Financial Appraisal Report Content

SCHEME NOTES

Scheme Notes

0.55 ha site

Existing Uses

Building 1

Old factory in very poor state of repair. 3 storeys, total floorspace 10,000 m2 gross.

1,000 m2 of ground floor occupied by car body shop on short lease.

Building 2

Old works, converted to offices. 2 storeys, total floorspace 600 m2 gross.

Listed; occupied by accountant.

Development Proposals

Demolish Building 1 and redevelop site for offices and apartments. Retain and refurbish Building 2.

1 standard office building of 3,750 m2 gross; 3 floors @ 1250 m2 per floor.

1 apartment building of 5,000 m2 gross; 4 floors @ 1,250 m2 per floor.

1 refurbished works to good, basic standard for offices: 600 m2 gross; 2 floors @ 300 m2.

Courtyards consisting of 2,000 m2 for parking and roads; 400 m2 for hard landscaping.

Mid-point costs and values used for initial appraisal.

COST & VALUE DATA

DEVELOPMENT COSTS AND VALUES BY TYPE OF CONSTRUCTION (INDICATIVE)
Land
	Cost: £s per m2		Cost: £s per ha		Cost: other basis
	Low	High	Low	High	Low	High
Site
For redevelopment	200	300	2,000,000	3,000,000
Site acquisition fees					5.25%	5.25%
Site Works
	Cost: £s per m2
	Low	High
Demolition	35	60
Abnormals & site preparation	11	110
Soft landscaping
Grassed areas	4	7
Planted Areas	5	19
Hard landscaping
Grey Concrete Paving	15	19
High Quality Paving	25	50
Roads and Footpaths	40	55
Buildings
	Cost: £s per m2		Prices: £s per m2		Rents: £s per m2 pa		Yields: %
	Low	High	Low	High	Low	High	Low	High	Notes
Parking spaces	45	75			30	40	10	10	Dimensions: 2.5m x 4.8m; 6.0m gangways
Offices									Only where separately priced/charged
Old, unimproved					30	35	10	10	80.0% net/gross
Old, reasonable repair					65	90	9	9	80.0% net/gross
Modern, reasonable repair					85	95	9	9	85.0% net/gross
New build, good basic	730	940			105	140	8	8	85.0% net/gross
Refurb, old to good basic	730	1150			95	130	8	8	80.0% net/gross
Refurb, modern to good basic	210	750			95	130	8	8	85.0% net/gross
Industrial/Workshops
Old, unimproved					15	20	12	12	90.0% net/gross
Old, reasonable repair					20	35	10	10	90.0% net/gross
Modern, reasonable repair					40	55	9	9	97.5% net/gross
New build, good basic	500	800			65	65	8	8	97.5% net/gross
Refurb, old to good basic	500	900			55	55	8	8	97.5% net/gross
Residential
Apartments	760	1,000	2,000	2,500					90.0% net/gross
Warehouse conversions	900	1,320	2,000	2,500					85.0% net/gross
Other
Pubs and bars	850	1,100			130	180	7	9	97.5% net/gross
Restaurants and cafes	900	1,250			130	180	7	9	97.5% net/gross
Convenience stores (shell)	475	600			80	100	9	9	97.5% net/gross
Leisure centre (dry)	1,040	1,560			150	150	7	7	97.5% net/gross
Leisure centre (wet and dry)	1,720	2,400			225	225	7	7	97.5% net/gross
Other Development Data
	Low	High	Notes
Professional fees: % building costs	4	8	Varies inversely with contract value
Pre contract period: months	3	6	Varies with size
Building contract: months	9	18	Varies with size
Disposal period: months	6	12	Varies with size
Interest rate	6.25%	8.25%	Varies with standing

