Appraisals
Appraisals should always be part of any property strategy but in today’s difficult market conditions they are the only way of making explicit the assumptions regarding future property performance and therefore value.
Our appraisals are used to assess the viability of proposed and completed developments to inform the acquisition or sale of investment properties, and to 2stress-test2 key inputs through sensitivity analysis.
Viability Appraisals
‘A commitment to maintain economic viability’.
Any property development need to show a healthy profit to justify the risk inherent in the project, and our development appraisals are provided to quantify the profit against various measures.
By taking an overview of all the key elements of development we can provide the financial information to measure the effect of any change to the key inputs.
We provide development appraisals for plc house builders, commercial developers, housing associations and local authorities, analysing development proposals and providing empirical answers to some of the following questions:
- Is the development mix proposed the most profitable?
- Can the proposals meet section 106 and affordable housing policy requirements?
- How is profitability affected by changing finance charges?
- What is the financial effect of a delay in the construction?
- How sensitive is the profit return to changes in the key inputs?
- What is the value of the site with the benefit of a specific planning permission?
The appraisal model is capable of providing solutions to these and other key development problems, and will also provide full cash flow modelling and sensitivity analysis to each scenario.
Investment Appraisals
Analysing current and predictable investment performance
The investment appraisal model is a vital part of assessing opportunities for purchase, sale and portfolio analysis.
The model is capable of analysing current and predicted investment performance in relation to current and predicted market conditions, rental values, covenant strength and lease terms
Full sensitivity analysis can be undertaken along with DCF cash flow reports to give total flexibility in the appraisal of investment opportunities.
S106 contributions ‘a reasonable level of return is maintained to protect the value of the site’
Obligations attached to planning consents in the form of section 106 agreements can affect a development scheme by
- Restricting the development or use of land
- Requiring specific operations or activities to be carried out in relation to the land
- Requiring the payment of a sum of money for specific items
- Requiring the subject land to be used in a certain way.
Cash contributions are generally put towards specific projects such as traffic calming, children’s play areas, public open space, public art, tree planting, and affordable housing
All of these obligations are provided at the expense of the developer, and inevitably there is an impact on profitability/affordability.
Using the development appraisal model, and utilising our excellent contacts with planning consultants, we will assist in negotiations with the local authority to ensure that the viability of any project is protected and that obligations under section 106 agreements are realistic within the scope of the development proposed
Affordable Housing
The impact of s106 contributions and the provision of affordable housing on residential housing schemes is becoming increasingly important to the profitability of any development. Most local authorities have set targets for substantial proportion of all new residential developments to be affordable, with a clear preference towards social rented accommodation to meet local need, as affordable housing generates substantially less revenue than a similar private house, profitability is inevitably affected, and it is essential to ensure that the proportion and tenant mix of affordable does not lead to the consented scheme becoming unviable. Using the development appraisal model, and utilising our excellent contacts with planning consultants and housing associations, we will assist in negotiations with the local authority to ensure that viability is maintained to allow development to take place
