Produce a revised version of the project report. Address the weaknesses and/or suggestions for improvement which were identified by the feedback provided on the first attempt.

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Factors leading to Unsustainable Construction in Developing countries.

Task
Produce a revised version of the project report (dissertation). The revised report should address the weaknesses and/or suggestions for improvement which were identified by the feedback provided on the first attempt.

Include a summary of what changes have been made in response to the feedback received, which should address each feedback comment directly.
As a reminder, to achieve a pass the report MUST include:

  • • An introduction (including aim and objectives and summary of changes)
  • • A review of relevant literature and practice that makes use of key reference sources.
  • • An explanation of an appropriate approach you have used to undertake your project.
  • • An attempt to provide a solution to a problem.
  • • Discussion of the outcome of your project
  • • Any conclusions reached.
  • • References (in AliA7 format)

To achieve a pass, the report MUST also attempt to follow guidelines regarding structure, citing references and presentation of data.
You are required to submit the following:

  • • One pdf copy to the second attempt project via the link on Moodie.
  • • Any appendices should be uploaded as separate files and can be in any format. There is a maximum file size of 250 MB.

Explain the meaning of the time value of money. Explain and compare two time-based and two non-time-based investment appraisal techniques which may be used when assessing the financial viability of the conversion project. Analyse and evaluate the potential effects of the conversion project on the economy and environment of the city and on the social welfare of the local population, supporting your answer with reference to relevant theories and current data.

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ECO5BEC Ass 2

Code Description
LO1 Demonstrate knowledge and critical understanding of the economic principles relating to property demand, supply and price; property and building cycles; urban and regional location decisions; and land use.

LO2 Identify the impact of government intervention in the property and construction sector using coherent economic reasoning.

LO3 Interpret economic data and demonstrate the ability to communicate information, arguments and analysis to specialists and non-specialists effectively, presenting coherently argued written work based upon economic principles and theory.

LO4 Analyse and evaluate the appropriateness of different approaches to investment appraisal in development decisions.

Scenario
You work for ECO5 Ltd, a small economic consultancy. ECO5 Ltd specialises in advising commercial clients on economic aspects of projects in the construction and property sectors in the
built environment in your country. ECO5 Ltd has been contacted by BEC plc, a medium-sized construction company. BEC plc has the opportunity to purchase a small commercial building in a nearby city and to convert it into residential units. The building is located near to the city centre in an area which is mainly commercial.* BEC plc has asked ECO5 Ltd to write a report on the proposed project. The report will help BEC plc’s management to understand the various aspects of, and the processes involved in, evaluating the economic viability of a project of this type. It will assess the economic climate in which the investment in the project will take place and it will analyse the financial and non-financial costs and benefits of the project, arriving at a supported conclusion.

(*You may select any further details relating to the project, including the country and city in which BEC plc is located.)

Task
Write a formal report for BEC plc’s managers which will enable them to assess the potential success of the proposed project from a financial and macroeconomic point of view, and to evaluate its impact on the economy, society and the environment. Your report should be suitable for a general non-expert audience and should show how economists would approach the investment decision and should explain the reasoning behind this approach. Your report should contain the following sections:

a. Explain the meaning of the time value of money. Explain and compare two time-based and two non-time-based investment appraisal techniques which may be used when assessing the financial viability of the conversion project. Illustrate these techniques by providing simple numerical examples, in line with the following instructions:

• Create two sets of simple figures to represent the cash inflows and cash outflows on two alternative building conversion projects of differing sizes;
• Use these figures to calculate the results of two time-based and two non-time-based investment appraisal techniques;
• Draw up and present a table of the results of your calculations;
• Explain your results and indicate which of the two options would be the more favourable;
• Show your calculations in an Appendix to the Report  (approximately 600 words)

b. Analyse the main macroeconomic factors which may affect the financial success of the conversion project. You should support your answer by referring to relevant economic theories and to current economic data in your chosen country and city. Examples could include conditions in the residential and commercial property markets, the current inflation and unemployment rates, interest rates and any other relevant variables. (approximately 700 words)

c. Analyse and evaluate the potential effects of the conversion project on the economy and environment of the city and on the social welfare of the local population, supporting your answer with reference to relevant theories and current data. (approximately 800 words)

d. Recommend to BEC plc whether or not it should proceed with the proposed conversion project. You should base your recommendations on your conclusions from the three other sections of your report. (approximately 300 words)

