Submission

Question 1

L1

What is the difference between a residual valuation and a development appraisal?

Answer 1

The Residual method is used to value land with development potential

A development appraisal gives more of a comprehensive view of the development and assesses the viability.

Question 2

L1

What is an Affordable Housing provision?

Answer 2

Where a percentage of the properties are available below market rate.

Approx 25%

Question 3

L1

What is CIL?

Answer 3

Community Infrastucture Levy

A planning charge charged by local authorities on new developments in their area to help deliver infrastructure needed to support the development of their area (e.g. roads, transport, flood defences, open spaces, schools, medical centres).

Question 4

L1

What is Section 106 Contributions?

Answer 4

A site-specific planning obligation (introduced under the Town and Country Planning Act 1990) which is set out in a legally binding agreement enforceable by the LPA.

e.g what can you do for us?

Question 5

L1

How do Affordable housing, CIL and Section 106 affect a scheme?

Answer 5

It reduce the project’s financial viability and lead to a lower residual land value. This can make the development project less attractive.

Question 6

L1

How do inputs such as construction costs and professional fees influence the value?

Answer 6

The higher the costs, the less viable the development

Question 7

What are the limitations of using Argus Developer?

Answer 7

• Highly sensitive to minor adjustments
• Does not account for timing of cash flows
• Assumes 100% debt financing

Question 8

L2 - Level Street, Brierley Hill

The local planning policy required 25% affordable housing. Is this normal?

Answer 8

Yes but depends on the council

Question 9

L2 - Level Street, Brierley Hill

Why did you run two appraisals?

Answer 9

To show one that was policy compliant and one that was 100% market led

Question 10

L2 - Level Street, Brierley Hill

What external works did you account for?

Answer 10

• Parking
• Landscaping
• Lighting

Question 11

L2 - Level Street, Brierley Hill

What timescales did you apply?

Answer 11

34 months overall

1 month sale
6 months pre-construction
15 months construction
12 months sale

Question 12

Why did you increase your BCIS figures to 7.5% to account for external works?

Answer 12

I increased it conservatively, estimate in line with industry standard.

Question 13

L2 - Level Street, Brierley Hill

The affordable appraisal produced a negative land value. On what?

Answer 13

Based on the GDV

Question 14

L2 - Level Street, Brierley Hill

Your blended benchmark profit was 18.90%. How did you arrive at that blended rate?

Answer 14

20% on open-market and 6% on affordable

Question 15

L2 - Level Street, Brierley Hill

What were your inputs for your affordable appraisal?

Answer 15

Question 16

L2 - Level Street, Brierley Hill

What did you adopt from your BCIS figures?

Answer 16

Lower quartile

Question 17

L2 - Former Dutton Glass

What was the proposed scheme?

Answer 17

9 storey building comprising 43 apartments

Question 18

L2 - Former Dutton Glass

What were your timescales?

Answer 18

30 months overall

0 month sale
4 months pre-construction
14 months construction
12 months sale

Question 19

L2 - Former Dutton Glass

What Developer profit did you target? And what was your resultant profit?

Answer 19

Targeted 17.5% on GDV which was achieved with 14%affordable housing / s.106 contributions

Question 20

L2 - Former Dutton Glass

What was the outcome?

Answer 20

I adopted a higher rate per sq ft which resulted in a higher GDV based on 100% market housing generates a profit above the target of 17.50% on GDV.

This indicates that the
scheme can sustain affordable housing and / or S106 contributions.

Question 21

BOTH

What finance cost did you apply?

Answer 21

8% debit rate. 3% above the UK base rate (to account for the unknown lending circumstances). At the time was 5%.

Question 22

BOTH

What legal fees did you apply?

Answer 22

0.5%

Question 23

BOTH

What agency fees did you apply?

Answer 23

1%

Question 24

BOTH

What acquisition/purchasers costs did you apply?

Answer 24

Agency 1%
Legal 0.8%
SDLT

Question 25

# BOTH What contingency did you apply and why do you apply contingency costs?

Answer 25

5% of build costs Contingency is applied to account for any unforeseen expenses.

Question 26

# BOTH What did you apply for external works?

Answer 26

7.5%

Question 27

# BOTH What RICS documentation should have regard to when valuing development land?

Answer 27

Valuation of development property (2019)

Question 28

# BOTH What is the difference between CIL and Section 106?

Answer 28

CIL is non-negotiable S.106 asks 'what can you do in return?'

