Viability Study Sandwell Community Infrastructure Levy – Viability Assessment
Sandwell Metropolitan Borough Council
March 2014
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Sandwell Metropolitan Borough Council CIL Viability Assessment March 2014
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Sandwell Metropolitan Borough Council CIL Viability Assessment March 2014
Contents Executive Summary
Report 1 Introduction 4
Report Structure 4
2 CIL Policy 6 CIL Examinations 9 3 Market Overview 11 National Outlook 11 Black Country 11 Residential 13 Office Space 22 Industrial Space 27 Retail 32 Hotels 35 Conclusions 36 4 Development Typologies 37 Residential 37 Offices and Industrial 41 Retail 44 Hotels 48 Non-Residential Institutions, Assembly & Leisure 48 Summary of Development Typologies 49 5 Viability Analysis 51 Development Economics 51 Gross Development Value 52 Balance 56 Viability Modelling 57 Assumptions 58 Profit, Finance and Overhead 61 6 Appraisal Outputs 63 Residential Typologies 63 Commercial Typologies 67 7 Conclusions & Recommendations 73 Economics of Brownfield Land 73 Charging Rates on Use Basis 75 Draft Charging Schedule 77 Next Steps 79
Appendices Appendix 1 – Residential Development Appraisals Appendix 2 – Commercial Development Appraisals
Sandwell Metropolitan Borough Council CIL Viability Assessment March 2014
Executive Summary
ES1 This report provides a viability assessment on a range of potential development typologies to support the possible introduction of a Community Infrastructure Levy (CIL) across Sandwell Metropolitan Borough.
Methodology
ES2 The key elements of the study are as follows:
An analysis of the property market (including consultations with developers) across the Borough for a range of uses in order to identify the assumptions (e.g. sales values, rents, yields, supply and demand). We have also undertaken an assessment of land values across Sandwell to identify whether there any significant variances by location/development type.
A review of planning policy and development data monitoring (i.e. completions) to identify the range of development typologies (scheme types) that are likely to come forward during the Black Country Core Strategy (February 2011) plan period (2006 – 2026).
A bespoke CIL viability model to test the development typologies using the information ascertained from the market analysis to assess whether the proposed development schemes can generate a surplus for CIL having allowed for all costs and a reasonable developer’s profit, and in respect of residential development the Council’s affordable housing requirements.
Key Findings
ES3 The results of the viability assessment for all the development typologies show that there is a significant challenge to viability across the Borough. Only retail and residential uses show any development surplus for CIL.
ES4 We have devised a draft charging schedule to reflect the outcomes of the viability analysis and take into account the need to have an ‘appropriate balance’ that allows for sufficient headroom in the levy rates so not to impact on the viability (i.e. delivery) of the scheme even if market conditions (values/costs) change.
ES5 Retail: As a result of the market and viability analysis it is clear that nearly all types of retail are viable cross Sandwell, apart from unit shops (up to 280 sqm) outside the strategic centre of West Bromwich. Supermarkets of less than 280 sqm are also marginal in terms of viability and
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therefore we have recommended a nil rate for these two typologies and a range of rates for the other retail development typologies.
ES6 Residential: We recommend a rate of £30 psm for any residential schemes between 1-14 units and £15 psm for all other residential developments (i.e. 15 units plus). The different rates are supported by the viability analysis which clearly shows that residential schemes between 1-14 units are more viable than the other development typologies and therefore can afford to pay a higher CIL rate.
ES7 Offices, Industrial and Hotels: The market values generated by these uses are currently insufficient to cover the costs associated with these schemes and therefore are unviable, which means that they are not able to pay a CIL.
ES8 Other Uses: With regards to leisure and education uses, as we explained in the development typologies sections, these uses are rarely viable and therefore are unable to pay a CIL rate.
ES9 The recommended CIL rates are summarised on the table overleaf:
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Development Typology CIL Rate £ psm
Supermarkets/Superstores and Retail warehousing £60 >280 sqm
Retail Units (Strategic Centre Only)* £50
Residential: 1-14 Units £30
Residential: 15 Units plus £15
Offices Industrial Industrial Warehousing £Nil Retail Units Outside Strategic Centre* Supermarkets/superstores < 280 sqm Hotel Leisure Education Residential Care Homes
Table ES 1 - Sandwell MBC Draft CIL Charging Schedule *Retail Units are those within Use Classes A1-A5, excluding convenience and retail warehouses.
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1 Introduction
1.1 AspinallVerdi has been commissioned by Sandwell Metropolitan Borough Council (SMBC) to prepare a Borough wide development viability assessment to be used as evidence to support the possible introduction of a Community Infrastructure Levy (CIL) charging schedule. This assessment is an update of an earlier CIL viability study undertaken by AspinallVerdi in 2012 and it is based on 2014 market evidence.
1.2 This study will be important evidence to ensure that, if adopted, the CIL charging schedule is commercially robust. The key elements of the study are as follows:
An assessment of land values across Sandwell to identify if there are any significant variances by location/development type.
A viability assessment of CIL rates including sensitivity testing to include; various different uses; a range of locations; different scales of development; and key policy requirements, including affordable housing.
Recommend CIL tariffs/rates to achieve an appropriate balance between delivering infrastructure and the impact on development viability; and to establish the evidence base for zoning if appropriate.
Report Structure
1.3 The remainder of this report is structured as follows:
Section 2 – CIL Policy – in this section we provide a brief overview of CIL policy, the key regulations and latest guidance (February 2014) issued by DCLG.
Section 3 - Market Overview – in this section we provide an overview of the current national economic context and also the local property market evidence which informs the assumptions for the CIL viability model. This also enables us to identify whether there is a significant differential in values across the Borough to warrant different CIL charging zones.
