Development Valuation / Residual Value

Question 1

What do total development costs include?

Answer 1

Site prep (demolition, levelling out) contractor’s cost plan

Planning costs (planning consent)

Build costs (sources of build costs include BCIS on GIA basis)

Marketing fees, contingency fees, professional fees

Question 2

What are three elements for finance?

Answer 2

1. Site purchase
2. Total construction costs
3. Holding costs to cover voids until disposal of scheme

Question 3

What do marketing fees consist of?

Answer 3

1. EPC quote
2. Sale fee around 1-2% of GDV
3. Letting fee around 10% annual rent

Question 4

What % for professional fees?

Answer 4

10%-15% plus VAT of otal constrcution costs

Question 5

What % for developer’s profit?

Answer 5

15-20% of GDV or total construction cost

Question 6

What is the % of developer’s profit dependent upon?

Answer 6

Risk

E.g. lower return for lower risk and VV

Question 7

What are professional fees made up of?

Answer 7

Architects, project managers, surveyors, structural engineers

Question 8

How do you arrive at Market/Residual value?

Answer 8

deduct TCC, professional fees, contingency fees, FF&E, financing and sute financing from GDV

Question 9

What does the choice of interest rate include?

Answer 9

1 - BoE base rate
2 - SONIA rate
3 - Rate at which developer can borrow money

Question 10

What is SONIA?

Answer 10

Sterling Overnight Index Average

Question 11

What are the main typed of funding?

Answer 11

Debt finance

Equity finance

Question 12

What is payable on all professional fees?

Answer 12

VAT

Question 13

What is the typical Loan to Value ratio?

Answer 13

60%

Question 14

WHat LTV may be adopted on difficult markets?

Answer 14

LTC 60%