LAND COSTS

Land Costs
Development Value
	Area	Unit cost	Total cost
	m2	£s per m2	£s
For redevelopment	5,500	250	1,375,000
Exisiting Use Vaue
	Gross	Net/Gross	Net	Price	Rent	Rental value		Estimated
Element	Flsp m2	Ratio	Flsp m2	per m2	per m2	£s pa	Yield	Value (£s)
Owner-occupied
			0					0
			0					0
			0					0
			0					0
			0					0
Sub-total								0
Tenanted
Car body shop	1,000	90.00%	900		17.5	15,750	12.00%	131,250
Accountant's office	600	80.00%	480		77.5	37,200	9.00%	413,333
			0			0		0
			0			0		0
			0			0		0
Sub-total								544,583
							Exisiting Use Value	544,583
							LAND COSTS	£1,375,000

CONSTRUCTION COSTS

Construction Costs
Site works
	Unit cost	Area	Total cost
Element	£s per m2	m2	£s
Demolition	48	10,000	475,000
Abnormals & site preparation	61	5,200	314,600
Roads and footpaths	48	2,000	95,000
Hard landscaping	38	400	15,000
			0
			0
			0
			0
			0
			0
			0
			0
Total cost of site works			899,600
Buildings
	Unit cost	Area	Total cost
Element	£s per m2	m2	£s
Apartments	880	5,000	4,400,000
Offices	835	3,750	3,131,250
Refurbished works to offices	940	600	564,000
			0
			0
			0
			0
			0
			0
			0
			0
			0
			0
			0
			0
			0
			0
			0
			0
			0
Total cost of buildings			8,095,250
TOTAL CONSTRUCTION COSTS			8,994,850

VALUATION

Valuation
	Gross	Net/Gross	Net	Price	Rent	Rental value		Estimated
Element	Flsp m2	Ratio	Flsp m2	per m2	per m2	£s pa	Yield	Value (£s)
For sale
Apartments	5,000	90.00%	4,500	2,250				10,125,000
			0					0
			0					0
			0					0
			0					0
			0					0
			0					0
			0					0
			0					0
			0					0
Sub-total (for sales fees)								10,125,000
For rent
Offices	3,750	85.00%	3,188		122.5	390,469	8.00%	4,880,859
Refurbished works to offices	600	80.00%	480		112.5	54,000	8.00%	675,000
			0			0		0
			0			0		0
			0			0		0
			0			0		0
			0			0		0
			0			0		0
			0			0		0
			0			0		0
Sub-total (for letting and investment sales fees)						444,469		5,555,859
							GROSS VALUE OF SCHEME	15,680,859

APPRAISAL 1

FINANCIAL APPRAISAL 1
				Valuation A
TOTAL CONSTRUCTION COSTS				£8,994,850
GROSS DEVELOPMENT VALUE				£15,680,859
Pre-contract Period (years)				0.375
Building Contract Period (years)				1.125
Period to Physical Completion (years)				1.500
Disposal Period (years)				0.750
Development Period (years)				2.250
Finance rate (% p.a.)				7.25%
Professional fees (% building costs)				6.00%
Land costs (£)				£1,375,000
Land acquisition fees (% land costs)				5.25%
Letting fee (% ERV)				10.00%
Investment sales fee (% GDV)				3.00%
Occupier sales fee (% CV)				2.00%
VALUATION
GDV				£15,680,859
Construction costs				£8,994,850
Finance on building costs (to completion)				£368,449
Professional fees				£539,691
Finance on fees (to completion)				£33,160
Land costs				£1,375,000
Land acquisition costs				£72,188
Land cost finance (to completion)				£160,201
Costs at physical completion				£11,543,539
Holding costs				£622,157
Letting fee				£44,447
Investment sales fee				£166,676
Occupier sales fee				£202,500
TOTAL COSTS				£12,579,318
RESIDUAL				£3,101,541
DEVELOPER'S PROFIT (ON COSTS)				24.66%