Section 4 – Development Typologies – in this section we summarise current planning policy and provide an overview of the proposed development within the core strategy. We compare this to where development has taken place in the past (as well as taking into consideration the market analysis undertaken in section 3) in order to identify the development typologies to be tested by the CIL viability model.
Section 5 – Viability Analysis - in this section we set out our methodology and assumptions for undertaking the modelling required to test whether there is scope to charge CIL.
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Section 6 – Appraisal Outputs – in this section we set out the findings of our viability model and the implications for setting CIL Charges.
Section 7 – Conclusions & Recommendations – in this section we draw together the results of the viability analysis and present a draft charging schedule for discussion.
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2 CIL Policy
2.1 CIL is a new planning charge that came into force on 6 April 2010 through the Community Infrastructure Regulations 2010 (amended in 2011, 2012, 2013, and 2014). CIL is a levy that enables local authorities to raise funds from developers undertaking new building within their area to pay for infrastructure that is needed as a result of development.
2.2 Local Authorities are normally required to implement their charging schedules on the basis of an up to date development plan. In this case, the Council’s key planning policies are enshrined in the Black Country Core Strategy (BCCS) (Adopted February 2011), Site Allocations and Delivery Development Plan (August 2011), West Bromwich Area Action Plan (AAP) (August 2011) and the Smethwick and Tipton AAP (2008).
2.3 We set out below a summary of the regulatory context and some recent Examiners report recommendations. The February 2014 guidance was issued by the Secretary of State under section 221 of the Planning Act 2008 and is therefore mandatory.
2.4 A fundamental part of the Regulations is about the judging the “appropriate balance”. Regulation 14 requires that,
In setting rates (including differential rates) in a charging schedule, a charging authority must strike an appropriate balance between (our emphasis) —
(a) the desirability of funding from CIL (in whole or in part) the actual and expected estimated total cost of infrastructure required to support the development of its area, taking into account other actual and expected sources of funding; and
(b) the potential effects (taken as a whole) of the imposition of CIL on the economic viability of development across its area1.
2.5 This is a difficult concept to interpret, but the Secretary of State has provided additional guidance on the appropriate balance in the February 2014 guidance which states:
The levy is expected to have a positive economic effect on development across a local plan area. When deciding the levy rates, an appropriate balance must be struck between additional investment to support development and the potential effect on the viability of developments.
1 The Community Infrastructure Levy Regulations 2010 coming into force 6 April 2010 under section 222(2)(b) of the Planning Act 2008 Regulation 14
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This balance is at the centre of the charge-setting process. In meeting the regulatory requirements (see Regulation 14(1)), charging authorities should be able to show and explain how their proposed levy rate (or rates) will contribute towards the implementation of their relevant plan and support development across their area. .
As set out in the National Planning Policy Framework in England (paragraphs 173 – 177), the sites and the scale of development identified in the plan should not be subject to such a scale of obligations and policy burdens that their ability to be developed viably is threatened.2
2.6 Therefore the appropriate balance is a balance to be struck between setting the CIL rates too high and ‘choking-off’ development such that economic growth and development is prevented (and CIL revenues reduced); and setting the CIL rates too low such that there is not enough revenue funding for the Authority to deliver the required infrastructure to support the future development. This is clearly a very fine balance.
2.7 Given the current economic climate and the reduced availability of funds to pay for much needed infrastructure, local authorities do have to consider alternative funding mechanisms (for example, Regional Growth Fund). CIL will be part of a ‘cocktail of funds’ and part of this consideration of the appropriate balance is to ensure that the CIL is not set right up to the margins of viability. This is also confirmed in the February 2014 Guidance:
Charging authorities should set a rate which does not threaten the ability to develop viably the sites and scale of development identified in the relevant Plan. They will need to draw on the infrastructure planning that underpins the development strategy for their area. Charging authorities should use that evidence to strike an appropriate balance between the desirability of funding infrastructure from the levy and the potential impact upon the economic viability of development across their area.3 (our emphasis)
2.8 This is important, because the cost and value assumptions for the hypothetical appraisals across the Borough in this study vary widely compared to the specific circumstances of actual sites coming forward for development.
2.9 The legislation (section 212(4)(b))4 only requires a charging authority to use ‘appropriate available evidence' to inform their charging schedules. The February 2014 guidance expands on this, explaining that:
2 Department of Communities and Local Government (February 2014) Community Infrastructure Levy, paragraph 2.2, page 12. 3 Department of Communities and Local Government (February 2014) Community Infrastructure Levy Guidance, paragraph 2.2, page 12. 4 S212(4)(b) The Planning Act 2008
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A charging authority must use ‘appropriate available evidence’ (as defined in the Planning Act 2008 section 211 (7A)) to inform their draft charging schedule. The Government recognises that the available date is unlikely to be fully comprehensive. Charging authorities need to demonstrate that their proposed levy rate or rates are informed by ‘appropriate available’ evidence and consistent with that evidence across their area as a whole.5
2.10 This is important because the appraisals can only be ‘high-level’ and therefore the evidence supporting CIL needs to be proportionate.
2.11 Furthermore, the Guidance requires that,
a charging authority should directly sample an appropriate range of types of sites across its area in order to supplement existing data. This will require support from local developers. The exercise should focus on strategic sites on which the relevant Plan relies, and those sites where the impact of the levy on economic viability is likely to be most significant (such as brownfield sites).6
2.12 This is what we have done by analysing values and development monitoring data across the borough (see below) to establish and appraise the relevant typologies and then ‘sense check’ against the Core Strategy Polices.