Reference list and bibliography
You should include a reference list with a minimum of ten separate relevant and appropriate sources that you have written about and cited within your work.
You should also include a bibliography list with a minimum of ten separate relevant and appropriate sources that have influenced your thinking but are not cited in your work. Further information to support you with this assignment is available within the study materials for this module on the UCEM VLE. If you have any questions about this assignment, please contact your Module Team using the Assignment forum in the relevant Assessment preparation week on the VLE.

Additional guidance
• This section is based on the materials studied in Week 13;
• Explain the meaning and importance of the time value of money;
• Explain and compare two time-based and two non-time-based investment appraisal techniques, using simple numerical examples of your own to illustrate them;
• Draw up a table of your results and comment on the results; you can use these results in your answer to section d
• You are advised to include figures for two alternative projects in your numerical example so that you can show BEC plc how to compare results.

Extract six terms of the lease into a lease summary, and explain how repairs to the building are paid for. What are the provisions and arrangements? Explain clearly to your client how the service charge operates and functions.

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Law and practise

Your client owns the freehold of a building and wishes to understand what certain terms of the lease mean in the light of the tenant’s obligations, rights and legal position; knowing that the building may be sold as a tenanted investment in the near future.

Your client has asked that you undertake three things in order to achieve their objectives:

  1. Extract six terms of the lease into a lease summary, and
  2. Appraise how each of these terms could impact the ‘quality’ and ‘attractiveness’ of the tenanted investment.
  3. You should also explain how repairs to the building are paid for. What are the provisions and arrangements? Explain clearly to your client how the service charge operates and functions.

You will be required to extract six key lease terms and provide a detailed explanation relevant to the scenario above.  Each lease provision should be paraphrased and summarised.  The format should be in the form of schedule laid out with the following column headings (this is an exemplar). You may, however, provide an introductory paragraph and a concluding paragraph

What is the Potential Gross Income (PGI) for the first year? What is the Effective Gross Income (EGI) for the first year?   If operating expenses are expected to be 40% of EGI, what is the Net Operating Income (NOI) generated by the property in the 1st year of ownership?

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Real estate homework

You want to purchase an office building in Brooklyn. The property contains 112,000 square feet of rentable space and is currently occupied by multiple tenants each with differing maturities on their respective leases. No lease is currently shorter than 1 year.

The annual rent in the 1st year of ownership is $55.50/sq ft.

The vacancy rate is 3.5%.

You expect to incur collection losses (from tenant default) of 1.5%.

QUESTION 1

What is the Potential Gross Income (PGI) for the first year?

QUESTION 2

What is the Effective Gross Income (EGI) for the first year?

QUESTION 3

If operating expenses are expected to be 40% of EGI, what is the Net Operating Income (NOI) generated by the property in the 1st year of ownership?

QUESTION 4

You decide you want to take out a loan to finance the purchase of this property. It will be a 10 yr balloon at an interest rate of 4.25% amortizing over a 30 year period with monthly payments and monthly compounding.  The lender will provide financing up to a minimum Debt Service Coverage Ratio (DSCR) of 1.2 based off the 1st year NOI.

What is the largest annual loan payment the lender will allow you to make based on the DSCR?

 

QUESTION 5

If you get a loan that corresponds to the largest annual loan payment the lender will allow you to make based on the DSCR (computed in part 4), what will be your net income (Cash flow after debt service) in the first year?

