent for amenities they wouldn’t utilise
- Attract target investors as operational expenditure would not be increased through additional amenities
19
Q
What is operational expenditure?
A
Typically 21.5 - 24.5%
Void of 4%
20
Q
What does op ex include?
A
Op ex:
- Staff costs
- Security
- Cleaning and refuse
- Utilities
- Repairs and maintenance
- Property admin expenses
- Health, fire and security
- Lift servicing
- Landscaping / external management
- HVAC
- Insurance and fees
- Property manager fee
- Individual flat refresh allowance
Leasing ex:
- Leasing staff and admin
- Advertising, website and promotions
Capital ex:
- Sinking fund provision
- Total capital expenditure
21
Q
Please explain the comparable method of valuation?
A
The comparable method can be used where there is a good body of recent, reliable comparable rental, yield or sales evidence
- Find comps
- Find headline rent to give a net effective rent (as appropriate)
- Assemble in schedule
- Adjust using hierarchy of evidence
- Opinion of value
- Report value and prepare file note
22
Q
Please explain the hierarchy of evidence?
A
A - Direct comps (completed transactions / asking)
B - Market data (commercial databases/indices/historic evidence/market demand)
C - Other sources (locations/assets)
23
Q
Why did you discount option 1? Achieved rents within 2 miles
A
- Royal Wharf - 2020, comparable location, but more premium offer, higher rents due to premium amenity offer
- Fizzy East 16 - 2022, less comparable location, limited amenity offer, higher rents due to location
Negatives:
- Insufficient to base market rents on two sources with different amenity offerings
24
Q
Why did you discount option 3? Expand search area and utilise achieved rents within 5 miles
A
Negatives:
- Discounted due to less comparable locations
25
Why did you advise to proceed with option 2? Utilise achieved and asking rents within 2 miles
- Millet Place - 2002, comparable in terms of location, inferior amenity offer, inferior rents to project
Positives:
- Achieved rents in Option 1
- Asking rents from additional scheme
26
What were the projects rents in the end?
Studio: £1,670
3b6p: £3,350
27
What were the projects rents per sq ft?
Studio: £40psqft
3b6p: £32
28
Have these rents increased from the time of instruction?
By about £100pcm (£6/7 more psqft)
Studio: £1,772 (£47)
3b6P: £3,481 (£38)
29
What yield did you apply?
4.5%
30
What void period did you apply?
2%
31
What purchaser's costs did you apply?
1.8%
32
What inflation did you apply?
2.2% at the time
33
What was the GDV of the scheme?
£327m
34
What was the value of the BTR?
£251m
35
What were the total development costs?
£287m
36
What was the profit of the scheme?
£40m
37
What was the MoC of the scheme?
14.19%
38
What is a planning risk?
Potential issue or uncertainty that can arise during the planning / implementation stage.
- Unrealistic programme / budget
- Lack of stakeholder buy in (insufficient engagement or agreement)
- Regulatory / legal issues (changes in regulation / unforeseen legal challenges)
- Other challenges include misunderstandings, misinterpretations, incomplete applications, payment of fees, timing of committee meetings
39
What is compliance?
Alignment to legal and regulatory standards
40
Why does your client use MoC, what else could they use?
41
Talk me through Option 1 - Increase massing
- Add storeys to increase number of apartments to improve GDV
- Reviewed max building heights plan, dictated by safeguarding of LCY, to establish project already at its max height
- Breaching consented parameter plan is failure to comply with S171A of T&P
42
What does the Town and Country Planning Act (1990) set out?
Act of Parliament that regulates land development in England and Wales - it is planning law
43
What does Section 171A of the Town and Country Planning Act (1990) set out?
"carrying out development without the required planning permission, or failing to comply with any condition or limitation subject to which planning permission has been granted constitutes a breach of planning control"
44
Talk me through Option 2 - Switch tenure
- Switching affordable to private to improve GDV
- Reviewed MA with the RP to understand commitment
- Certain number of AH have to be delivered in Phase 1
- Not delivering this would breach MA
45
How many homes have to be delivered in Phase 1?
