Managerial Finance Assignment

Department of Architecture and the Built Environment

University of the West of England

Postgraduate Level

MSc Real Estate Management

Managerial Finance for the Built Environment

Coursework

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Purpose

The coursework is intended to provide you with the opportunity to demonstrate understanding and integration of the various aspects of the

programme and this module. The aim should be to obtain, analyse and

interpret financial information; assess the financial viability of a project and

integrate them into a balanced

decision-making framework.

Project Brief:

MF4BE, a leading local housing

developer of the South West is considering a new housing

development to be built under a quasi- social housing agreement with a

national house-building firm. Several sites were identified in the initial

feasibility studies, however, many of these required substantial demolitions

of existing dwelling houses and relocation during construction and

have thus been rejected. Source: http://www.eastofharrystoke.com/proposals/

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The proposed development will take place on a site in a new neighbourhood

called East of Harry Stoke (EoHS) situated on the urban edge of north

Bristol near the University of the West of England and close to the M32 and M4 motorways. This site is mostly owned by Crest Nicholson and South

Gloucestershire Council who intend to deliver about 2000 houses; while some parts are owned by other private landowners. MF4BE has purchased

3.125 hectares of the EoHS land from the private landowners for £3.5 million per hectare to enable it to carry out this development. MF4BE plans

to develop the site to provide a mix of housing (including family housing, flats and sheltered accommodation), together with commercial uses in

future and also provide some open spaces. In keeping with this, the average dwelling per hectare (density) for this development should NOT

exceed 32.

To achieve this undertaking, MF4BE is considering engaging a reputable construction company or housebuilder from a list of firms that have

expressed interest. MF4BE is also considering taking a stake in a construction company or housebuilder as part of its long-term expansion

goals of accessing other income.

You are required to provide a report that will contain the following:

Part 1: 60 Marks

Assessment of suitability of the construction or housebuilder firm

(1800 words)

You are required to obtain the most recently published “FULL ANNUAL REPORT” for an exisiting construction company or housebuilder of your

choice. The annual report must be for a UK PLC that is listed on the UK

Stock Exchange and must be in the English language.

You are required to assess the suitability of the chosen construction

company or housebuilder, both as a building contractor and a potential investment, by preparing a report on the financial “health” of this company.

This should be done by making use of financial ratios as revealed or implied by the most recent FULL annual report and its financial statements. Your

report should be clear and succinct as if prepared for your boss (with no

accounting knowledge) who is a very busy person with limited time to read it before an important meeting. All relevant information in the annual

report should be used as necessary.

The detailed calculations of all ratios must be shown in FULL and must be

attached separately as part of the Appendices either in Microsoft Word or

Microsoft Excel (Note: Please only restrict yourself to the ratios covered in class). A complete copy of the FULL ANNUAL REPORT must

be attached as a separate file in the submission. Please DO NOT use the

interim (half-year) annual report.

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The full annual report can be obtained online from the respective

company’s website or by carrying out a search using your preferred

internet “search engine". You can use FAME (a database accessible through the UWE Library webpage) to check that the company is a PLC. Note that

FAME should only be used to compare the ratios but all the ratios should be

calculated manually.

Part 2: 40 Marks

Development decision making (1200 words)

You are required to propose a choice of two (2) housing schemes on the site for MF4BE to pick from. Decide on the total number of residential

dwellings proposed for this site and the housing mix and types (e.g. 1 bedroom, 2 bedrooms etc). Note: a minimum of three house types is

required for both proposed schemes.

a. Undertake breakeven analyses (charts included) based on only the development of houses on both of the proposed schemes. Based on the

breakeven analyses, advise MF4BE which of the two schemes is the best.

Market information can be gleaned from a variety of databases e.g. “Rightmove” that will provide reasonable comparables. Cost information

can be obtained from sources such as the Building Cost Information Service

(BCIS) or Spon’s.

(18 marks)

b. With the use of the information from (a) above, advise MF4BE on the

viability of the two proposed schemes by carrying out capital budgeting using the Return of Capital Employed (ROCE), Payback Period (PP), Net

Present Value (NPV) and Internal Rate of Return (IRR). Discuss which of these appraisal methods IS the most suitable for this task and advise

which of the two proposed schemes is the best.