ANALYSIS

ANALYSIS SHEET
		% Change
Variable		B	C		Notes
Rent/Price		0%	0%		To enter a negative number you must put a minus before the number
Yield		0%	0%
Construction Costs		0%	0%		Red indicates a negative number should be added
Finance Rate		0%	0%		Green indicates a positive number should be added
Disposal Period		0%	0%
B is an Optimistic Scenario: Economic Growth / Boom Economic activity grows faster than its current rate. The demand for accommodation increases and, consequently, rents/prices increase. The risk of property developments and investments being unsuccessful is reduced, so yields fall. Contractors increase building tender prices in the face of increased demand for their services from developers so construction costs rise. Interest rates are raised to dampen potential inflation. Property can be let/sold more quickly in the face of increased occupier demand so the disposal period falls.
C is a Pessimistic Scenario: Recession / Crash Economic activity slows and then contracts. The demand for accommodation decreases and, consequently, rents/prices stabilise and then fall. Property development and investment becomes more risky, so yields rise. Contractors decrease building tender prices in the face of decreased demand for their services from developers so construction costs fal. Interest rates are lowered to encourage investment and economic growth. Property takes longer to let/sell in the face of decreased occupier demand so the disposal period increases.
AUTOMATIC WORKINGS
Valuation A
	Gross	Net/Gross	Net	Price	Rent	Rental value		Estimated
Element	Flsp m2	Ratio	Flsp m2	per m2	per m2	£s pa	Yield	Value (£s)
For sale
Apartments	5,000	90%	4,500	2,250	0	0	0	10,125,000
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
Sub-total (for sales fees)								10,125,000
For rent
Offices	3,750	85%	3,188	0	122.5	390,469	8.00%	4,880,859
Refurbished works to offices	600	80%	480	0	112.5	54,000	8.00%	675,000
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
Sub-total (for letting and investment sales fees)						444,469		5,555,859
							GROSS VALUE OF SCHEME	15,680,859
Valuation B
	Gross	Net/Gross	Net	Price	Rent	Rental value		Estimated
Element	Flsp m2	Ratio	Flsp m2	per m2	per m2	£s pa	Yield	Value (£s)
For sale
Apartments	5,000	90%	4,500	2,250	0	0	0	10,125,000
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
Sub-total (for sales fees)								10,125,000
For rent
Offices	3,750	85%	3,188	0	122.5	390,469	8.00%	4,880,859
Refurbished works to offices	600	80%	480	0	112.5	54,000	8.00%	675,000
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
Sub-total (for letting and investment sales fees)						444,469		5,555,859
							GROSS VALUE OF SCHEME	15,680,859
Valuation C
	Gross	Net/Gross	Net	Price	Rent	Rental value		Estimated
Element	Flsp m2	Ratio	Flsp m2	per m2	per m2	£s pa	Yield	Value (£s)
For sale
Apartments	5,000	90%	4,500	2,250	0	0	0	10,125,000
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
0	0	0	0	0	0	0	0	0
Sub-total (for sales fees)								10,125,000
For rent
Offices	3,750	85%	3,188	0	122.5	390,469	8.00%	4,880,859
Refurbished works to offices	600	80%	480	0	112.5	54,000	8.00%	675,000
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
0	0	0	0	0	0	0	0.00%	0
Sub-total (for letting and investment sales fees)						444,469		5,555,859
							GROSS VALUE OF SCHEME	15,680,859

