Scenario A developer wants to purchase a site within the business district of the town centre near a railway station to develop a six-storey office complex. A residual land calculation was carried out and the cost to acquire the land was established as £12 million.
The site is a freehold site and with planning permission.
The developer is currently negotiating a contract with a management contractor and wants to be assured that they will be receiving value for money for the proposed project.
A top priority and project requirement is to achieve an excellent BREEAM rating with minimum running, repair and maintenance costs to ensure that the building is let for a high rent.
The developer is also seeking to receive a return on their investment as soon as possible and therefore looking for advice on alternative funding options for the project.
The project details are as follows:
Grade A specification offices designed to meet the energy efficiency requirements of a modern business.
Gross floor area 18,000m² Lettable area 90% Required yield 7% Anticipated rent £500 per m² Target Construction cost £3,800 per m² Construction period 3 years Finance rate 4% Land Cost £12M
Assume all other information not provided.
Task Write a report to your client, incorporating the following items:
a. Produce a residual profit calculation for the development.
(indicative word count 500)
b. Carry out a sensitivity analysis on the residual profit to identify those risks specific to the project. (indicative word count 1,000)
c. Include a critical evaluation of the factors to be considered to achieve an excellent BREEAM rating and meet the developer’s requirement for minimum running, repair and maintenance costs. (indicative word count 1,000)
d. Advise the client on alternative funding options for the project. (indicative word count 1,000)
Reference list and bibliography You should include a reference list with a minimum of 12 separate relevant and appropriate sources that you have written about and cited within your work.