QUESTION 6

What is the largest loan a lender is willing to provide you with based on question 4? (Use the terms and loan payment from question 4.)

QUESTION 7

The seller’s asking price for the property is $55,000,000 (assume this is the value). If the lender has a maximum 70% LTV requirement, what is the most the bank will lend you? (Only based on the LTV requirement.)

QUESTION 8

The loan must satisfy both the minimum DSCR of 1.2 and maximum LTV of 70%.

What is the biggest loan the borrower can get?

QUESTION 9

If you buy the property at the asking price of $55,000,000 using the biggest loan you can get (from question 8) and purchase costs are 5% of the purchase price, what will your down payment be?

QUESTION 10

What is the annual mortgage payment on the loan in question 8?

QUESTION 11

If you buy the property at the asking price of $55,000,000, what is your ‘going in’ Cap Rate?

QUESTION 12

If the annual IRR for this property is 8.5%, then based on the cap rate in question 11, what does this imply is expected NOI growth rate for this property? (think about the formula for a growing perpetuity)

QUESTION 13

You do research and find that similar properties are selling at an 8% cap rate. Using an 8% cap rate, what price would you offer for this property ?

QUESTION 14

Suppose you buy the property at the asking price of $55,000,000 and own it for exactly 3 years.

You make the down payment in part (9).

You collect the NOI in part (3).

You make the annual mortgage payment in part (10).

The NOI is expected to grow 3% annually.
You sell the property at the end of year 3 (based on proforma year 4 NOI), at a cap rate of 6.5% (roughly equal to the going-in cap rate in part (11) and pay off the loan balance when you sell (this loan is amortizing principal).

Sale costs are 3% of the sales price.

Compute the IRR on this investment.

 

Analyse and critically review property market dynamics using verbal, mathematical and graphical methods. Apply a variety of research methodologies and analytical techniques to practical business issues related to property investment, and develop essential practical skills such as how to evaluate, finance and manage property investment projects

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Oliver’s Story – CASE STUDY

Module Overview
Real estate (land and any structures on it) accounts for around half of global wealth. Over the last fifty years investment in real estate has grown massively. At the moment, the diverse activities associated with real estate (e.g. construction, building management, leasing, trading, fund management, finance) together make up a larger fraction of UK GDP than the manufacturing sector. Most recently, the growth of mortgage backed securities, listed real estate firms and the introduction of derivatives based on real estate indices made the industry even more complex. The 2008 Global Financial Crisis and the consequent global recession were directly triggered by the events in the American real estate market.
These dramatic events have highlighted the lack of understanding by many professionals of the linkages between the property market and the rest of the economy, which played an important role in the development of this crisis. Apart from this, millions of amateur property investors suffered from negative equity and loss of wealth due to their lack of knowledge of the property cycles and the naïve assumption of ever increasing property prices.

The Real Estate Economics module attempts to close this knowledge gap. It develops your ability to understand the functioning of the real estate market, to analyse the effects of various events on property prices and property yields, and to forecast future property trends. This module is consistent with the general programme philosophy since it offers a combination of sound academic knowledge of relevant economic and financial theory with a particular focus on their real life application. Special attention will be paid to the practical aspects of property investment. The module also seeks to develop key transferable skills for a successful career in the real estate sector and in other industries (e.g., analytical, data analysis and report writing skills).

Module Learning Outcomes
On successful completion of the module, students will be able to:

1 Demonstrate sound knowledge and understanding of concepts, theories and models related to the real estate market.

2 Analyse and critically review property market dynamics using verbal, mathematical and graphical methods.

3 Apply a variety of research methodologies and analytical techniques to practical business issues related to property investment, and develop essential practical skills such as how to evaluate, finance and manage property investment projects.

4 Feel confident and accept the challenge of carrying out an individual piece of business- oriented research with elements of originality.

Produce a report which identifies a number of proposals to tackle the various issues you have identified in your previous analysis. Highlight/summarise the key issues you have identified and then focus on your various solutions and proposal for your chosen topic.