Make appropriate assumptions regarding the timing of the construction and

sale of the units.

(22 marks)

The full report should include, among other things:

• One-page executive summary of both Part 1 and Part 2- containing the

key features and results of the report. This should be on a separate page placed at the beginning of the report

• A brief introductory section

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• Numerical investigation

• Findings - analysis and interpretation of results

• Solutions, conclusions and recommendations • References (ensure that you use the Harvard System check the UWE

library website for guidance) • Appendices – these should be used appropriately to show the workings

(Calculations for Part 2 should be done in MS Excel) and should be limited to information supporting the report. Definitions of ratios should

be within the report while ensuring that important information is not relegated to the appendices

Style

The typed report should be complete, coherent, clear and concise (maximum 3,000 words with a 10% allowance – see the University's policy

on word count) making good use of headings, tables, graphs, diagrams, page numbers etc., and presented professionally with balanced use of

appendices, contents listings, proper referencing, bibliography, word count, etc. material in the appendices. The report should be predominately

analytical rather than descriptive.

Coursework hand-in

The coursework should be handed ONLINE (electronically) following

normal Faculty practice BEFORE 14.00hrs on Thursday, April 28th,

2022. Note that you will be penalised if your work is submitted even one

(1) second after the 14.00hrs.

The most significant point to stress at this time is that your submission

must consist of three electronic files: -

1. The report containing both parts 1 and 2 and any appendices MUST

be submitted as a single MS WORD document. 2. A single spreadsheet file (MS Excel or similar) containing (at least)

two (2) separate worksheets (labelled appropriately) for the appendices of all the calculations.

3. The pdf file of the FULL ANNUAL REPORT

Note: Please DO NOT just paste pictures of extracts of the Excel file since we will need to see your calculations. Ensure that this Excel file is uploaded

as a separate file and DO NOT EMBED it in the MS WORD file – embedded files that cannot open will be deemed as missing and therefore making your

work incomplete.

Electronic Submission

Full instructions will be provided about 4 weeks before submission. Ensure

that you read the submission instructions carefully.

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Hard copy submissions are NOT accepted under any circumstances.

Please do not leave submission to the last day. Computer and internet

connection problems are not acceptable grounds for Personal Circumstances. Anticipate that very close to the deadline blackboard usage

will surge and may cause upload speed issues.

The electronic format provides the ability for word counts to be completed. Anything more than 10% over the limit (not including any covering note)

will not be marked. This will leave your submission incomplete and

disjointed; this will be a major penalty.

The electronic submission also provides the marker with the ability to

process the whole batch of assignments through a piece of software called ‘safe assign’. This will compare the text in every assignment against

available electronic resources AND compare it to all the other submissions

in the batch.

Best wishes

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Guideline assessment criteria for postgraduate work

Student Performance Formative work Summative work % Level M

A full, coherent and well- rounded submission showing rigour, clarity and insights leading to elements of originality

Excellent 80-100

'Starred' Distinction

A well-structured, relevant piece of work based on an understanding of virtually all the important aspects, with good reasoning and insight, expressed throughout, that wholly supports the conclusions or solutions

Very good 70-79

Distinction

A submission that is well focused on the task, showing a good grasp of the subject and based on most of the important aspects being well integrated into the work with reasoned outcomes

Good 60-69 Merit

Reasonable coverage of the subject matter demonstrating logic and reasoning that is directed towards meeting the aims of the task

Good

55-60

'Solid' Pass

Work showing a grasp of the subject matter, having some omissions and confusions but in which the work presented is used to support conclusions and/or solutions

Barely

satisfactory

50-54

Bare Pass

Some of the relevant material is identified and there is some indication of an appreciation of the subject matter but with significant omissions, poorly structured and weak conclusion/solutions

Weak

40-49

Fail / Area of

Compensation at

Component Level

Work with a few relevant aspects of the subject matter, poorly linked together and lacking direction in addressing the question and providing no support for conclusions

Very weak

30-39

Fail

Very little of relevance to the question with an absence of focus and largely incoherent with little sign of understanding, leading to an inability to draw meaningful conclusions

Unacceptable Unacceptable