2.13 The February 2014 CIL Guidance also refers to regulations allowing charging authorities to apply differential rates in a flexible way, to help ensure the viability of development is not put at risk. The guidance goes on to state:
Differential rates may be appropriate in relation to
Geographical zones within the charging authority’s boundary Types of development; and/or Scales of development.7
2.14 The ability for the authority to adopt different rates is important given that different uses (or even uses within the same use class) will have different levels of viability.
5 Department of Communities and Local Government (February 2014) Community Infrastructure Levy Guidance issued by the Secretary of State, paragraph 2:2:2:4 6 Department of Communities and Local Government (February 2014) Community Infrastructure Levy Guidance issued by the Secretary of State, paragraph 2:2:2:4 7 Department of Communities and Local Government (February 2014) Community Infrastructure Levy Guidance issued by the Secretary of State, paragraph 2:2:2:6
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CIL Examinations
2.15 There have been a number of recent CIL examinations in public which have a direct impact on the approach to our viability study including specifically:
the Examiner’s report to the Mayor of London CIL (January 2012)8
the Examiner’s report to the Greater Norwich Development Partnership CIL (December 2012)9
2.16 These are discussed in more detail below.
2.17 The impact on land value of future planning policy requirements e.g. CIL was contemplated in the Examiner’s report to the Mayor of London CIL (January 2012). Paragraph 32 of the Examiner’s report states:
…the price paid for development land may be reduced. As with profit levels there may be cries that this is unrealistic, but a reduction in development land value is an inherent part of the CIL concept. It may be argued that such a reduction may be all very well in the medium to long term but it is impossible in the short term because of the price already paid/agreed for development land. The difficulty with that argument is that if accepted the prospect of raising funds for infrastructure would be forever receding into the future. In any event in some instances it may be possible for contracts and options to be re-negotiated in the light of the changed circumstances arising from the imposition of CIL charges. (our emphasis)
2.18 This is a very important principle for CIL viability. Whilst we have every sympathy with landowners whose values have fallen or stagnated due to the economic climate since the credit crunch in 2007 there does have to be recognition that without funding for essential infrastructure development may not be able to take place at all. This brings us back to the discussion on the appropriate balance (see pp 6-7 above).
2.19 In the Greater Norwich Development Partnership’s CIL Examiners report, paragraph 9 states:
Bearing in mind that the cost of CIL needs to largely come out of the land value, it is necessary to establish a threshold land value i.e. the value at which a typical willing landowner is likely to release land for development. Based on market experience in the Norwich area the Councils’ viability work assumed that a landowner would expect to receive at least 75% of
8 Holland, K (27 January 2012) Report on the Examination of the Draft Mayoral Community Infrastructure Levy Charging Schedule, The Planning Inspectorate, PINS/K5030/429/3 9 Holland, K (4 December 2012) Report on the Examination of the Draft Community Infrastructure Levy Charging Schedules for Broadland District Council, Norwich City Council and South Norfolk Council, The Planning Inspectorate, PINS/G2625/429/6
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the benchmark [Market] value. Obviously what individual land owners will accept for their land is very variable and often depends on their financial circumstances. However in the absence of any contrary evidence it is reasonable to see a 25% reduction in benchmark values as the maximum that should be used in calculating a threshold land value. (our emphasis)
2.20 This is important, because in the Greater Norwich examination the same Examiner has built upon the report to the Mayor of London and has quantified the discount from benchmark market values to the threshold land value – 25%.
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3 Market Overview
3.1 This market section gives an overview to the national economic and property markets, followed by the Black Country and Sandwell specifically. A detailed sectoral breakdown then follows for within the Sandwell Borough. This element of the report outlines the data necessary to understand sectoral viability and respective value differentials across Sandwell, informing both the development typologies for testing and the assumptions to be taken into account within the CIL Viability Model.
National Outlook
3.2 As is well documented in the national press; UK property markets across all sectors have witnessed a significant downturn since the financial crash/economic recession of 2007/8. However, the residential property market is beginning to show signs of recovery following a long period of subdued activity. The ‘Help-to-Buy’ scheme implemented by the government has helped to recover the residential property market considerably over recent months. Despite this, price movements vary somewhat between regions, with London and the South East still faring well in comparison the rest of the country (Land Registry House Price Data, 2014).
3.3 As we emerge from the recessionary environment, commercial property and development is in greater demand as confidence in the economy improves continuously. The supply of commercial stock has recently decreased, with capital values and investment transactions expected to rise, as well as increased in occupier demand for each sector in most parts of the UK (RICS UK Commercial Market Survey, 2013).
Black Country
3.4 The Black Country sits within the West Midlands. As a region there are some key economic indicators (HM Treasury, 2013) and Property Indicators which reveal the regional standing within the UK:
The West Midlands region contributed £93.1 billion to UK economic output. This was 7.2% of the UK’s total economic output (below the mean contribution by region of 9.4%);
The average economic output per person was £16,788. This was below the UK average of £19,977.
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The West Midlands is one of the biggest fallers from the 2010 index, dropping 126 places. It is also among the most marked regions in terms of convergence across localities (UKCI, 2013).
House values are below UK average values (£167,534) at £116,196 (Land Registry, 2014). Of the 9 regions and London (10 localities), The West Midlands sits 5th in terms of the regional values hierarchy and 5th in terms of the number of residential mortgage applications submitted in August 2012.
Commercial development is showing signs of recovery (Estates Gazette Property Market Data, 2014).