721
Actually stipulates how many per plot
46
Talk me through Option 3 - Value engineering
- Work with quantity surveyor to undertake VE
- Identified:
1. Switching to aluminium to composite windows
2. Switching from bespoke to standardised balconies
3. Cheaper façade treatment
- Reviewed RPs design spec to check these were acceptable, which they were
- Engaged with DP9 to check if they posed a planning risk, which they did not
- Reduced CC which increased MOC to 14.19%, threshold is 14%
47
What is included in a Cost Plan?
48
How did you adhere to the Rules of Conduct?
Seeking advice from:
- Residential agents
- Quantity Surveyor
- Planning Consultant
49
What does the PS: Comparable Evidence in Real Estate Valuation (1st Edition, 2019) set out?
- Principles of comparable evidence
- Sources of comparable evidence
- Recording of comparable evidence
- Recording comparable evidence
- Analysis of comparable evidence
- Dealing with a shortage of comparable evidence
50
What else would you have considered in the sensitivity analysis?
Other development costs:
Reviewed:
- Marketing fees
- Planning fees
51
What are key things an investor would look for when investing in a property?
- Location
- Asset Class
- Valuation
- Cost implications (mortgage / tax)
- Expected cash flow and profit
52
Why would location be important to an investor?
How the area is expected to evolve over the investment period
53
Why does an investor look at the expected cash flow and profit?
- Cash flow from rental income
- Expected increase in value due to appreciation
- Depreciation considerations
Be careful of loans in adverse market conditions
54
Are there any specific requirements in the TGP Design Guide that differ from the BTR Guide?
TGP made no specification to any of the below, so there was no risk:
- Windows
- Balconies
- Façade
TGP Spec:
- Kitchen kit: Bosch
- Wardrobes: Bisley
- Bathroom kit: Vitra
BTR Spec:
- Kitchen kit: Bosch
- Wardrobes: Bisley
- Bathroom kit: Roca
55
What are headings you'd typically see in a Cost Plan?
- Substructure
- Frame
- Upper floors
- Roof
- Stairs
- External walls
- Windows and external doors
- Internal walls and partitions
- Internal doors
- Internal finishes
- FF&E
- Services
- External works
- Civils / infrastructure
- Utilities
- Prelims
- OHP
- Contingency
- Inflation to contract award
- Inflation to construction mid-point
56
What are headings you'd typically see in a VE schedule?
- Architectural (Façade, bricks, balconies, staircase balustrade, bike store)
- Structural (Piles, transfer beams, brick support brackets, roof slab)
- MEP
- Landscaping (Passive irrigation to reduce attenuation tank, concrete pavers in lieu of clay)
- Other (windows, doors, kitchens, wardrobes)
57
Did you look at any other VE options?
Yes many:
Architectural:
- Reducing number of bathroom pod types
- Reducing number of kitchen types
- Removing the painting to staircase balustrades and handrails
MEP:
- Removing TV in all bedrooms
58
So how many stair cores, lift cores, car parking spaces and cycle parking spaces did you have in the project?
Car parking spaces: 17 blue badge
59
What is the build programme?
36 months
SoS Q1 2026
60
Is inflation built into the cost plan?
- 3.5% until MC contract awarded
- 4.5% to construction mid-point
61
What is the GEA, GIA and NIA of the project?
GEA - 60,000 GEA
GIA - 56,000 GIA
NIA - 40,000 NIA
62
What is the typical net to gross?
69% (overall)
76% (typical floor) - LL targets 76-78%
63
What is the typical dual aspect?
42%
64
What is a typical floor to floor height?
3075mm
2500mm
65
How many apartments and lifts should you have per core?
8 apartments
2 lifts per core
66
You mention you did not undertake a conflict of interest check or terms of engagement, what would you typically expect to see in these?
