12535 - A2 Autumn 2021 - sdfsf PDF

Preview

Summary

sdfsf...

Description

DEVELOPMENT FEASIBILITY & MODELLI NG – Autumn 2021 ASSESSMENT 2 – Value 30% DUE DATE & INSTRUCTIONS This assessment is to be completed u sing excel and submitted electronically at any time up to 11.45pm Friday 30th April, 2021. You are to submit the assignment by uploading your excel file via link on the UTS Onlin e webpage for this subject. Please ensure that you name your excel file as follows: File Name Protocol: YOUR SURNAME– A2 ASSESSMENT TASK You have been presented with the de tails of a multi storey CBD office building currently for sale. Your client is considering buying the building and converting it to a s trata residential building and selli ng off individual units. Con sider the information provided and prepare separate feasibility valuatio ns using both appro aches set out below. Your feasibili ty is as at the 1st of October 2020. VALUA TION / FEASIBILI TY METHO DOLOGY

1)

Hypothetical Development (Residual) Method Adopt a Profit & Risk factor of 20%

2) Disco unted Cash F low method Adopt a discount rate (Target IRR) of 2.75% per month (includes financing) Con struct spreadsheet columns based on m onthly cash flows in arrears NOTE: 1) ALL COSTS AND REVENUES PROV IDED ARE EXCLUSIVE OF GST. 2) YOU ARE NOT REQUIRED TO CONSIDER GST IN YOU R ANSWER/S. 3) Any assumptions y ou make should be listed under each scenario in the excel worksheet. SCENARIO 1 - 20 Marks Compl ete both Hypothetical Devel opment and Discounted Cash Flow approaches to calculate your offer price based o n the information provided . SCENARIO 2 – 10 Marks The asking price for the building is $35,000,000. Based on the information provided, sho w your workings to calculate: 1) The Profit & Risk factor at the a sk ing price 2) The Internal Rate of Re turn at the asking price

DEVELOPMENT FEASIBILITY & MODELLING – Autumn 2021 ASSESSMENT 2 – Value 30% PROPERTY OVERVIEW The property comprises a 13 level, 1980’s CBD office building, with 2 basement levels car parking (90 cars), ground floor entry foyer, 2 ground floor retail shops and medical centre and 10 upper office levels. The building was originally built for a NSW government department who occupied all office levels 1-10 until subsequently vacating the buil ding in 2020. Since 2020, the owners have experienced difficulty in attracting quality longterm commercial tenants to the building, due to the relatively small floor plates and general age and condition of the building. Only 2 commercial floors are presently l eased to a single tenant with the lease due to expire in January, 2021. Ground floor retail premises and medical centre leases also expire in January 2021. Whilst the building is close to the end of it’s life as an office buil ding, it’s location on the western s ide of Hyde Park is considered prime for a potential conversion to residential use. Additionally, the planning scheme provides a higher FSR for residential use and 2 additional levels will be permissible. An engineers report instructed recently confirms that the existing structure will support the additional 2 floors if required. A preliminary architectural & planning report suggests that the conversion to residential will facilitate: Development Potential 60 x 2 BR units (90m2 strata area each) 30 x 1 BR (60m2 strata area each) NEW LEVELS 4 x Penthouses (300m2 strata area each)

RENTAL INCOME – (all rents paid monthly in advance) Retail 1 – Current Gross Rental is $150,000 pa (100m2 NLA) Retail 2 – Current Gross Rent is $ 225,000 pa (150m2 NLA) Medical Centre – Current Gross Rental is $220,000 (40 0m2 NLA) Office Levels 3 & 4 – Current Gross Rental is $560,000 (1600m2 NLA) Car-Parking Spaces – 90 spaces all let at $600 per calendar month each. These licences can be terminated on one months notice. The carpark will need to be vacated once construction commences (month 4).

DEVELOPMENT FEASIBILITY & MODELLING – Autumn 2021 ASSESSMENT 2 – Value 30% OUTGOINGS / HOLDING COSTS (budget monthly from month 1) Council Rates - $200,000 per annum Water Rates - $120,000 per annum Land Tax - $300,000 per annum Insurances - $100,000 per annum PROFESSINAL FEES Allow $ 2,400,000 over the first 16 months of the development period / cash flow (even spread) CONVERSION COSTS & TIMING Allow $ 4,000 per square metre strata area for both the conversion costs of the existing building to residential (upper 10 levels) and also for the construction of the two new penthouse levels (even spread months 4 - 16). Allow $250,000 for ground floor general cosmetic upgrading (months 4-8). MARKETI NG & TIMING Marketing will commence in month 4. Cost anticipated at $ 200,000 month 4 and then $100,000 per month till sold out. SELLING AGENTS FEES Agency sales commissions based on 3% of the gross selling price. Sales commissions are payable 1% on exchange and the balance on settlement of individual lot sales. SALE RATES Your market research indicates that a sale rate of 8 lots per month would be realistic (starting in month 6 ). You anticipate that initial settlements will occur in month 18 (on registratio nof the s trata plan an d issue of new titles). SALES REVENUE Penthouse levels $12,000 psm strata area Residential Units $10,000 psm strata area Carspaces $ 100,000 per space (all to be sold in association with residential units) Ground Floor Retail $ 15,000 m2 Ground Floor Commercial $6,000m2 OTHER INFORMATION Development finance is available at 12% per annum nominal (HYPOTHETICAL DEVELOPMENT METHOD ONLY). Legals on sale 0.25% of gross sale price (payable on settlement) Acquisition costs 7% of purchase price (includes legals)...