3.5 A number of inter-related factors are having on impact on delivery of development within the Black Country:
External economic influences;
Market failure within the Black Country - hence public sector interventions such as the Black Country Business Property Investment Programme which is funded from the European Regional Development Fund;
The region’s ‘structural vulnerabilities’ as a result of its historic and present dependence on the manufacturing sector (and the related site contamination issues raising development costs);
Predominance of brownfield sites, and the associated costs of development exerts a negative influence on viability;
Low commercial rents/average house prices (further discouraging development);
Low skills levels and poor ‘quality of life aspects’ are making commercial development options less attractive to potential investors.
Sectoral Data Sources: Overview
3.6 Information for each sector is conveyed using the following structure and sources:
Supply: Local activity is analysed utilising development monitoring data provided by the Council. This is cross referred with current availability utilising in particular Property Link (which lists a variety of properties advertised by agents) to understand present supply; recent deals done (Estates Gazette); and planning policy projections.
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Demand: Future projections of demand are interpreted from Planning Policy evidence. DCLG CIL Guidance required the existing evidence base to be utilised to the fullest to inform assumptions. Demand is also informed by the levels of activity across Sandwell utilising development monitoring (SMBC) and deals done (Estates Gazette Property Data) information.
Values: Rents and any rent differentials are informed by: deals done informing average values, quoting rents/market rents currently advertised; and via any information gathered for the planning policy evidence base, or planning policy itself. Yields data utilises property data at the wider level. Residential Values have been informed by information available on databases (e.g. Zoopla) and consultation with developers and agents.
3.7 All of the above data is supplemented by conversations with developers and agents. Although the information is summarised in the report background evidence has been recorded throughout and is available upon request.
Residential
3.8 This section provides an overview of the residential market to enhance our understanding of development viability in Sandwell. We have firstly reviewed the housing market across the borough, values of new homes, and then discuss whether the high and low value areas as identified within the Roger Tym CIL Scoping Study (2011) are still applicable.
Sold Values
3.9 House prices in Sandwell are approximately £70,000 below the national average (£167,353), and have fallen a long way since their peak in 2008. Sandwell has the lowest average house prices across all dwelling types and locations within the West Midlands. The average house value within Sandwell is £95,071; this compares with £107,801 in Walsall, and £118,715 in Dudley, as displayed below in Figure 3.1 (Land Registry, 2014).
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Figure 3.1 – Average House Prices (Land Registry, 2014)
Regeneration Corridors
3.10 In Sandwell, the key housing locations are in West Bromwich and the housing led regeneration corridors (9, 12, 13, and 16 as defined in the BCCS, of which none are areas of high value as discussed below). The first stage of research has therefore been focused within these areas as they are critical to the delivery of the Core Strategy. These sites are also where the greatest number of site allocations for housing development occur (BCCS, 2011), where the greatest number of deals have taken place (Property Data, 2014), and also where the greatest number of completions have been registered to date (Development Monitoring, 2014). Areas outside of the regeneration corridors are not expected to receive significant levels of housing development (BCCS, 2011).
3.11 There have been a number of new developments within the regeneration corridors (9, 12, 13, and 16) and West Bromwich (SMBC Development Monitoring Data, 2014; New Build Property Market Data, 2013). Sandwell has a reasonably active market, with a comparable number of
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sales achieved of both new and second-hand property in relation to neighbouring locations within the West Midlands (Land Registry, 2014). According to developers and agents, demand is greatest for smaller properties; however demand differs within different locations. There is a limited apartment market in the borough as there is little demand for this property type despite its affordability, and very few new schemes include apartments (Agent/Developer Consultation). We would suggest that due to a healthy supply of smaller affordable houses in Sandwell, buyers are likely to favour this property type as a residence over apartments.
3.12 We have researched average sold values within the regeneration corridors for all dwelling types (including new and second-hand homes), which will enable us to understand the level of value differentials which may occur between locations. This data has been collected using Land Registry, which holds the sold values for both new and second-hand homes across locations. The average house prices in particular locations of Sandwell exhibit some variation in values across different house types. However, one location is not consistently higher or lower across all house types.
3.13 To confirm these findings, we have also undertaken research of the asking values of new homes across the regeneration corridors, and how the values may differ across these locations via Zoopla. Variables exist upon local area factors, and can vary substantially within a particular locality. For example, in Cradley Heath (Reddal Hill Road) the asking value of a new 2 bedroom house for sale is £130,000, which is above the average asking price of £108,000 for a 2 bedroom house in Sandwell. At another new housing scheme in Tipton (Lower Church Street), the asking price of a 3 bedroom terrace is £179,950, which is considerably above the average asking price in Sandwell for a 3 bedroom home of £142,000. This pattern is repeated across and within different locations, therefore differential values cannot be attached across locations within the regeneration corridors. As discussed above, the limited provision of apartments is notable in new developments; during consultations developers stated there is no real demand for apartments in Sandwell, and due to high land and build costs they are mostly unviable in the new development schemes.
Value Differentials
3.14 Upon reviewing the average sold values across the entirety of Sandwell District, we identified value differentials across different locations within Sandwell District.
3.15 Our research utilising Land Registry data for new properties sold in 2013 identified only three postcode areas (two locations) which exhibit higher values across all house types; these are postcode areas B71 4 (West Bromwich), B43 7 and B43 6 (Great Barr). We would therefore only identify these postcode areas within West Bromwich and Great Barr as higher value areas,
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as no other locations with new build houses sold over the 2013 period exhibit higher values across all property types. As there have been a low number of new build sale in some areas, this high/low value area identification has been verified by cross checking the average values of existing (second-hand) property. Although it is recognised that values for new homes often achieve a premium, if the average values of existing properties are also high this would indicate that the market (postcode area) is in fact one of high value.