Conflict of Interest:
- Check software
- Send email around
- If conflict, get informed consent and put an information barrier in place
Terms of Engagement:
- Consider if you are competent and experienced / meet the client's needs / are there any conflicts of interest
- Scope of works
- Fee schedule
- Complaint's handling procedure
67
What are the different types of affordable units and how are they valued?
Social Housing
- Provided by LPAs
- 50% below market rent / value
E.g. Affordable Rent / Social Rent
Intermediate / Affordable Housing
- Provided by RPs & Developers
- 20% below market rent / value
E.g. London Affordable Rent / Shared Ownership
68
Why is it important to show client care and how did you show it?
Client care is important:
- Build positive reputation
- Secure repeat business
- Links to duty of care
How did I show it?
- Understand my client's objectives
- Refer to others when acting outside my area of expertise
- Maintained professionalism at all times
69
How do you ensure you provide best practise to your clients?
- Ensure I understand my client's objectives
- Ensure I understand my client's long term goal
- Seek informal / formal feedback
- Ensure good communication (quick responses / regular reporting)
- Ensure I am competent to undertake the work
70
What different planning applications are there, and how do they differ from an RMA?
- Full
- Outline
(or Hybrid)
- RMAs for Detailed
- Material change (under s73 of a T&C, such as removing a condition)
- Non-material change (under S96a of T&C, such as amending a condition)
- Planning condition discharge
- Listed Building Consent
71
What are the benefits of phasing a site?
Financial:
- Reduces initial investment risk
- Diversify borrowing (shorter term loans with more favourable interest rate repayments)
- Improved cash flow (costs incurred gradually and revenue generated sooner)
- Continued income generation which can be reinvested into site
Design:
- Adapt design / tenure to changing market
Construction:
- Construction logistics
72
What use class is residential?
Use Class C
73
Is Use Class C subdivided?
C1 - Hotels
C2 - Residential institutions (care homes, hospitals, boarding schools, residential colleges)
C3 - Dwelling houses
C4 - HMOs (3 individuals reside)
74
What use class is the project?
C3 - Dwellinghouses
75
How is use class C3 subdivided further?
3a - Single household
3b - Single household (less than 6) where care is provided (e.g. learning disabilities / mental health problem and care is provided)
3c - Single household (less than 6) where no care is provided (but not under C4 HMOs, e.g. a religious community)
76
Your data set in Appendix 4 is from 2022, how did you ensure this is still relevant and up to date considering the huge change in the market?
- Checked it with local residential agents, and also with agents from Knight Frank
77
Instead of the comparative method, what could you have done?
78
How reliable is right move as a source of information?
- It provides the asking rents rather than achieved rents, hence why I used it in addition to achieved rents
- There are more reliable sources, such as Molior London and Rightmove Plus
Rightmove Plus provides:
- Access to historical data
- Reports on market trends
EG Radius (commercial)
79
Do you think it is important to advise what other submarkets are doing with regards to amenity and making sure the £psqft is correct?
Yes
- You should have an understanding of where your submarket sits in comparison to other submarkets
- E.g. I knew that the residential offer in Canary Wharf is superior to Silvertown, similarly it is superior in Stratford due to the demographic / transport connections
80
What yield did you apply and how did you determine it was appropriate?
- 4.5% yield
- Spoke with Knight Frank who undertook research into competitors
81
What type of yield did you apply?
82
What occupancy rate did you apply and why?
We don't use them
I know 90% is excellent and 60% is poor, so around 75% would be a realistic assumption
83
You applied purchaser's costs, what different types of transactions can you do? And how would this change your purchaser's costs?
84
What growth did you apply to the values and did you apply this to the costs?
Yes:
Growth (escalation / inflation) applied to GDV and costs.
85
What other revenue streams are there?
- BTR
- Affordable
- Retail
- Other Revenue (rent from BTR)
86
A lot of developers are going back into planning to reduce their affordable provision, how is this done and is this something you would consider?
