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APC P&D 2023 Autumn > Development Appraisals (L3) > Flashcards

Development Appraisals (L3) Flashcards

(52 cards)

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1
Q

How do you calculate ROCE?

A

Net operating profit / Capital Employed

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2
Q

How do you calculate GPM?
Difference between POC and POGDV

A

Gross profit / revenue x 100

Profit on GDV = 20-25%
Profit on cost = 15-20%

POC in more challenging markets

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3
Q

What is GPM and ROCE

A

GPM is the degree at which a business activity generates money

ROCE is the efficiency use of capital

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4
Q

Sensitivity analysis?

A

Quantifies risk.
Simple, Scenario, MonteCarlo

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5
Q

Site investigations and DD before an appraisal?

A

Topo
Contours
Local Policy
Title
Surveys
Ground Conditions
Services
Legal searches (ROW/TPO/covenants)

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6
Q

Types of option agreement?

A

Promote site for LP - option to buy at a market discount

Call-buyers right to buy
Put-sellers right to sell
Cross - both right to buy or sell
Reverse - repurchase rights following trigger

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7
Q

Overage requirements? The key elements

A

Duration
Trigger
Calculation
Amount
Securing the payment (charge over land/ransom strip)

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8
Q

What’s a ransom strip

A

Land adjacent that is key to unlock development or over Access

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9
Q

Random strip case law

A

Stokes V Cambridge

1/3

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10
Q

What are Pre Emption Rights

A

Contractual agreement- the right to be offered land before the market is

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11
Q

If VAT is opted on land, at what %?

A

20%

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12
Q

What SDLT is charged on non resi properties?

A

Over £250k is 5%
You Pay SDLT on Land + VAT

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13
Q

What is SDLT?

A

Paid on the purchase of an interest in land

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14
Q

What is residential developer property tax?

A

Tax of 4% on developers who earn >£25m profits.
Brought in in April 2022

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15
Q

What are the corporation tax thresholds?

A

19% - up to £50k profits
25% tax - £50k + profits

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16
Q

What is a capital allowance

A

Tax deductible expense on qualifying capital expenditure eg Equipment/Machinery/Vehicles

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17
Q

What is capital gains

A

Tax on the profit realised on a transaction

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18
Q

What is zero rated mean?

A

New build housing for example. No VAT on labour, goods etc

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19
Q

What is the polluter pays principle

A

Environmental protection act 1990
Polluter of contaminated land must pay.
If can’t identify the polluter, landowner pays.

LA investigates the pollutant/contamination

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20
Q

Name some land contaminants

A

Waste disposal, landfill, tanks
Entails, oils, asbestos

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21
Q

What is the Golden Brick

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A

A point in construction whereby the 1st brick over the foundations is laid. Can then be classed as a residential dwelling (thus zero rated and can recover VAT)

22
Q

What is a mezzanine finance?

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A

Additional capital at higher IR.
Senior debt is the first tranche paid back first

23
Q

What DICS literature does Viability refer to?

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A

RICS viability in planning 2019

24
Q

Difference between Viability and Feasibility?