Question 29

# L1 Talk me through a Residual Valuation

Answer 29

GDV MINUS TDC MINUS Developers Profit EQUALS Residual Land Value

Question 30

# L1 Should you check your BCIS costs?

Answer 30

Yes - I always cross-check my BCIS costs with my in house Building Surveying team

Question 31

What is a **development appraisal**, and what is its purpose?

Answer 31

A development appraisal assesses the viability of a development project ## Footnote It evaluates potential costs and revenues to determine if a project is financially feasible.

Question 32

Why is **residual valuation** commonly used when assessing development viability?

Answer 32

It provides a clear indication of land value

Question 33

What are **planning obligations**, and why are they important in development appraisals?

Answer 33

Planning obligations are legal agreements and assesses whether the development is allowed ## Footnote They ensure that developers contribute to local infrastructure and services.

Question 34

How can **affordable housing requirements** affect the profitability of a development scheme?

Answer 34

The more affordable housing, the less profitable the development will be ## Footnote This impacts the financial viability of the project.

Question 35

What is the **Community Infrastructure Levy (CIL)**, and how does it impact development value?

Answer 35

CIL is a charge on new development to fund local infrastructure. It is non-negotiable ## Footnote It reduces the net development value by adding costs.

Question 36

What are **Section 106 contributions**, and how can they influence development appraisals?

Answer 36

Section 106 contributions are funds developers must pay to mitigate the impact of their development ## Footnote They can affect the overall financial viability of a project.

Question 37

What key **cost inputs** are typically included in a development appraisal?

Answer 37

* Construction costs * Professional fees * Land acquisition costs * Financing costs * Contingency * Agency Fees * Legal fees ## Footnote These inputs help in calculating the total cost of the development.

Question 38

How do changes in **construction costs** or **professional fees** affect a residual valuation?

Answer 38

The higher the construction costs, the lower the residual land value ## Footnote This can impact the feasibility of the development.

Question 39

Why is specialist software such as **Argus Developer** useful when preparing development appraisals?

Answer 39

It is designed to easily input costs etc ## Footnote This software is designed specifically for property development analysis.

Question 40

Can you describe your role in assisting with the **development appraisal** for Level Street, Brierley Hill?

Answer 40

It was an appraisal of 54 apartments over 6 storeys. The local planning policy required 25% affordable housing. I ran two market appraisails, one being policy compliant, one being 100% market led. The build costs were approx £150 psf which I increased by 7.5% to allow for external works. Both appraisals produced a negative value so therefore advised that an alternative use should be explored. ## Footnote This was essential for assessing the project's feasibility.

Question 41

Why did you run two separate appraisals for Level Street, one policy-compliant and one 100% market-led?

Answer 41

To compare viability under different scenarios and assess potential outcomes. They both produced a negative residual land value. ## Footnote This approach aids in understanding market dynamics.

Question 42

# L2 - Level Street How did you source and apply **BCIS build costs**, and why did you rebase them to Dudley?

Answer 42

I sourced BCIS costs from the BCIS website which I cross-checked with my in house building surveying team. The development site was governed by Dudley council so rebased it to there. ## Footnote This ensures the appraisal reflects local market conditions.

Question 43

Why did you apply a **7.5% uplift** to the base build cost?

Answer 43

To account for exetrnal works which ccovered parking, landscaping and lighting.

Question 44

How did you incorporate **demolition and remediation costs** into the appraisal?

Answer 44

BI was provided with these costs which I incorprated in the total development expenses ## Footnote This is crucial for accurately assessing viability.

Question 45

How did you assess the impact of the **25% affordable housing requirement** on residual land value at Level Street?

Answer 45

It produced a negative residual land value. ## Footnote This directly affects the land value and project feasibility.

Question 46

What steps did you take to interpret and report a **negative residual land value**?

Answer 46

There was a significant viability deficit so I therefore advised that an alternative use should be explored. ## Footnote This influenced the overall conclusions regarding project viability.

Question 47

At Former Dutton Glass, why were you instructed by the council to validate the applicant’s **viability position**?

Answer 47

To ensure the applicant's claims were accurate. ## Footnote This saves time and resources while ensuring credibility.

Question 48

How did you source and analyze **comparable sales evidence** to arrive at an average value of £480 psf?

Answer 48

By researching recent sales in the area and adjusting for differences ## Footnote This helps establish a realistic market value.

Question 49

How did your revised **GDV assumption** affect the scheme’s ability to support affordable housing?

Answer 49

It impacted the financial capacity to include 14% affordable housing and/or S106 contributions ## Footnote This is critical for meeting local planning requirements.