- Done through an FVA
- Not possible in Phase 1 because we have committed to 721 AH homes
- However, sitewide an FVA has been undertaken to reduce the affordable
FVAs effectively show that the profit levels fall below the required amount, therefore reducing affordable housing helps boost profit
87
What are typical profit margins for developers?
15-20%
88
Why is your profit margin low?
First plots on the MP create less profit
- Rental / sales values lower (regen kickers have not kicked in)
- Part of strategy for phased development
89
Other than changing the facades, what other savings could be made?
- Standardised kitchens
- Standardised bathroom pods
- Lower tech / white goods spec
- Exposed concrete
90
How did you adjust your comparable evidence?
In line with the hierarchy of evidence from most relevant to least relevant
91
What legal and regulatory controls did you consider when advising your client?
- Town and Country Planning Act (1990)
- RICS Professional Standard: Valuation of Development Property (2019)
92
Do FVAs have to be Red Book compliant?
93
What future levys could affect the viability of this scheme?
Building Safety Levy
- An additional cost
- In effect Autumn 2026
- Charged on all new residential dwellings over 10 units
- Affordable housing is exempt
- Like CIL, payable on a GIA basis
- 50% discount on schemes on previously developed land
- Rate will be reviewed every 3 years
- Concern this could impact the level of AH delivered, which could impact minority groups / people with priority groups
- In LBN it is £23.61 per sqm for PDL and £47.23 per sqm on non-PDL
94
How does the building and safety act effect your programme?
The levy incentivises developers to deliver housing before it takes effect
The BSA and gateway process is delaying programmes
95
What are the determination periods for the Gateway process?
G1: Not stated
G2: 12 weeks (new HRB), 8 weeks (existing HRB)
G3: Not stated
Developers are seeing:
G2: 25-40 weeks
G3: 18 months
96
Who enforces the BSA?
BSR within HSE
97
What is included in G1?
Fire Statement
- Reviewed by HSE
- Provide approval to LPA
98
What is included in G2?
- Compliance with Building Regs
- Full plans
- Appointment of competent people
- Application for Building Control Approval
99
What is included in G3?
- Demonstrate building is safe to occupy
- Apply for completion certificate
- Show ongoing management plans
100
What are key deliverables from RIBA Stage 0?
Strategic Definition
- Define scope, issues and outcome
- Assess design intervention
- Programme
101
What are key deliverables from RIBA Stage 1?
Preparation and Briefing
- Project objectives
- Client's business case
102
What are key deliverables from RIBA Stage 2?
Concept Design
- First drawings / visualisations
- Structural design, building services and specifications, used for cost info
103
What are key deliverables from RIBA Stage 3?
Spatial Coordination
- Coordinated design takes form
- Drawn up in CAD and developed alongside structural design
- Cost info finalised
Planning:
1. Application form
2. Location plan
3. Site plan
4. Ownership certificate
5. Agricultural holdings certificate
6. Application fee
104
What are key deliverables from RIBA Stage 4?
Technical Design
- Refinement of existing design
- Preparing drawings and documents for tendering
- Approaching specialist subcontractors
105
What are key deliverables from RIBA Stage 5?
Manufacturing and Construction
- Start of construction
106
What are key deliverables from RIBA Stage 6?
Handover
- Rectifying any defects
107
What are key deliverables from RIBA Stage 7?
Use
- Aftercare for client
- Monitoring energy peformance
108
I can see your revenue streams are BTR, Affordable, Retail and other revenue, what is included in other revenue? It is c. £9m.
It is the rental income for the stabilisation period on the BTR and retail, pre disposal.
- The BTR line is the cap value (if you sell, you get this first)
- The other revenue line is income (if you sell, you would not get this)
109
How is revenue made from Affordable, please can you explain that?
TGP give us X % per unit to build them over the course of the build period.
Grant is also rolled into this, TGP also gives us £59k per unit to help deliver (from GLA).
