Residual Valuation Appraisal

Property Yields

Land Value

Profit Appraisal

Gross and Net Development Values

Return on GDV, Cost and Equity

Proforma Development Cash Flow

Inputs:

• Timings: purchase date, works start date, planning, lead in, construction and refurbishment, void period, lease start, sale date
• Revenue: sales proceeds, estimated rental value per sqf, net internal areas, rental growth and target returns
• Development Costs: construction and refurbishment, site purchase and vacant possession value, contingency, professional fees, statutory costs, allowances and rights 
• S-Curve vs. Straight Line

Outputs:

• Internal Rate of Return (IRR)
• Net Present Value (NPV)
• Maximum Bidding Price
• Total profit, profit on cost and equity multiple

Financial Viability Testing & Analysis

Data tables & sensitivity analysis

Risk visualisation techniques

Case study: Un-geared office redevelopment in the UK

Development finance

•           Debt & Equity Structures
•           Senior Debt
•           Mezzanine Loan

Geared Cashflow

Debt Types

•          Rolled-up interest senior debt
•          Equity first capital deployment waterfall
•          Debt repayment structures for development finance

Joint-venture structures

•          Equity waterfall structure
•          Preferred returns
•          Promote Cash Flow

Capitalised interest & circularities

Case Study: Geared office redevelopment in the UK

Details

• Current in-place leases, operating expenses – vacancy costs, including rates and empty costs
• Site acquisition including options, pre-development and planning costs
• Equity and debt drawdowns, including mezzanine finance

Construction period

•      Development hard and soft costs using S-curve, Straight line and Known curves
•      Construction finance drawdowns following an equity-first model

Lease-up and stabilisation period

•       New leases with gross and net lease clauses
•       Tenant incentives such as rent-free and capital expenditure contributions
•       Operating expenses – delayed rates, letting fees, service charges and void costs

Investment options modelling

•      Lease re-gearing, hold or sell
•      Re-develop, refinance and hold
•      Re-develop, stabilise and sell

Sources of funds

•      Calculating debt and equity peaks
•      Modelling the debt repayment waterfall
•      Calculating total cost of debt (interest and fees)

Carried Interest / Promote Structures

•              Profit shares and preferred equity returns
•              Equity returns based on different IRR tiers

Risk modelling and presentation

      Financial ratios: IRR, NPV, Residual Land Value, Profit on Cost, Profit on GDV, Equity Multiple

      Sensitivity analysis (2-way data tables)

      Scenario analysis