A copy of my presentation given to the CPD Foundation on 7th February 2013

1. An Introduction to Development Appraisal
& Residual Valuations
Speaker: Simon Wainwright BSc FRICS
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2. 2013 Lecture Series
Lecture Date
An introduction to development 7th February 2013
appraisal & residual valuations:
Cash flow techniques and 13th February 2013
sensitivity analysis:
Possession strategy : 25th February 2013
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3. 9900 Wilshire Boulevard Beverly
dfdf
Hills
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4. Valuation of Development Land
Comparison Method or Residual Method?
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5. Terminology
• Residual Valuation
• Comparable Valuation
• Development Appraisal
• Viability Study
• Feasibility Study
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6. Think Timeline
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7. RESIDUAL VALUATION &
DEVELOPMENT APPRAISAL
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8. Residual Valuation
Month • Value of Completed Development
12
Month • Less Development Profit
12
Month • Less Construction Cost
1 - 12
Month • Less Finance Cost%
1–12
Month • Residual Site Value
1
8

9. Development Appraisal
Month • Residual Site Value
1
Month • Plus Construction Cost
1 - 12
Month • Plus Finance Cost%
1 - 12
Month • Less Capital Receipts
12
Month • Development Profit
12
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10. Development Appraisal
GROSS DEVELOPMENT VALUE
COST HEADINGS
• Site Cost
• Construction Cost
• Professional Fees
• Marketing Cost
• Finance Cost
• Other Costs
OUTPUTS
• Development Profit
• Profit on Cost %
• Profit on Cost IRR (inc/exc finance)
• Yield on Cost
• Profit / Rent Cover
• Profit Erosion / Dissipation
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11. PLANNING & DEVELOPMENT RISK
PROFIT

12. Land Speculation v Development
Land Speculation Development
• Agricultural Land • Development Land
1 • Planning Application 1 • Planning Permission
• Development Land • Construction Finance
2 • Planning Risk 2 • Development Risk
• Site Sale • New Building
3 • Speculative Profit 3 • Development Profit
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13. Land Plotting & Urbanisation
Urbanisation of Land
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14. 14

15. Development
Options
Regeneration
Redevelopment
Retrofitting
Refurbishment
Redecoration
Repair & Maintenance
Improvements
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16. Where do you start?
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17. Sensitivity Analysis
Letting Period -10%
Letting Period +10%
Construction period -10%
Construction period +10%
Pre-construction period -10%
Pre-construction period +10%
Variable
Finance Rate -10%
Finance Rate +10%
Land Cost -10%
Land Cost +10%
Building Cost -10%
Building Cost +10%
Yield -10%
Yield +10%
Rent -10%
Rent +10%
-80.0% -60.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0%
% Profit Change
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18. What guidance is available?
• RICS Guidance Note
• RICS Valuation
Information Paper 12
• RICS Practice Standard
UK
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19. Follow Us
J Peiser Wainwright
Website Jpeiserwainwright.com
Facebook /jpeiserwainwright
LinkedIn
Twitter @JPWNews
Google+
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20. An Introduction to Development Appraisal
& Residual Valuations
Speaker: Simon Wainwright BSc FRICS
20