110
What assumptions did you make to get the retail revenue?
£32psqft
6.5% yield
10 year term
12 months rent free
£16-£80psqft cap con
111
What are included in other development costs in your stack?
Service charge
Non-recoverable VAT
Estate mobilisation
Customer care provision
Maintenance
Warranty
112
Why are DM/PM fees included in your stack?
They had been excluded from the professional fees budget and treated separately because they were LL employees rather than consultants. It was a business decision.
113
Why is the land value so low?
GLA own the land and we are DM on their behalf.
So we don't buy the land, we just draw it down.
114
What do sitewide costs contribute to?
PR&I
115
If this wasn't internal, what would you find in the terms of engagement?
1. Identify client
2. Identify yourself / senior who has responsibility for the instruction
3. Declaration of conflicts
4. Description of instruction
5. Relevant legislation
6. Scope of instruction / data collection
7. Assumptions / special assumptions
8. Information supplied
9. Limitations on liability
10. Description of deliverable
11. Fee basis
12. Follow up work
13. CHP
116
Why did you use the comparative method, was there any other ways you could have undertaken this?
1. I used the comparative method to find the market rents. When the asset is operational, the investment method will be adopted.
2. I used it because there was a large body of evidence.
3. I am aware I could have adopted other methods of valuation (the profit's method)
117
What type of yield did you adopt?
4.5%
- All risks yield (fully let, reflects risks and opportunities)
- I am aware you use different yields in different scenarios, e.g. you would apply a reversionary yield to revert a rent to market rent.
- LL is in market, we benchmark, use comps, speak to agents to find yields
118
What this a property of companies transaction?
It will be a property transaction in the future.
The purchaser's costs (1.8%) include:
- SDLT
- Legal fees
- Surveyor / agent fees
119
How was growth / escalation / inflation treated?
Standard is 3% for revenue and costs
Revenue: 3% until disposal date (stabilisation, 12-24 months after PC)
Construction: To mid-point
120
What is a RIBA design stage?
Set of 8 stages which organise the process of briefing, designing, constructing and operating a building.
121
How did you manage the stakeholders?
GLA
TSP
TGP
LBN
- Regular facetime with them
- Always present mid and end stage for comments so they can formally sign off
122
With amenity, is there a minimum number of facilities that need to be provided to be standard or premium?
No specific number
Standard always includes:
- 24 hour concierge
- Co-working
- Lounge
123
What is the price difference between standard and premium, is there a % that can be applied?
Can be up to 9-20% more expensive than the typical rental model
124
Why would you not always deliver the premium offer?
- Tenants pay service charge (included in rent)
- If you have too many amenities, it becomes very expensive, which may put off tenants
- You then have low occupancy rates, which could deter an investor
125
What guidance do you follow when undertaking assessment of market value?
RICS Professional Standard: Comparable Evidence in Real Estate Valuation (2019)
- Important impacts for each use class
- Key comparative elements (age, condition, specification and layout efficiency and adaptability, legal, limitations on use, location, size, transaction date)
- Source of comps
- Hierarchy of evidence
126
Where did the rents sit in comparison to the comps?
1. Phase 3 Royal Wharf (premium amenity, but comparable location, a bit older from 2020)
2. Fizzy East 16 (limited amenity, less comparable, a bit older from 2022)
3. PROJECT IN HERE
4. Millet Place (inferior amenity, but comparable location, a bit older from 2020)
- Project had inferior amenity to Royal Warf
- Project had inferior location to Fizzy East, despite better amenity
- Project had superior amenity to Millet Place
I looked at amenity offer, location and age. Amenity offer and location had the biggest impact, less so age, as they were all completed within four years of the instruction so wouldn't have started to see depreciation.
127
Was growth accounted for in your appraisal?
Standard escalation is 3% long term across BTR revenue and costs.
