Microsoft Word - 3a_Assignment 3 Brief_ XXXXXXXXXXCopy
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The University of New South Wales
School of Built Environment
Assignment No 3: Development Appraisal Report (weighting: 50% of the total;
individual work; to be marked out of 100%)
Submission due: Monday, 12 August 2024, 5:00 pm
Please submit your assignment online (in Word or pdf format) via the course Moodle
platform. Other forms of submission or submission records, for example, via email or
WhatsApp, are NOT accepted.
Late submission: All assignments must be submitted by the due date/time. UNSW
standard late submission penalty will apply 5% per day, capped at five days (including
Saturday and Sunday) after which students cannot submit the assignment.
Extensions for submission: Applications for special consideration regarding an
extension for assignment submission or examination are now centrally assessed by the
Case Review Team. Applications must be submitted online as soon as you encounter
any problems before the due date. Application procedures can be found via
https:
student.unsw.edu.au/special-consideration
The Brief
Assignment 3 is individual work. This is a continuation of Assignment 2 (development
controls) in which you can make use of your findings on key planning requirements which
affect the development design, and hence its gross realisation, development costs and
feasibility.
Use the selected site in Assignment 2, which is situated in metropolitan Sydney and can
accommodate a ‘shop top housing’ development with around 50 apartments and ground-
floor retail shops. It should comprise 20% 3-bedroom apartments, 60 % 2-bedroom
apartments and 20% 1-bedroom apartments. The site can be a single land lot or an
amalgamation of several land lots.
The development should be completed within 12 months, as planned by the developer.
Using the Hypothetical Development Approach, determine what should be paid for the site.
Then conduct a Discounted Cashflow Feasibility (DCF) Analysis to determine the
following:
Development time frame: pre-construction (lead-in period), construction and post-
construction (selling period)
Market analysis of economic market conditions and comparable prices
Potential gross realisation value
Likely development Costs
Finance cost (interest; assume 100% debt)
Profit margin excluding and including interest
Internal Rate of Return before and after Interest
It is assumed that the planning authority has given positive support for this development
REST0006 Property Development & Feasibility Analysis XXXXXXXXXXTerm 2, 2024
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after reviewing the preliminary design and planning concept in the pre-lodgement meeting.
All inputs and other assumptions should be fully given and explained.
All explanations and arguments should be properly cited and a list of references should be
provided.
Length of the assignment:
10 pages / 2800 words max.
Prepared on 11 May 2024
Briefing on 13 June 2024
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REST0006 Property Development & Feasibility Analysis
Assignment No 3 Cover Sheet
Title: REST0006 Assignment 3: Development Appraisal Report
Student Name: ______________________
Student Number: ____________________
CHECKLIST (please tick)
☐ Cover sheet
☐ BE Plagiarism Form
☐ Length and format of the report: 10 pages/2800 words max. (excluding the list of references),
Times New Roman or Arial font, 12-point, 1.5 spacing
ASSESSMENT CRITERIA:
Criteria Mark Value
Executive Summary
A clear and concise overview of the main points/ key
findings of the report
Enable reader to make a decision based on reading the
executive summary
10%
Market Analysis
Macro and microeconomic market analysis; apartment
and retail sale prices of recent comparable projects,
comparable development site sales; local competition;
SWOT analysis
25%
Hypothetical Development Approach
Discussion on gross and net realisation values; profit
margin, development costs and interest, land acquisition
costs, GST liability and reclaims; residual land value
XXXXXXXXXX%
DCF Model
Discussion on: cashflow (outflows and inflows) over the
entire development time frame (gross and net realisation,
land costs, development costs, finance cost), GST
liabilities and reclaims; profit margin, IRR, NPV,
sensitivity analysis
XXXXXXXXXX%
References and presentation
Referencing, figures, tables, sketch plans, report structure
(cover page, contents page, executive summary,
introduction, main body, conclusions, list of references,
appendices), proofreading
XXXXXXXXXX%
TOTAL MARK /100
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REST0006 Property Development and Feasibility Analysis
Assignment 3: Development Appraisal Report
Guidance Notes:
These guidance notes only serve as a guideline to provide you with a framework for
preparing this appraisal report. You are expected to conduct your own in-depth research to
holistically complete the tasks. All inputs and assumptions should be given and explained
in relation to the ‘Hypothetical Development Approach’ for estimating residual land value,
and the ‘DCF’ model for calculating profitability level. Citations and a reference list should
e given in the report.
1. Market Research should include, but is not limited to, the following:
• Site Overview (Lectures 2, 3 and 4)
➢ why select the site: Land use zoning and planning provisions; property cycle and
trend; local amenities, public transport facilities, educational facilities, existing
and future business, demand for housing and retail, etc.
