【正文】 than standing investment activity ? Commercial developers seek a return on cost (1025%) ? Residential developers seek a return on GDV (% of overheads) aka sales margin ? Other criteria: Initial yield on cost, IRR Profit on development costs = 163。165,934 25 Interest on half construction costs over construction period For void period, interest is on all construction costs and interest rolled up so far 6 months 15 months 3 months 163。227,171 163。120,000 + 163。4,857,143 / = 163。800/m2 and the development will take, after a leadin period of years, years to plete, plus a void of years ? The developer is seeking a minimum return on development value of 20% ? What is the value of the site? 4 Simple residual land valuation Development value (DV): Total constructed area (m2) 5,000 Estimated market rent (163。 800/m2) 4,000,000 Profit on construction costs 20% DV 1,625,000 5,625,000 Residual land value (RLV) 2,500,000 5 (don’t worry about timing of pletion yet…) Case Study 10 See handout… Revenue Inputs NIA GIA = 2,000 m2 Efficiency ratio = 85% So NIA = 2,000 x = 1,700 m2 Estimated () annual rent = NIA x estimated rent / m2 = 1,700 m2 x 163。1,938,000 Cost Inputs Professional fees ? Architect ? QS ? Engineers (structural, Mamp。72,166 Other costs and fees Estimates for various additional costs and fees can be included... Development timeline amp。454,341 163。2,622,944 + 163。1,092,489 – (1,092,489 / ) = 163。40,911 163。391,189 Letting amp。3,993,950 / 163。s profit on pletion* 163。2,622,945 Interest: Over building period 163。752,403 / = 163。51,000 Marketing cost Would cover items such as advertising, opening ceremony, brochure design and production. The scale would obviously depend on the nature of the development. Cost Inputs Developer’s Profit ? Reward for initiating and facilitating the development。2,622,944 / 2) x [(1 + )] = 163。2,622,945 163。1,938,000 + 163。4,857,143 Cost Inputs Disposal costs (agent and legal fees if sold or refinancing and valuation fees if retained as an investment) NDV = GDV / (1 + ) = 163。130/m2 and sell at an initial yield of 8% ? Construction costs are estimated to be 163。200 / m2 = 163。E) ? Legal ? Consultants (planning, highways, ecology, archaeology) ? Developer / project management ? Landscape architect Professional fees = (building costs + other works) x 13% = 163。 cost buildup 20 Leadin period (6 months) Construction period (15 months) Void period (3 months) Total development period Construction begins Construction pleted Site acquisition Site clearance, foundations, etc. Main construction activity Fitting out Total Costs (163。227,171 163。165,934) x [(1 + ) 1] = 163。182,081 Land Value output Interest on site costs* = 163。752,403 *This is the general model as it can be used to ‘back out’ land value 31 Construction