- BTR Revenue escalation is to sale date (stabilisation date, 12-24 months from PC)
- Cost escalation is to construction mid point
(OMS is pre-PC sale of some units so escalation to deposit date, escalation is then higher for post PC units)
128
If you had an unencumbered site with no MA with TGP, would you consider a different option to improve viability?
Improve viability through:
Improve Revenue:
- Level of AH
- Different use class
- Different tenure
- Maximise site (improve massing / more efficient design)
- Phasing (to help viability and recycle capital)
Reduce Cost:
- Value engineer design
- Negotiate planning conditions / obligations so they are phased rather than in large instalments
Engage with people in market to understand further how schemes viability could be improved
129
What competencies did you cover in your case study?
- Ethics
- Client care
- Communication and negotiation
- Business planning
- Dev apps
- Plan and dev man
- Legal / regulatory
- Dev / project briefs
- Masterplan / urban design
130
How long is the design programme?
Typically between 14-17 months to planning for a scheme of this size
131
What are the red and orange shaded areas in Appendix 3?
Orange - Has planning
Red - Under construction, in detailed component
132
What did the key demographics show in your research?
- Age demographic is highest for 25-34 year olds
- Household type is highest for couples/sharers
- Employment sector is highest for finance/insurance/law, but also students (international)
- Income band is highest for (£26-31k so sharers, and £68-95k so singles)
133
For the BTR valuation, what factors did you consider in terms of the difference between gross rent and net rent?
Gross rent is all rent received from the units
Net rent is all rent received from the units minus operational expenditure
134
What is operational expenditure?
Includes:
- Voids
- Staff costs
- Cleaning
- Utilities maintenance
- Repairs
- Admin expenses
- Health, fire and security costs
- Lift servicing
- Landscaping / external management
- Insurance and fees
- Property manager fee
- Flat refresh
- On site leasing staff and admin
- Website and promotions
Typically 17.5 - 21.5% of gross rent for operations
Typically 20.5 - 25.5% of gross rent for operations and leasing staff
135
What % is operational expenditure?
Between 20.5 - 25.5% of gross rent
136
You mention in your Case Study that Canning Town provides higher rents than Silvertown. What are some of the factors that lead to Canning Town having higher rental values than Silvertown? How did you communicate this to your client?
- Proximity: Closer to the City and Canary Wharf, therefore there is a higher demand to be in that area, which drives rental values up
- Accessibility: Connectivity is better as there is the DLR and Jubilee Line, as opposed to ST which just has the DLR
- Established: Canning Town is a District Centre, Silvertown is a Local Centre in LBN's street hierarchy. There is better general amenity provision here.
137
From a legal and regulatory point of view, are there any key considerations for a BTR building as opposed to a residential for sale building that you would highlight to your client?
A resident is more likely to be worried about certain things in an OMS scheme than a BTR scheme as they own it.
If BS9991 comes up, I would refer to a fire specialist.
138
What are the variation in tenures of affordability? How might that impact the viability?
Social:
- 50% lower
Intermediate/Affordable:
- 20% lower
139
Were there any design, planning and value considerations when assessing the appropriateness of the other revenue streams?
BTR
- Design
- Planning
- Value
Affordable
- Design
- Planning - Must deliver AH
- Value
Retail
- Design - Contribute to experience of place
- Planning - Must deliver certain quantum of retail as per planning
- Value
140
Beyond the three options you considered to improve viability, were there any others that you "longlisted" but discounted?
1. Increase massing
2. Switch tenure
3. Value engineering
Also considered:
- Different use class (no demand for commercial though)
- Different tenures (not OMS as lower demand, cost to buy is so much)
- Negotiate planning conditions / obligations so they are phased rather than in large instalments (already underway)
141
What external consultants did you use to support your development appraisal work?
- Residential agents to support rents
- Quantity surveyor to support costs
- Planning consultant to support planning costs
- Potentially agents to help market / sell
142
What information did you use to reach the capital value of your retail (£1.7m)
£psqft and yield
£24psqft and 6.5% yield
143
You say that MoC was your client's preferred metric. What other metrics might the client have utilised?