• Market Analysis (Lecture 4)
➢ Macroeconomic market analysis (business confidence and demand for space)
o GDP growth, GDP per capita, cash and mortgage rates, CPI, population
growth, unemployment rate; housing finance; federal election, etc
➢ Microeconomic market analysis (local demand and supply for decision-
making)
o residential market at the Sydney level (median unit price and trends,
vacancy rates, units under approval and completion, median days on the
market, etc: sources of information: PCA, property research reports of
JLL, CBRE and the like, etc)
o retail market at the Sydney level (rental value and trend, yields, vacancy
ates, etc; sources of information: PCA, property research reports of JLL
CBRE and the like, etc)
o local market conditions at the subu
postcode level: median age,
household size, population growth, dwelling structure/number of
edrooms/ tenures; days on the market; residential median unit prices,
yields and trend; retail median rents, yields and trend; sales prices of
comparable residential and retail projects identifying median, low and
high prices, etc; sources of information: ABS, PriceFinder, local estate
agents, etc)
o local competition and projected supply in the pipeline (sources of
information: development applications to the council, local estate agents,
etc)
o Determine the prices of the subject property by making appropriate
adjustments
➢ SWOT analysis summarises the ‘cu
ent’ and ‘future’ market conditions and the
potential viability, taking into consideration your company’s expertise in a
specific type of development. (e.g. strength: expertise in apartment development,
ising population of a subu
; weakness: buyer sentiment, slow GDP growth;
opportunities: low cu
ency; threat: low migration rate, global economy)
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2. Planning Control
• An outline of the Planning Requirements (use the research findings from
Assignment 2) (Lecture 2):
➢ LEP: land use zoning (B4 mixed-use zone or R4 high-density residential
development for shop top housing / residential flat buildings); FSR, building
height limit
➢ DCP and ADG: apartment mix, site coverage, setbacks, parking provisions,
apartment sizes, private open space (balcony; not counted as GFA if the balcony
wall is < 1.4m), common open space
➢ Housing SEPP and NSW Apartment Design Guide
➢ SEPP 55 Contaminated Land Act (implications for site remediation and costs)
➢ Sydney Regional Environmental Plan (SREP) 2005 – Sydney Ha
our
Catchment (Is the property located at the catchment area, which aims to protect
high quality and sustainable u
an environment?)
3. Proposed Development (also use the research findings from Assignment 2) (Lecture
2):
➢ Site area
➢ Apartment mix (DCP & ADG: e.g. 20% 1-B (10 units), 60% 2-B (30 units), 20%
3-B (10 units); DCP requirements should take precedence.
➢ Provide site and floor plans to show how your proposed development will be
designed to meet the planning requirements; these form the basis for the
development appraisal.
➢ Residential GFA (measured from the inside face of external walls) summary for
each floor; parking spaces provided
➢ Retail GFA summary of shop units; parking spaces provided
➢ GFA capacity (residential + retail) = site area x FSR
➢ Building efficiency: e.g. 80% of GFA for apartments; 20% of GFA allowed for
the entrance hall, lift lo
ies, and co
idors)
➢ Site area required = (apartment floor area ÷ 80%) ÷ FSR
4. Development Program
➢ Development duration: 12 months; prefa
icated construction to speed up the
construction time, and improved the quality of construction and cost
➢ Pre-construction period: no. of months to cover DA approval, land acquisition,
construction certificate, design, tender documents, tendering and award of
contract, etc
➢ Construction period: demolition, site establishment, construction, contingency,
marketing & pre-sales, compliance certification and occupation permit, strata
plan & title registration, etc
➢ Post-construction period: sales, settlement
5. Gross Realisation
➢ Retail sale projections for the retail units (value of individual shops = GLAR x
median, high or low comparable price per sqm)
➢ Residential sales: e.g. 1-B units, 2-B units, 3-B units; each category should be
split into two types of apartments (without and with car parking space); the value
of individual units = enclosed area x median, high or low comparable price per
sqm (adjusted)
➢ Retail unit sales: the value of individual units: GLAR (measure from the inside
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face of external walls and the centre line of shared walls) x median, high or low
comparable price per sqm (adjusted)
6. Development Costs
➢ Land and acquisition costs
➢ Construction costs:
- Demolition of the existing structures: enclosed floor area x unit rate per sqm
- Construction of multi-units, balconies, retail floor and car park: enclosed floor
area x unit rate per sqm
- Preliminaries: say 12% of the building costs for overheads, site set-up,
hoarding, insurance, etc.
- External works: say 5% of the building costs for landscaping, tree planting,
paving, outdoor furniture, etc.
- Contingencies: say 5% of the building costs for unforeseen risks and works,
e.g. ground conditions
- Inflation: say 2% of all costs for the period from January to June 2024
- Construction cost (excl GST)
- Total construction cost (add GST 10%)
➢ Professional fees: for Architect, structural engineer, M&E engineer, quantity
surveyor, project manager, and development manager: say 15% + GST
➢ Use the Rawlinsons Australian Construction Handbook 2024 for cost
estimations: (a) ‘Estimating building costs per sqm’ for the construction of
apartment units and balconies (Section 13), parking (Section 10) and retail
(Section 14); (b) ‘Detailed prices’ for the demolition; allow for 0.8% increase in
uilding cost between Dec 2023 and June 2024.
➢ DA approval and inspection fees
➢ Building approval and inspection fees
➢ Holding costs: land tax, council rates and water rates
➢ Finance approval fees (loan application and management)
7. Marketing Costs
➢ Online advertisement
➢ Display suite
➢ Promotion and marketing (photography,
ochure, model, computer-generated
imaging (CGI), etc)
8. Finance costs
➢ Senior debt: 75% TDC (total development costs) is expected from using bank
lenders; Mezzanine debt: 25% of TDC from using merchant banks or specialist
property lenders
➢ Banks often require 100% debt coverage from presales; not required when the
developer show good credential and track records.
➢ Lending rate, say at a weighted average of 6% (4% x XXXXXXXXXX% x 0.25)
9. Residual land valuation / hypothetical development approach (Lectures 6 and 8)
➢ Use the template from Lecture 8 for calculation (Residential land valuation Ex.
3, but build in the GST reclaims for selling cost, related development costs, and
land legal cost)
➢ Assume at least 20% profit margin to cover profit and risk for this apartment
development
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➢ Residual land value = (gross realisation – GST tax liability and selling costs +
GST credit on selling costs) – profit – development costs – interest on
development costs + GST tax credits for related development costs – interest on
land and acquisition – acquisition costs (legals) + GST tax credit for acquisition
costs – stamp duty
➢ Use this land value for