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Baseline analysis and Proposals Report (OA level for the Parish of Wilmslow)

Your first assignment is a baseline analysis report focusing on a particular topic that you have identified through the analysis of a range of data sources. This will include producing MS Excel based data analysis, presentation and statistical analysis, ArcGIS PRO choropleth mapping, overlaying other data layers on your base map (i.e. Using the overlay technique in ArcGIS PRO) and undertaking spatial analysis (e.g. buffering). Your baseline assessement you typically focus one of the following topics:

The analysis should be undertaken at what is called the OA level for the Parish of Wilmslow. Your analysis should be put into context and examine how this compares to the whole of the Cheshire East Council area. A full assessment briefing will be issued in week 5.

Building on assignment Part I, you will produce a report which identifies a number of proposals to tackle the various issues you have identified in your previous analysis. The report should highlight/summarise the key issues you have identified and then focus on your various solutions and proposal for your chosen topic. The report should be illustrated with a series of maps, plans, diagrams, illustrations etc. to show how you intend to address the matter. You proposals report should include:Provide a written explanation to support and justify your proposals.

  • Provide a written explanation to support and justify your proposals.
  • Include a summary or conclusion at the end.
  • A list of references for data sources, ideas etc.
  • Provide a written explanation to support and justify your proposals.

LINKS/ RESOURCES

In terms of the financing of the scheme, can you explain how the scheme is financed using publicly available information. Draw a diagram and explain the major investors, lenders, stakeholders and how they interact with each other.

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Battersea Power Station Development Project Financing

Use the Battersea Power Station Development in London as a case study for a development project and answer the following question: In terms of the financing of the scheme, can you explain how the scheme is financed using publicly available information. If you cannot find information, make assumptions. Draw also a diagram and explain the major investors, lenders, stakeholders and how they interact with each other. (800 Words + References)

 

Demonstrate critical understanding of the property development cycle, the process of valuing and developing land for residential, industrial and commercial purposes and the ability to communicate information, arguments and analysis effectively to advise stakeholders.

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Development and Appraisal Assignment 2

LO1 Demonstrate critical understanding of the property development cycle, the process of valuing and developing land for residential, industrial and commercial purposes and the ability to communicate information, arguments and analysis effectively to advise stakeholders.

LO2 Demonstrate critical understanding of client briefing to the process of developing land and property in all sectors.

LO3 Undertake financial appraisals using residual and cash flow techniques, risk analysis and sensitivity analysis for different development schemes including the evaluation of the role of and limitations of market data used in such appraisals.

LO4 Evaluate sources of finance and alternative funding options for different development schemes.

Task 1
Using the details on the plan provided in Appendix 1 and the schedule of accommodation provided in the scenario, you are required to produce a residual calculation to establish the profit that Aprilla Developments might achieve from the scheme. Calculations should be prepared either on a spreadsheet such as Microsoft Excel or presented in a Word (or similar) document where calculations have been undertaken manually. It is anticipated that the scheme will take one year to build, and that finance is available at 8% for the entire cost of the scheme although they will be funding the scheme themselves with cash. Carry out research, in respect of building costs, ancillary costs, and house prices and making any necessary assumptions prepare a residual appraisal which should include, as a minimum, the following information:
• full details of the input figures you are using in the appraisal including comparable properties, building costs, and other costs likely to be involved in the scheme;
• the extent of social housing likely to be required on a site of this size;
• all of your calculations of the individual input elements in the appraisal; and
• full justification of the assumptions, costings and input figures that you use.

Task 2
Using the profit (or loss) established in Task 1, provide two separate sensitivity analyses that models the impact of the following changes to the input variables in the scheme. Include a brief critical evaluation for your clients of the limitations of market data used in these appraisals and highlight how they might maximise the profitability of this site.