144
Can you explain what IRR is?
Internal Rate of Return
- Method of calculating an investment's rate of return.
- The higher the IRR, the better the investment.
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What are the factors that might drive a clients accepted rate of return?
- Risk tolerance (e.g. shorter time horizon / higher liquidity might not accept high risk, and demand a rate of return that compensates for those risks)
- Portfolio growth (if looking to grow portfolio, may accept higher risk and lower returns in short term, for higher returns in long term)
- Market conditions: If stable market, more appetite for risk
- Inflation: Higher inflation, so higher rate of return required
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What software have you used to create or review development appraisals?
Argus
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Why is funding and sources of funding important in the context of development appraisals and scheme performance?
Funding is important because it could impact interest rate that TSP have to pay back.
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What are different ways to fund a project?
- Developer's equity / forward sale / JV
- Debt / Loan (with interest repayments)
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With respect to the different types of affordable housing, can you explain how the different tenures might affect the value associated with the development appraisal?
150
Beyond residential uses, how do other uses affect or create value? What are the factors that you would consider in reaching a value? Would you seek any third party advice?
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- Office drives higher value but need demand for it
- Market demand for other use classes, e.g. office space
- Mixed use can create sense of place
- Speak to investment agents, what are investors looking for
151
Have there been any recent changes to legislation or planning requirements that have added to the cost of building new residential buildings?
- BSA
- BNG
- Building Safety Levy
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What developments does the building safety levy apply to?
All new resi buildings (inc. mixed-use) in England that require Building Control approval, regardless of height
Affordable housing is excluded
Effective Autumn 2026
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Can you summarise what the Building Safety Act is in the context of planning and development?
- Following Grenfell, increased legislation for high rise buildings
- Royal ascent in April 2022, implementation in 2024
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In the context of the Act, what is a higher risk building? Broadly speaking, how do the requirements of a HRB differ from a "non HRB"?
- 18 metres in height
- Or at least 7 storeys
- Contains 2 residential units
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What are the practical considerations of the inclusion of HRB's in the building process?
- Second stair core
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What documents are required before a start on site?
- Planning permission
- Building regulations approval
- F10 Notice under CDM (from client, and displayed in construction site office)
- Party wall act
- Environmental consents
- Other approvals
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Why do we pay GLA a fee for the land?
- We agreed to
- It's GLA's land and the land price is in the MDA
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What IRR do you target at LL?
Typically c. 15%
IRR forecast changes with risk
- Low risk: Sell plot to another developer and it has full planning permission and is ready to build
- High risk: Sell parcel of land with no planning, higher risk and developer would want a higher IRR to compensate
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What is the difference between opex and service charge?
Service charge is for shared services and maintenance, often paid by tenants
Opex is operational expenses of property, often paid by landlord / investor
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What could you use instead of MOC?
Margin on Profit
IRR
MoP is margin on GDV, a % of GDV of the project. Typically for residential OMS.
MoC target is 14-20%
MoP target is 15-25%
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With respect to the different types of affordable housing, can you explain how the different tenures might affect the value associated with the development appraisal?
We receive:
SO: £230-322k per unit
LAR: £196-274 per unit
Therefore SO drives more value to TSP.
However, grant from TGP and the GLA also gets added to this.
SO: £60k grant per unit.
LAR: £180k grant per unit.
So:
SO 1 bed: £290k (money+grant)
LAR 1bed: £376k (money+grant)
So LAR drives more value than SO in this case.
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What are other types of affordable housing?
Low cost rent:
- Social rent
- Affordable rent
- LAR
Intermediate:
- Intermediate rent
- London living rent
- Shared ownership
- Discounted market sale
- London key worker
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What is the difference between service charge and opex?
Service charge is relates to cost of maintaining and operating a property
Opex relates to all recurring business expenses like salaries, utilities, marketing (e.g utility bills very high is there is a pool)