3.16 Below we display heat maps for the identified higher value locations within West Bromwich (B71 4) and Great Barr (B43 7 and B43 6). The heat maps show that these pockets of high value are enclosed within surrounding low value areas, and therefore that high and low value streets lay adjacently.
Figure 3.2 – Heat Map of B71 4 (Zoopla, 2014)
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Figure 3.3 – B43 7 and B43 6 (Zoopla, 2014)
3.17 Great Barr (B43 7 and B43 6) exhibits higher than average market values across new and existing stock and therefore can be considered to be a high value area. However, as with all other locations, there are differentials in values (Table 3.1). All developments cannot therefore be assumed to be the top end of the value scale which is important when determining the CIL rate.
Address House Type No’ Beds Price (£)
Townhouse 3 £209,995
Semi 3 £189,995 Booths Lane Detached 4 £259,950 - 319,950
Detached 5 £359,996
Netherhall Avenue Semi 3 £209,995 - £224,995
Detached 5 £449,995
Townhouse 3 £189,995 - £232,995 Queslett Road Detached 4 £289,995 Table 3.1 - Value differentials (New schemes/advertised prices) in Great Barr (Zoopla, 2014)
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3.18 No flats or apartments have been sold within these postcodes (Great Barr). There are however some apartments advertised in the area at a similar price to the regeneration corridors, reflecting the lack of demand for this kind of property. No value differentials have thus been applied to apartment/flat properties in this higher value area.
3.19 West Bromwich is somewhat unusual in that its average new build values are mixed. Values achieved for new build properties in 2012/13 are marginally above those achieved in 2009. Furthermore, across the existing housing stock the values are subject to a wide variance (the market is not purely high or low value), which makes it difficult to zone West Bromwich as a high value area, with the exception of postcode area B71 4 where all property exhibits higher values.
3.20 We have also identified a further 4 postcodes out of total 36 areas with the B district postcode which exhibit consistently higher values across all house types for existing stock. These are: B43 5, B62 8, B67 5 and B71 3. However, it must also be noted that these areas have experienced no sales of new build property over the 2011-2013 period, and therefore existing stock values have been considered in these locations. The lack of new development in these areas reflects the policy within the Core Strategy (BCCS, 2011) to focus development within the Regeneration Corridors; the majority of the high value areas are outside these corridors and therefore unlikely to see much development.
3.21 The following table (Table 3.2) summaries this research.
Area/Postcodes New Build Existing Stock
Generally higher values exhibited for all house types Generally higher values Great Barr (B43 7 and B43 6) – but some variance (see exhibited for all house types Table 2.2) Values are generally high, Mixed values, not West Bromwich (B71 4) but inconsistent over 2011- consistently high or low 2013 No sales recorded for new B43 5, B62 8, B67 5 and B71 Generally higher values development in last three 3 exhibited for all house types years
Table 3.2 – High Area Summary Findings
3.22 The table below displays the average sold values for new homes in both high value (West Bromwich and Great Barr) and low value (all other locations) across Sandwell over 2013.
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Please note there is only one comparable value for semi-detached property sales across the high value areas, which is likely to be why the average value is lower overall.
House Type Low Value Area High Value Area
Flats £90,800 £112,300
Terraced/Townhouse £149,700 £159,400
Semi-detached £160,700 £150,000
Detached £192,800 £227,300
Table 3.3 - New Homes Average Sold Values (Land Registry, 2013)
3.23 The average new build sold prices of properties of higher value are £227,300 for detached properties, £150,000 for semi’s and £159,400 for terraced (or townhouses). We would suggest that the average sold value for semi-detached homes presented in the table is not representative of the high value areas due to limited comparable data, and that the true average value is likely to be higher for this property type (sold values over 2011-2012 in high value areas were approx. £180,000).
3.24 As mentioned above, due to the limited new build comparables we also reviewed the average sold values for existing (second-hand) properties across high and low value locations, as displayed in the table below. It must be considered that second-hand homes often place downward pressure on average values.
House Type Low Value Area High Value Area
Flats £68,800 £69,200
Terraced/Townhouse £104,200 £106,700
Semi-detached £117,100 £127,000
Detached £181,400 £207,600
Table 3.4 - All Homes Average Sold Values (Land Registry, 2013)
3.25 It is notable that there is limited differentiation in values for flats across high and low value areas, which is likely to be due to a limited market for apartments in Sandwell. Detached homes in high value areas hold a considerably higher average sold value.
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Value Assumptions
3.26 The following tables set out our assumptions of residential values for our CIL viability model. These values are based upon all of our market research (in particular information from the Land Registry and actual units on the market), and are representative of the general tone of values in the Borough. We refer to these as ‘low value’ areas and ‘high value areas’.
3.27 Table 3.5 below sets out our value assumptions for the ‘high value areas’ within our CIL models.
1 Bed Flat £100,000
2 Bed Flat £125,000
2 Bed House £160,000
3 Bed House £195,000
4 Bed House £225,000
Table 3.5 – Residential High Value Assumptions
3.28 We have also calculated value assumptions for the ‘low value areas’ within our CIL models, as presented in Table 3.6 below.
1 Bed Flat £100,000
2 Bed Flat £120,000
2 Bed House £150,000
3 Bed House £160,000
4 Bed House £190,000
Table 3.6 – Residential Low Value Assumptions
3.29 There is limited value differentiation between apartments in high and low value areas due to the low demand for this property type in Sandwell. All other house types in the high value areas identified exhibit constantly higher values.
