Property Finance and Development | Good Grade Guarantee!
© TAFE NSW – Higher EducationAssessmentAssessment Title: Research ReportSubject Code: PVVAL306ASubject Name: Property Finance and DevelopmentCourse Code: HE20507Course Name: Bachelor of Property ValuationWeighting: Interim Paper 40%Final Research Paper 50%Due Date: Interim Paper Submission – by 9:00am Lecture 6Final Research Paper Submission – by 5:00 pm Lecture 8Version: 01/07/2019 Version 1/2017Assessment: PVVAL208A© TAFE NSW – Higher Education- Version Date: 01/07/2017 Page | 21. PurposeIn this assignment, you will practise preparing development finance analysis including feasibility,project cashflow and funding cashflow.2. Subject learning outcomesThis assessment relates to the following subject learning outcomes:1. Determine sources of development finance.2. Select appropriate development processes.3. Compare and then choose suitable industry benchmarks.4. Interpret research and consider demographic data.5. Judge project risks and explain mitigation techniques.Assessment: PVVAL208A© TAFE NSW – Higher Education- Version Date: 01/07/2017 Page | 33. The BriefYou, as the acquisition manager of Ultimo TAFE Development Pty Ltd (UTD), are required to conducta development finance analysis and to prepare a report on a property at 102-108 Alexander Street,Crows Nest with a combined site area of 920 sqm. The two properties are owned by one singleentity. For the purpose of this analysis, UTD has engaged an architect to produce a sketch designwhich has a design efficiency of 90% on the residential component and 100% design efficiency onthe retail component. (See separate document provided). Comparable sales rates and building ratesare also obtained by other UTD development colleagues. (See separate document provided). UTD’sshareholders generally expect an Effective Return Rate of 26% pa.UTD has entered into the following acquisition arrangement with the landowner:• UTD will pay the owner $500,000 cash as a non-refundable option fee for a put and calloption for a period of 12 months. The agreed purchase price of the properties is$11,500,000. Should UTD exercise the option within the option period, the option feewill form part of the purchase price. Upon expiry of the initial option period, the optioncan be extended on a monthly basis up to a maximum of 6 months. The optionextension fee is $100,000 per month and does NOT form part of the purchase price.Option will be exercised as soon as DA is approved. Settlement period in Sales Contractis 1 month. The purchase price of the properties is to be part monetary payment andpart stock. Upon completion of the development, the owner will take one 3-bedroomapartment as part of the purchase price. The value of the apartment will base on anagreed market comparable sales rate.Estimated development program as following:• DA preparation & lodgement – 3 months• Council’s DA approval process – 12 months• CC documentation & approval – 3 months• Construction will not commence until all retails, 2-bedroom apartments are sold.• Net construction program – 12 months• Allowance for inclement weather – 3 months• Strata registration – 2 months• Marketing material preparation commences after DA is lodged and will take 2 months tocomplete.• On-site sales display requires 1 month to construct and required to be opened to publicfor marketing as soon as marketing materials are ready.• Advertising will commence 1 month before sales display is opened to public.• Pre-Sale Sales Contract will take 1 month to prepare and is required when apartmentsare marketed.Assessment: PVVAL208A© TAFE NSW – Higher Education- Version Date: 01/07/2017 Page | 4• Pre-Sales projection:o It takes every 5 months to sell 1 retailo One sale of apartment per montho Assumption: All 2-bedroom apartments will be sold first, then follow by 3-bedroom apartments, then 1-bedroom apartment and studios will be sold last.• Land acquisition financeo Loan application straight after option agreement is executedo Valuation completed a month before loan settlemento Legal fees paid on loan settlement• Construction Financeo Loan application straight after all 2-bedroom apartments are soldo Loan approval in 3 months after applicationo Valuation completed within a month before loan approvalo Legal fees paid on loan approvalOperating expenses are estimated as following:• Total Consultants Fees = 5% on construction costo DA = 40% on Total Consultants Feeso CC = 35% on Total Consultants Feeso Construction = 25% on Total Consultants Fees• Legal Feeso Preparation & execution of option agreement = $5,000o Acquisition settlement = $5,000o Preparation of apartment sales contract = $400 per apartmento Exchange of pre-sale contracts = $100 per apartmento Settlement of apartments = $500 per apartment• DA lodgement Fee = $10,000• PCA fee for CC = $20,000• Demolition of existing building = $100,000• Construction on underground parking = $70,000 per paring space• Long Service Levies = 0.35% on construction cost. Paid before commencement ofconstruction.• Section 94 Contribution = 1% on development cost. Paid before commencement ofconstruction.• Marketing Budget = 1 % on total gross realisationo 10% of marketing budget on marketing materialso 30% of marketing budget on on-site sales display officeo 60% of marketing budget on advertising• Land Holding Costo Land Tax = $15,000 pa. Now due for payment.o Council Rate = $3,000 per quarter. Payment 1 month overdue.o Insurance = $5,000 pa. Next payment due in 6 months.Assessment: PVVAL208A© TAFE NSW – Higher Education- Version Date: 01/07/2017 Page | 5• Finance on Land Acquisitiono Maximum LVR = 50%o Establishment Fee = 0.65% on Loan Amounto Legal Fees = 0.35% on Loan Amounto Valuation Fee = $5,000o Interest Rate = 6% pa monthly resto Repayment = Interests will be serviced monthly. Loan principal will be repaid byrefinance.• Finance on Constructiono Maximum LVR = 55% on net realisation of sold properties plus 45% on netrealisation of unsold propertieso Establishment Fee = 0.65% on Loan Amounto Legal Fees = 0.35% on Loan Amounto Valuation Fee = $15,000o Line Fee = 1.8% pao Margin Lending Rate = 2% on BBSY (90 days)• Sales Commissiono 2% on sales priceo 50% of commission paid on exchange of Sales Contract and another 50% paid onsettlement.• Contingencieso For construction cost = 5%o For development hard costs other than construction and land costs = 10%Assessment: PVVAL208A© TAFE NSW – Higher Education- Version Date: 01/07/2017 Page | 64. Submission DetailsYou are required to prepare a development report covering the following headings.1. Executive Summary(Note: this section is to include a “2-lines summary” of each section from Section 3 to Section 8.Summary from Sections 11 to 13 are to include information/comments on total project cost,project return on cost, NPV, IRR, equity required).2. Introduction3. Legal description of the properties4. Town planning controls5. Descriptions of the site and current improvements6. Surrounding developments and amenities7. Market Commentary8. Development Potential9. Development program10. Sales evidence on proposed development11. Feasibility analysis12. Project cash flow analysis13. Funding cash flow analysis14. Appendix including comparable sales evidence and comparable building costsInterim SubmissionSubmission in Excel format including:1. Sections 11 Feasibility Analysis2. Section 12 Project Cash flow Analysis3. Section 13 Funding Cash Flow AnalysisFinal SubmissionSubmission is to include two (2) separate files:1. PDF file of the whole report including Section 1 to Section 14. Sections 11 to 13 MUST beincluded in this report.2. Excel file including Sections 11 to 13.5. Digital submission requirementsUpload a PDF record of your project onto the Moodle. NO hard copy submission is required.
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