Scenario a)
• House prices increase by 10% before start on site;
• Building cost inflation is 4% per annum;

Scenario b)
• House prices fall by 5% before start on site;
• The local authority impose a CIL of £100/sq.m. with immediate effect.

Task 3
The Directors of Aprilla Developments have now found a further site that they want to purchase. This means they are no longer able to fund this development from their cash holdings. They still want to carry out the development but need some basic guidance on funding options.
Prepare a Briefing Note that outlines and evaluates various potential sources of finance that might be available to them.

Research the NW real estate market, with a specific focus on East Manchester to provide a full market commentary, which should also highlight any factors, which could have either a positive or negative impact on the GDV or Development Costs for the site. Prepare a fully costed valuation to calculate your opinion of the residual land value based on the information that has been provided by the local agent (please see below). The valuation should be presented on a separate excel spreadsheet, but your report must include a clear explanation for the client of the method of valuation and your main assumptions for the GDV and Development Costs.

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Property Development

Assessment Information/Brief 2021-22

 

Module title Property Development
CRN’s 55601 55606
Level 7
Assessment title Development appraisal report for land at Ashton Old Road, Manchester, M12 6LP
Weighting within module This assessment is worth 100% of the overall module mark.
Submission deadline date and time  
Module Leader/Assessment set by:

 

 

Contact can also be made via Microsoft Teams and 1-2-1 appointments can be made by pre- arrangement.

 

Module Aims

 

  1. To provide students with an understanding of property development as an industrial, financial and socio-political process.
  2. To enable students to develop the practical and entrepreneurial skills appropriate to the property development industry.
  3. To enable students to undertake a development related feasibility study.
  4. To enable students to assess development viability.
  5. To enable students to create a development appraisal using various techniques

 

 

How to submit

 

You should submit your assessment via Turnitin®. By submitting your assessment on Turnitin®, you consent (insofar as your consent is needed) to the following:

a)      The university will submit your assessment (including details of your name and course details) to the Turnitin® service so that your assessments can be compared with the database of works that is maintained by the Turnitin ®service and that is drawn from various sources including the internet; and

b)      Your assessments may be stored in that database of works indefinitely (or until the university stops using the Turnitin® service and request their deletion) to help protect your assessments against future plagiarism.  Where there is a match content in your assessment in other works, then your assessment may also be copied by the University and other users of the Turnitin® service to allow closer analysis.

Further information and support for students using Turnitin® can be found here:

http://www.salford.ac.uk/libray/help/blackboard-and-collaborate.

 

Intended Learning Outcomes

 

On successful completion of this assessment, you will be able to:

Knowledge and Understanding

1.      Demonstrate an awareness of what influences the development process

2.      Prepare a basic development valuation

3.      Identify the benefits and risks of undertaking a development project

4.      Knowledge of the key factors and stakeholders who have a vested interest in a scheme Transferable Skills and other Attributes

5.      Develop independent learning, analytical and research skills

6.      Clear and concise report writing to meet a client’s needs

7.      Understanding of the key drivers of the local property market

8.      Good communication, acting always in a professional manner

 

Assessment Brief/Task

 

The Manchester Crane Survey, 2021 produced annually by Deloitte provides a useful market insight into construction and property development activity in Salford and Manchester. The report monitors new starts on site, planning applications and permissions and refurbishment schemes to enable a thorough analysis of the quantity and type of new floorspace which has (and is in the pipeline) to be delivered over the next few years. Whilst construction activity is resilient, this can vary quite significantly between the different sectors. The outlook, whilst remaining positive states that there may be an element of “levelling” off in the future.

 

A new client has recently contacted your property development consultancy for advice on a potential development opportunity in East Manchester that has been brought to their attention. Whilst they have an established, successful manufacturing business, they have no experience in property development, or any active involvement in the real estate market. They believe that property development is a “high risk/ high reward” activity and would like to seek professional advice before they decide if this venture is the right opportunity for them.

