Appendix 6A Development appraisal of a mixed use

development

Timescale
Commences Months
Project start date Oct 2006
Pre-construction Oct 2006 3
Construction Jan 2007 18
Project length 21
Total project length 22
(including exit period)

Assumptions

Construction
1. Construction costs paid on S-curve
2. Professional fees are related to construction costs, including contingency

Disposal
1. Purchasers costs based on net capitalisation
2. Purchasers costs deducted from sale (not added to cost)
3. Sales fees based on sales plus net capitalisation
4. Sales fees added to cost (not deducted from sale)

Interest
1. Single credit/debit rate of interest adopted for all payments/receipts (12.00%)
2. Interest compounded annually and charged annually
3. Same rate of interest in each discounted cash-flow (DCF) period
4. Interest not calculated on items in final DCF period
5. Interest not included in internal rate of return (IRR) calculations
6. Effective rates of interest used

Cash-flow
1. Payments in arrears
2. Receipts in advance
3. Initial IRR guess rate is 8.00%

Property Valuation in an Economic Context

2007 by Peter Wyatt
Valuation
1. Formulae are annually in arrears
2. Tenants rent valued as true income stream

Appraisal Summary
INCOME

Sales Valuation ft Rate ft Value

Apartments 10 units at 50 000 500 000
500 000

Rental Area ft Rate ft Rent pa

Summary
Offices 1 500 95.00 142 500
Shops 800 140.00 112 000
Factories 1 900 70.00 133 000
4 200 387 500

Investment Yield Factor Cap. Rent

Valuation

Offices 142 500 YP @ 7.0000% 14.2857 2 035 714

Valuation Rent
Shops 112 000 YP @ 6.0000% 16.6667 1 866 667
Valuation Rent
Factories 133 000 YP @ 9.0000% 11.1111 1 477 778
Valuation Rent 5 380 159

GROSS DEVELOPMENT VALUE 5 880 159

Purchaser's Costs 2.50% -131 223
NET DEVELOPMENT VALUE 5 748 935
NET REALISATION 5 748 935

EXPENDITURE

ACQUISITION COSTS
Acquisition Price 1 200 000
Acquisition Agent 2.00% 24 000
Fees
Acquisition Legal 2.00% 24 000
Fees
Town Planning 11 000
Survey 65 000
1 324 000
CONSTRUCTION COSTS
Summary ft Rate ft Cost
Offices 2 000 600.00 1 200 000
Shops 1 000 500.00 500 000
Factories 2 000 300.00 600 000
Apartments 10 units at -30 000 300 000
5 000 2 600 000
Contingency 5.00% 130 000

Property Valuation in an Economic Context

2007 by Peter Wyatt
Road/Site Works 25 000
Statutory Costs 2 000
157 000
PROFESSIONAL FEES
Architect 4.00% 109 200
Quantity Surveyor 3.00% 81 900
Structural Engineer 3.00% 81 900
Mech./Elec. 1.00% 27 300
Engineer
Project Manager 1.00% 27 300
327 600
MARKETING
Marketing 10 000
Letting Agent Fees 10.00% 38 750
48 750
FINANCE
Debit Rate 12.00%
Credit Rate 12.00%
(Effective)
Land 261 955
Building 270 650
Total Finance Cost 532 606

TOTAL COSTS 4 989 956

PROFIT 758 980

Performance Measures

Profit on Cost% 15.21%

Profit on GDV% 12.91%
Profit on NDV% 13.20%
Development Yield (ERV Basis) 7.77%
Equivalent Yield (Normal) 7.20%
Equivalent Yield (True) 7.54%
IRR % 26.51%
Rent Cover 2 yrs 0 mths
Profit Erosion (finance rate 12.000%) 1 yr 3 mths