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Land Values
3.30 Land values for residential land are expected to be at the £300,000 per acre value for fully serviced decontaminated sites. A range of values has been given from agents and developers (£275,000 - £350,000 per acre for serviced sites). Market Evidence suggests that un-serviced land achieves a land value of circa £225,000 per acre. As set out in paragraph 2.19 above and based on the outcome of other CIL examinations, we have discounted the benchmark market land value by 25% to give us a Threshold Land Value.
3.31 Based on discussion with agents/developers this lower value for un-serviced sites suggests that a remediation allowance of £75,000 per acre is being adopted by developers. Land values are thought to be consistent across the Borough with no particularly high or low value areas. Land may be at the lower end of the scale for less desirable residential locations and at the higher end of the scale for more aspirational locations. However this is not a rule applicable across the board as location factors, access, contamination, and physical attributes and site specifics all influence this value.
Affordable Housing
3.32 Housing associations are private, non-profit making organisations that provide low-cost social housing for people in need of a home. Although independent, they are regulated by the state aid commonly receive public funding. Housing associations are major providers of new housing for rent; while many also run shared ownership schemes to help those who cannot afford to buy a home outright. Affordable housing is exempt from Community Infrastructure Levy (CIL), however it has implications for residential developers in terms of viability.
3.33 We consulted with several registered housing associations that provide homes across Sandwell. All of the registered providers (RPs) we made contact with stated they provide a mix of housing developed independently, as well as privately delivered homes, and mostly provide between 10-15 dwellings per annum across the district. Over previous years, RPs delivered more new build homes independently, however the deliverance of privately developed homes is becoming more frequent due to issues of development viability in Sandwell. High build costs and land values are affecting the delivery of housing; land values are particularly affecting development due to the decontamination costs of the brownfield sites. The transfer values paid for social rented properties are typically 50% (with a range provided of between 40-50%), and 60% for intermediate housing (with a range provided of 55-65%). It was discussed that high rents affect the transfer values paid by RPs.
3.34 We have analysed three new housing schemes which are currently being delivered across Sandwell, all of which provide different levels (percentages) of affordable housing due to
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development viability. However, the affordable housing provided in each scheme is an equal split of social rent and intermediate housing.
Residential Care Homes
3.35 Care Homes / Residential care homes is living accommodation for older people and involves employ staff who provide residents with personal care, such as washing and dressing. Residents normally occupy their own single room but have access to other communal facilities. We have reviewed the development plan monitor information and noted that no residential care developments have been developed in the recent past, suggesting either low demand for this use or viability issues hampering delivery. The high fixed cost of construction, inefficient net- gross ratios and high management costs in residential care homes means that these facilities tend to be marginal in terms of viability particular in low value areas and therefore we have not tested this use. One Registered Provider added commentary that extra-care schemes are costly, complex, and mostly unviable in Sandwell (Registered Provider Consultation).
Office Space
3.36 This section provides an overview of the Sandwell office market creating an understanding of office development viability in Sandwell.
3.37 The Roger Tyms CIL Scoping Study (2011) in their initial Black Country wide review recommended a zero CIL charge on office development stating that both office and industrial markets are depressed, exhibiting low demand, and high vacancy within and outside the key settlements of the Black Country.
3.38 The office market in Sandwell is under-developed due to the economic history of the area and its close proximity to Birmingham city centre, the main office location in the West Midlands. This proximity to a regional centre effectively makes the whole of the Sandwell Borough a secondary market for office space. It suffers from low levels of activity in terms of completions, deals and development. Only one large office development at the former Council Depot, West Bromwich (Providence Place - first phase let to BT) has taken place in recent years, requiring public sector subsidy to bring the project forward.
3.39 Discussion with agents/developers and general market research has confirmed that speculative office developments are highly unlikely to be delivered. Development activity is occupier led and therefore it is difficult to make distinctions in value terms across the Borough. Deals on new development will be primarily based on the cost of the new development and returns to land owners and developers will be low.
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3.40 Given the weak demand and occupier led market, office development in general is not viable. Even a modest CIL charge would serve to increase development costs, which may have the unintended consequence of reducing demand further (i.e. occupational rents will need to be increased to achieve viability).
3.41 The key areas of office supply in Sandwell are West Bromwich, Tipton, Oldbury and to a lesser extent Wednesbury and Smethwick. These are the localities where the greatest numbers of deals have taken place (Estates Gazette Property Data, 2014), that exhibit the greatest availability (Property Link, 2014) and where the greatest number of completions have taken place (SMBC Development Monitoring Information, 2014). Furthermore these areas fall within the regeneration corridors and the Strategic Centre of West Bromwich, where future development is to be concentrated in accordance with the BCCS (2011).
3.42 We reviewed the total office demand across Sandwell in the key locations (as above) between the period January 2006 – January 2014. A total of 1,796,537 sqft of office floorspace was transacted across 139 units. The figures below illustrate the deals done.
Sandwell - Office Take-up by Number of Units 20 18 16 0 - 1,000 sqft 14 12 1,001 - 2,500 sqft 10 2,501 - 5,000 sqft
Units 8 6 5,001 - 10,000 sqft 4 10,001 - 20,000 sqft 2 0 20,001 - 50,000 sqft 50,001 - 100,000 sqft 100,001 sqft + NB: Tipton saw 27 deals for offices below 1,000 sqft
Figure 3.4 – Office Take-up by Units (EGi, 2014)
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Sandwell - Office Take-up by Sqft 200,000 180,000 160,000 0 - 1,000 sqft 140,000
120,000 1,001 - 2,500 sqft 100,000 2,501 - 5,000 sqft Units 80,000 5,001 - 10,000 sqft 60,000 40,000 10,001 - 20,000 sqft 20,000 20,001 - 50,000 sqft 0 50,001 - 100,000 sqft 100,001 sqft +
NB: West Bromwich had 353,592 sqft transacted in the 50,001 sqft category
Figure 3.5 – Office Take-up by Sqft (EGi, 2014)
3.43 Oldbury saw the greatest number of office deals (53 units); however West Bromwich had the greatest amount of transacted floorspace (695,855 sqft). Wednesbury had the lowest number of deals (6 units), however Smethwick had the lowest amount of office floorspace transacted (29,176 sqft). Offices under 2,500 sqft saw the highest take-up over the period reviewed (68 units).