APPRAISAL 2

FINANCIAL APPRAISAL 2: ANALYSIS OF CHANGE
				Valuation A		Valuation B		Valuation C
TOTAL CONSTRUCTION COSTS				£8,994,850.00		£8,994,850.00		£8,994,850.00
GROSS DEVELOPMENT VALUE				£15,680,859.38		£15,680,859.38		£15,680,859.38
Pre-contract Period (years)				0.375		0.375		0.375
Building Contract Period (years)				1.125		1.125		1.125
Period to Physical Completion (years)				1.5		1.5		1.5
Disposal Period (years)				0.75		0.75		0.75
Development Period (years)				2.25		2.25		2.25
Finance rate (% p.a.)				7.25%		7.25%		7.25%
Professional fees (% building costs)				6.00%		6.00%		6.00%
Land costs (£)				1375000		1375000		1375000
Land acquisition fees (% land costs)				5.25%		5.25%		5.25%
Letting fee (% ERV)				10.00%		10.00%		10.00%
Investment sales fee (% GDV)				3.00%		3.00%		3.00%
Occupier sales fee (% CV)				2.00%		2.00%		2.00%
VALUATION
GDV				£15,680,859.38		£15,680,859.38		£15,680,859.38
Construction costs				£8,994,850.00		£8,994,850.00		£8,994,850.00
Finance on building costs (to completion)				£368,449.38		£368,449.38		£368,449.38
Professional fees				£539,691.00		£539,691.00		£539,691.00
Finance on fees (to completion)				£33,160.44		£33,160.44		£33,160.44
Land costs				£1,375,000.00		£1,375,000.00		£1,375,000.00
Land acquisition costs				£72,187.50		£72,187.50		£72,187.50
Land cost finance (to completion)				£160,200.62		£160,200.62		£160,200.62
Costs at physical completion				£11,543,538.95		£11,543,538.95		£11,543,538.95
Holding costs				£622,156.72		£622,156.72		£622,156.72
Letting fee				£44,446.88		£44,446.88		£44,446.88
Investment sales fee				£166,675.78		£166,675.78		£166,675.78
Occupier sales fee				£202,500.00		£202,500.00		£202,500.00
TOTAL COSTS				£12,579,318.33		£12,579,318.33		£12,579,318.33
RESIDUAL				£3,101,541.05		£3,101,541.05		£3,101,541.05
DEVELOPER'S PROFIT (ON COSTS)				24.66%		24.66%		24.66%
				A		B		C
			Developer's profit	£3,101,541		£3,101,541		£3,101,541
			Land costs	£1,447,188		£1,447,188		£1,447,188
			Finance costs	£1,183,967		£1,183,967		£1,183,967
			Professional fees	£953,314		£953,314		£953,314
			Construction costs	£8,994,850		£8,994,850		£8,994,850
				£15,680,859		£15,680,859		£15,680,859

FIGURES

Financial Structure of Schemes (absolute)

Developer's profit A B C 3101541.0476157796 3101541.0476157796 3101541.0476157796 Professional fees A B C 953313.65625 953313.65625 953313.65625 Finance costs A B C 1183967.1711342209 1183967.1711342209 1183967.1711342209 Construction costs A B C 8994850 89 94850 8994850 Land costs A B C 1447187.5 1447187.5 1447187.5

£s

Financial Structure of Schemes (proportionate)

Developer's profit A B C 3101541.0476157796 3101541.0476157796 3101541.0476157796 Professional fees A B C 953313.65625 953313.65625 953313.65625 Finance costs A B C 1183967.1711342209 1183967.1711342209 1183967.1711342209 Construction costs A B C 8994850 8994850 8994850 Land costs A B C 1447187.5 1447187.5 1447187.5

TABLES

	Table 1: Sensitivity Analysis (Proportionate Change)
			Original	New	Change in Profit
	Variable	Change	Profit	Profit	Absolute	%
	Rent/Price	+10%	24.66%	36.67%	12.01%	48.73%
	Yield	+10%	24.66%	20.79%	-3.87%	-15.69%
	Construction Costs	+10%	24.66%	15.08%	-9.58%	-38.85%
	Finance Rate	+10%	24.66%	23.46%	-1.19%	-4.84%
	Disposal Period	+10%	24.66%	24.02%	-0.63%	-2.56%
	Table 2: Sensitivity Analysis (Break-even)
		Proportionate change required
	Variable	to reduce the developer's profit to 0%
	Rent/Price		-20.32%
	Yield		135.60%
	Construction Costs		29.62%
	Finance Rate		241.20%
	Disposal Period		432.50%
	Table 3: Scenario Analysis
			Scenario
	Variable		B	C
	Rent/Price		25%	-5%
	Yield		-5%	15%
	Construction Costs		26%	-10%
	Finance Rate		15%	-20%
	Disposal Period		-50%	100%
	Orignal profit		24.66%	24.66%
	New profit		31.45%	21.04%
	Change in profit	Absolute	6.79%	-3.62%
		%	27.56%	-14.68%
	Table 4: Comparative Analysis of Design Change
			Original	New	Change in Profit
	Nature of Change (10%)		Profit	Profit	Absolute	%
	Higher density		24.66%	27.18%	2.52%	10.22%
	Different mix of uses		24.66%	19.66%	-4.99%	-20.24%
	Increased specification		24.66%	26.20%	1.55%	6.27%