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A

V - value generated > cost over project lifetime

F - state something can actually be achieved

25
What is the industry standard GPM?
FY 22 Barratt’s 23% GPM & 30% ROCE Bellway 22% GPM & 19% ROCE
26
What cash flowing of finance do you get?
S curve (important given IR is paid on the drawn down balance) Eg BUILD COST Straight line (equal tranches) Eg LAND or HOLDING COST
27
Where would you source finance costs?
Equity Debt Internal
28
What would you assume for a finance rate?
Comitment fee 1% Exit fee 1% IR - 5.25% + 2% Legal fee?
29
Loan to value or loan to cost- which is a higher %?
LTV - 60-70% LYC - 80-90%
30
Outline inputs of a development appraisal?
GDV BUILD COST CONTINGENCY PROFESSIONAL FEES PLANNING FEES LAND AC COSTS LEGAL FEES S&M FEES FINANCE COSTS LAND + TX (SDLT/VAT) GPM
31
Residua Val vs Dev appraisal?
Residual val AT VAL DATE - market input - RLV Dev appraisal Tool to financially assess viability/feasibility - client input - sensitivity
32
Name some developer risks
Delays Costs Market shift Contractors unreliable
33
What is an FVA?
Financial Viability Assessment Balanced developer aspirations with planning system aims. Submitted by applicant/part of wider reps/during a case. Must be objective. Baseline land value (value land as existing) + premium to sell If BLV > RLV, site is not viable
34
How would you find BC if you didn’t have an internal QS?
Build cost information service (RICS service that is updated monthly with construction data) Input : m2 Date Location Property type Then choose upper/lower quartile
35
What are the drawbacks of using BCIS?
No spec Broad Econ of scale External works not accounted for GIA only
36
Rough BC % Rough Prelim % Rough professional fee %
BC: 30% GDV PRELIM: 12% BC Prof (design architect, Civil eng, Struct eng, topo, surveys, S38 fees 10-20% BC
37
Planning fees and any upcoming changes?
£462/plot for a full application (max £300k) Being increased by TCPA Amendment by 35% in 2024
38
Land ac costs?
SDLT - 5% land AGENT FEE - 1% land
39
Legal costs?
Land at: 20k Aff sale: 10k 0.5%
40
Contingency
3% BC Industry average is 5-10%
41
What is indexation?
System to connect prices and asset values. Produced by ONS. Calcs costs of inflation
42
Example of indexation?
RPI (all items) Suitable Alternative Natural Green Space - contribution for Ch.Bchw SAC mitigation: £3k/1B £4K/2B Current charge times by the index figure at payment divided by index figure at UU date = indexed charge
43
What was the inflation paid for the SAC mitigation in Linmere?
Check
44
Why was the BC lower at Alconbury for your Standard Housetypes?
No DD fees Designed engineered to my client Economies of scale (labour/material)
45
How did you undertake the comparable analysis in Wycombe?
Established a PSF value of the area. Sourced comparable transactions, Collated in schedule, Analyse, Adjusted, Determined PSF comp. For each bed type. Cross referenced with agents pricing of my clients standard HT’s.
46
What were the high level inputs at Wycombe in your dev appraisal?
24% GPM £180 bc £470 psf £5m LV Agreed in advance.
47
How did you cash flow the programme and costs at Wycombe?
Construction team produced a programme following instruction for 4pcm sales rate. S curve build costs Planning and Prof fees prior to SOS aff income GB and monthly vals Private income as per the sales rate
48
What was the GDV, BC and Land value at Linmere?
£55m GDV (£30m affordable) £26m BC £16.25 LV
49
Tell me about the Natural England charged on Linmere?
This was an unforeseen moratorium on development within a 12km radius of a SAC (Chiltern Beechwood’s) enforced by Natural England. This delayed planing by 1 year. Affected appraisal (ROCE but not benefitting from sales price inflation being a largely pre sold scheme) £880k (charged depending on house bed type) £3k 1B and 4K 2+B to contribute to a SANG (suitable alternative Natural green space)
50
Tell me how you calculated the RPI on the SANG Charge
I referred to the RPI on the BCIS. Using proposed calculation: (880k * index at payment/index at date of UU) I ran 3 scenarios of payment. 1.paying in 25% tranches per 50 units 2.50% per 100 units 3.100% upon 1st occupation Indexation charges incurred: 1.£170k 2.1£40k 3. £85k Considering the cost increase and delays, the advice was to pay as soo as possible as to mitigate the indexation charge to minimise GPM dilution. In fact, negotiated if paying at SOS we could avoid any indexation, agreed with the council.
51
Why were your clients HT’s more economical to build at Alconbury.
Reduced DD fees Std floor plate design Value engineered Contractor relationships Elevational treatments not specified in decision notice.
52
What other options at Alconbury could you have to reduce BC?
S73 - Material amendment to condition S96a - NMA

APC P&D 2023 Autumn (20 decks)

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