3.44 We also reviewed the current supply of offices by sqft and number of units in Sandwell. There is currently an availability of 457,530 sqft of floorspace available across 63 units. Figure 3.6 below displays the data.
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Sandwell - Office Supply 250,000 35 30 200,000
25
150,000 20 Sqft 100,000 15 Units Total Sqft 10 50,000 Total Units 5 0 0
Figure 3.6 – Office Supply (EGi, 2014)
3.45 West Bromwich has the highest availability of office in terms of both floorspace (206,092 sqft) and units (30). Wednesbury has the lowest availability of units (4), closely followed by Tipton (6). Tipton also has the lowest availability of total office floorspace (12,171 sqft).
3.46 There is a limited supply of offices in terms of available/advertised properties revealing the small-scale nature of the office market in Sandwell. Office supply is to be predominantly located within the strategic centre (West Bromwich). There is an aspiration in West Bromwich for the provision of 220,000 sqm (2.4m sqft) of office space by 2026, guided by the West Bromwich AAP.
3.47 Within the Borough very few new office developments have taken place. Only 35 implemented planning applications had been logged in the SMBC development monitoring report between 2006 and 2013. This equates to 5 completions per year across Sandwell. These were generally at the lower end of the size scale with the majority of applications (22 out of 35) at 400 sqm (4,300 sqft) and below (as discussed by the development typologies assumptions).
3.48 Providence Place in West Bromwich is the largest scale development (13,115 sqm (141,000 sqft)) in the Borough for a number of years. There are however 14 extant permissions for purely office use. It is likely that limited occupier market demand is affecting the bringing forwards of these developments. Agent and developer conversations have confirmed that no/very limited speculative office development is expected in the Borough for the foreseeable future.
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3.49 The Employment Land Review (2008) suggests a small increase in B1a and B1b office space developments. Less than 100,000 sqm (1,076,000 sqft) is expected to be required across the Borough between 2011 and 2026 (equivalent to 6,666 sqm (71,700 sqft) per annum). Within the Strategic Centre, West Bromwich, the BCCS predicts development in the order of 20,450 sqm (220,000 sqft) by 2026 or 1,363 sqm (14,665 sqft) per annum.
3.50 Demand is thus very modest for office accommodation within Sandwell. Historically market activity has been focussed in West Bromwich, Tipton and Oldbury (Estates Gazette Property Data 2007-2013) although only a small number of deals have been recorded in these locations averaging 6 deals per annum in West Bromwich, 3 deals per annum in Tipton, and approximately 5 per annum in Oldbury. Smethwick only experiences an average of 3 deals for offices per annum.
3.51 Across the Borough prime rents for new builds in desirable locations are in the region of £161 - £182 psm, £15 - £17 psf for larger developments of around 1,500 sqm. For smaller offices the figure may be slightly higher (based upon professional knowledge) at £193 - £204 psm (£18 - £19 psf). These figures are at the higher end of the spectrum for the best quality new units in the most desirable office locations, thus if schemes are unviable at these higher end rents, then a scheme in a local centre at lower rents is likely to be similarly unviable.
3.52 Market research into available units and deals done in the area has not confirmed whether rent differentials exist between locations, and there is no consensus on this issue between agents. Variable rents occur in a two tier market that is either driven by the impetus to rent a property that has sat empty (thus subject to empty rates) and that of a new build on a cleared site, where the rent reflects the costs associated with the delivery of the scheme.
3.53 Rental variations do however, occur across the Borough although clear distinctions based on locations are not evident i.e. variations also occur within settlements rather than between them. In terms of the rental values range, all of the main areas exhibit some rents below £100 psm (£9.30 psf), whereas only Smethwick does not achieve rents above this value. Between 2006 - 2014, the highest rents for offices were paid in West Bromwich, Estates Gazette Deals Done, 2014).
3.54 Secondary accommodation frequently incurs rental values of £100 psm (£9.30 psf) and below (from £54 psm (£5 psf)) whereas prime accommodation sits below and around the £175 psm (£16.30 psf) mark across the Borough (Deals Done, 2012). This is however subject to variance and limited comparables, with some agents stating a much lower value for prime office in the current market, at £12.50 psf.
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3.55 This information is somewhat anecdotal in that very few new developments have come forwards. Based on new schemes and consultation with agents/developers the figure of £175 psm (£16.25 psf) could be achieved on a well located high quality office development in any locality across the Borough, particularly as new development may be charging rents aligned with the cost of the development rather than market demand. Average rents data is not available in the Employment Land Study (2008), thus data has been collected via achieved rents (deals done), availability (quoting rents) and agent/developer consultation.
3.56 There is some range in terms of the incentives currently available, and this will also be determined by the quality of the covenant and length of lease undertaken. Typically anything for a private sector covenant the range is 18-24 months on a 10 year lease, to 6-12 months on a 5 year lease. These incentives however relate to existing buildings, to secure development a longer term lease would be required and the incentive adjusted accordingly. Yield data is not readily available at the Sandwell level. Prime yields as per the Q3 2013 CBRE Rents and Yields Monitor for the West Midlands region were 7.96% in Q2, and 7.72% in Q3. These yields reflect the nature of occupiers to be found across Sandwell. In general they tend to be local or regional organisations occupying smaller premises on shorter leases.