Sensitivity Analysis: Table of Profit Amount and Profit on Cost %

Land Price
Interest Rates - (20 000) - (10 000) 0 + 10 000 + 20 000
% 1 180 000 1 190 000 1 200 000 1 210 000 1 220 000
- 0.400% 802,296 789,789 777,282 764,775 752,268
16.219% 15.926% 15.634% 15.344% 15.055%
- 0.200% 793,225 780,680 768,136 755,591 743,046
16.006% 15.713% 15.422% 15.132% 14.843%
0.000% 784,146 771,563 758,980 746,397 733,814
15.794% 15.501% 15.210% 14.920% 14.632%
+ 0.200% 775,056 762,435 749,814 737,193 724,572
15.583% 15.290% 14.999% 14.709% 14.421%
+ 0.400% 765,958 753,299 740,639 727,980 715,321
15.371% 15.079% 14.788% 14.499% 14.211%

Property Valuation in an Economic Context

2007 by Peter Wyatt
 Detailed cash-flow

Sep 2006 Dec 2006 Mar 2007 Jun 2007 Sep 2007 Dec 2007 Mar 2008 Jun 2008 Jul 2008

QuarterlyB/F 0 (1,324,000) (1,573,424) (2,089,499) (2,954,416) (3,655,556) (4,248,072) (4,941,206)

Revenue

Cap - Offices 0 0 0 0 0 0 0 0 2,035,714

Cap Shops 0 0 0 0 0 0 0 0 1,866,667

Cap - Factories 0 0 0 0 0 0 0 0 1,477,778

Sale - Apartments 0 0 0 0 0 0 0 0 500,000

Purchaser's Costs 0 0 0 0 0 0 0 0 (131,223)

Acquisition Costs

Acquisition Price 0 (1,200,000) 0 0 0 0 0 0 0

Acquisition Agent 0 (24,000) 0 0 0 0 0 0 0

Fees

Acquisition Legal 0 (24,000) 0 0 0 0 0 0 0

Fees

Town Planning 0 (11,000) 0 0 0 0 0 0 0

Survey 0 (65,000) 0 0 0 0 0 0 0

Construction

Costs/Fees

Road/Site Works 0 0 (25,000) 0 0 0 0 0 0

Con. - Offices 0 0 (87,288) (202,542) (265,174) (275,174) (232,542) (137,280) 0

Con. - Apartments 0 0 (21,827) (50,635) (66,292) (68,792) (58,135) (34,319) 0

Con. - Shops 0 0 (36,375) (84,391) (110,488) (114,655) (96,892) (57,199) 0

Con. - Factories 0 0 (43,646) (101,271) (132,586) (137,586) (116,271) (68,640) 0

Contingency 0 0 (9,457) (21,942) (28,727) (29,810) (25,192) (14,872) 0

Statutory Costs 0 0 (2,000) 0 0 0 0 0 0

Architect 0 0 (7,944) (18,431) (24,131) (25,041) (21,161) (12,492) 0

Quantity Surveyor 0 0 (5,958) (13,823) (18,098) (18,781) (15,871) (9,369) 0

Structural Engineer 0 0 (5,958) (13,823) (18,098) (18,781) (15,871) (9,369) 0

Mech./Elec. 0 0 (1,986) (4,608) (6,033) (6,260) (5,290) (3,123) 0

Engineer

Project Manager 0 0 (1,986) (4,608) (6,033) (6,260) (5,290) (3,123) 0

Marketing/Letting

Marketing 0 0 0 0 0 0 0 0 (10,000)

Property Valuation in an Economic Context

2007 by Peter Wyatt
Letting Agent Fees 0 0 0 0 0 0 0 0 (38,750)

VAT Paid 0 0 0 0 0 0 0 0 0

VAT recovered 0 0 0 0 0 0 0 0 0

Quarterly Total 0 (1,324,000) (249,424) (516,075) (675,659) (701,139) (592,516) (349,787) 5,700,185

Debit Rate (1) %pa 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00

Credit Rate (1) 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00

%pa

Interest 0 0 0 (189,259) 0 0 (343,347) 0

C/f Quarterly 0 (1,324,000) (1,573,424) (2,089,499) (2,954,416) (3,655,556) (4,248,072) (4,941,206) 758,980

Property Valuation in an Economic Context

2007 by Peter Wyatt