 

The client has been sent property particulars from a local agent for the sale of land of a redundant public house situated on Ashton Old Road, Manchester (M12 6LP), close to Manchester City Centre and the Etihad Stadium. The current owners submitted plans and an application for planning permission for a scheme of apartments, with ground floor commercial use and have received full consent. This development opportunity is to be sold freehold, with vacant possession and the agent has confirmed that there are no onerous covenants or restrictions on title.

 

The client are very keen football fans and would like to pursue a development opportunity in this part of the city, as they consider East Manchester to be an “up and coming” area. However, they are a little concerned that the real estate market in Manchester/ Salford may now have reached its saturation point. To make progress, your consultancy has now been instructed to research the NW real estate market, advise on the residual value of the land, and to appraise this opportunity.

 

The advice will be presented in a report, which will be shared with the client’s investors and must cover all the following:

 

1. Research the NW real estate market, with a specific focus on East Manchester to provide a full market commentary, which should also highlight any factors, which could have either a positive or negative impact on the GDV or Development Costs for the site. (ILO’s 1, 7; 750 words)

 

2. Prepare a fully costed valuation to calculate your opinion of the residual land value based on the information that has been provided by the local agent (please see below). The valuation should be presented on a separate excel spreadsheet, but your report must include a clear explanation for the client of the method of valuation and your main assumptions for the GDV and Development Costs. (ILO’s 2,5,7; 750 words)

 

Site area: 1,500 sq m

Location: Ashton Old Road, Manchester, M12 6LP

Tenure: Freehold

Planning: Full planning permission has been granted

Proposed scheme: Demolition of existing, derelict public house and construction of a 9 storey, new build, single apartment block comprising 54 apartments (12 x 1 bedroom (50 sq m), 39 x 2 bedroom (75 sq m) and 3 x 3 bedroom (100 sq m). Ground floor commercial space, to a “shell” specification of 7,500 sq ft (which may be capable of sub- division)

S106 contribution: £500,000 for a placemaking strategy, in lieu of any affordable housing.

Demolition costs: £75,000 – £100,000

Finance: Available at 7% interest

Build period: 24 months

 

The market value for apartments in East Manchester can be researched from databases and local property agent’s websites. Resources such as Co- star, can be used for comparable evidence for the commercial space. You will need to make your own reasoned assumptions on BCIS build costs, professional fee’s, developers profit, project contingency and any other required costs.

 

3. The client is aware that property development is a an inherently high- risk activity and that they are inexperienced in this sector. They would like your report to include an analysis of the systematic and unsystematic risks that they may incur if they were to proceed with the purchase of the land and development of the proposed scheme. This section also include advice on how these could be mitigated. (ILO’s 1,3,5; 500 words)

 

4. It is expected that that this will be a good opportunity and that the client should now proceed with a purchase of the land. They would like your reasoned advice on how the scheme should be marketed and for any ways in which they could potentially increase the GDV or reduce the Development Costs to increase their profit. (ILO’s 1,3,7; 500 words)

 

The date for the residual valuation will be the submission date for this coursework assessment. You can make assumptions but please ensure that these are reasonable and have been clearly explained for the client.

 

This is a fictional property development project, so you should not contact Manchester City Council for any information regarding the hypothetical planning consent. However, the local plan, strategic regeneration framework and LPA website can be reviewed.

 

The client will be provided with your advice in the form of a report, and this should refer to the relevant valuation and property development procedures which are currently in place in England. Please ensure that all the required points in the client’s brief have been fully addressed and that you accord with the required word count for each specific task.

 

The residual valuation should be prepared on a excel spreadsheet and emailed to L.Buchanan1@salford.ac.uk by the required time and date. The submission will not be complete until both elements have been received. Additional tabs can be used for any supporting information.

Critically discuss whether real estate cycles do exist and, if so, to what extent they are predictable.

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Real estate cycles

Critically discuss whether real estate cycles do exist and, if so, to what extent they are predictable.