Land Values
3.57 Land values for office use, for fully serviced and ‘ready’ sites, are generally in the region of £300,000 per acre. A range of values has been given from agents and developers (£250,000 - £350,000 per acre). Alternative sources of information on land values were considered, but there is a lack of robust information at the local level. The level of knowledge held by local agents makes this the most robust source. According to local agents land values are thought to be consistent across the Borough with no particularly high or low value areas. The developer and agent consultations identified that land may be at the lower end of the scale for town centre locations and at the higher end of the scale for motorway (roadside) locations. However this is not a rule applicable across the board as locational factors, access, contamination, and physical attributes and site specifics all influence this value.
Industrial Space
3.58 This section provides an overview of the Sandwell industrial market creating an understanding of industrial development viability in Sandwell.
3.59 High vacancy and low rents characterise the market resulting in limited viability and development potential.
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3.60 Sandwell has a longstanding industrial legacy with an excess of secondary industrial stock (Employment Land Review, 2008). There is an aspiration to: keep this stock as local quality employment land; update it to high quality employment land; or redevelop this stock for residential use (BCCS, 2011). New development is thus likely to take place on existing sites. CIL may still apply on the net additional floorspace if net additional space is delivered. Consultations with agents suggested the market demand for industrial property improved considerably in 2013, which in turn has driven up rents in some instances and decreased the supply of B8 units. However, there is still high availability of B2 industrial property under 10,000 sqft (Estates Gazette, 2014).
3.61 The key areas of industrial supply in Sandwell are West Bromwich, Oldbury, Smethwick, Tipton, and Wednesbury. Although a large swathe of industrial land/property is available across the Sandwell Borough in various locations, these are the localities where the greatest numbers of deals have taken place (Estates Gazette Property Data, 2014), that exhibit the greatest availability (Property Link, 2014) and where the greatest number of completions have occurred (SMBC Development Monitoring Information, 2014). Furthermore these areas fall within the regeneration corridors and the Strategic Centre of West Bromwich, where future development is to be concentrated, as identified within the Core Strategy (BCCS, 2011).
3.62 We analysed the industrial take-up in Sandwell over the key locations mentioned above. A total of 18,383,903 sqft of industrial floorspace was transacted across 712 B2 and B8 units between the period of January 2006 – January 2014. The figures below show the take-up by location, as well as total number of units and sqft transacted.
Sandwell - Industrial Take up by Number of Units 50 45 0 - 1,000 sqft 40 35 1,001 - 2,500 sqft 30 2,501 - 5,000 sqft 25 20 5,001 - 10,000 sqft
Total Units Total 15 10,001 - 20,000 sqft 10 20,001 - 50,000 sqft 5 0 50,001 - 100,000 sqft 100,001 - 200,000 sqft 200,001 sqft + NB: Wednesbury had 118 units transacted in the 20,001 - 50,000 sqft category.
Figure 3.7 – Industrial Take-up by Number of Units (EGi, 2014)
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Sandwell Metropolitan Borough Council CIL Viability Assessment March 2014
Sandwell - Industrial Take up by Sqft 1,000,000 0 - 1,000 sqft 900,000 800,000 1,001 - 2,500 sqft
700,000 2,501 - 5,000 sqft
600,000 5,001 - 10,000 sqft 500,000 10,001 - 20,000 sqft 400,000 Total Sqft Total 20,001 - 50,000 sqft 300,000 50,001 - 100,000 sqft 200,000 100,001 - 200,000 sqft 100,000 0 200,001 sqft +
NB: Oldbury had 1,873,485 sqft of floorspace transacted above 200,000 sqft. Tipton had 5,201,642 sqft of floorspace transacted above 200,000 sqft. Wednesbury had 4,701,516 sqft of floorspace transacted above 200,000 sqft.
Figure 3.8 – Industrial Take-up by Sqft (EGi, 2014)
3.63 The greatest amount of industrial floorspace was transacted in Tipton (5,201,642 sqft), however the greatest number of units transacted was in Wednesbury (198 units), and then West Bromwich (147 units). The size category which saw the greatest number of take-up was the 20,001 – 50,000 sqft category as 179 units were transacted in total, closely followed by the 5,001 – 10,000 sqft category which saw 118 transactions.
3.64 We also reviewed the current supply of industrial property in the Sandwell district across locations. There is a current supply of 3,591,386 sqft of B2/B8 floorspace available across 199 units. The figures below illustrate this availability.
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Sandwell Metropolitan Borough Council CIL Viability Assessment March 2014
Sandwell - Industrial Supply by Number of Units 18 16 14 0 - 1,000 sqft
12 1,001 - 2,500 sqft
10 2,501 - 5,000 sqft
Units 8 5,001 - 10,000 sqft 6 10,001 - 20,000 sqft 4 20,001 - 50,000 sqft 2 50,001 - 100,000 sqft 0 100,001 - 200,000 sqft 200,001 sqft +
Figure 3.9 – Industrial Supply by Number of Units (EGi, 2014)
Sandwell - Industrial Supply by Sqft 300,000 0 - 1,000 sqft 1,001 - 2,500 sqft 250,000 2,501 - 5,000 sqft 200,000
5,001 - 10,000 sqft
150,000 10,001 - 20,000 sqft Sqft 100,000 20,001 - 50,000 sqft 50,001 - 100,000 sqft 50,000 100,001 - 200,000 sqft 0 200,001 sqft +
NB: Tipton has 439,162 sqft available in the 100,001 - 200,000 sqft. Wednesbury has 474,996 sqft of take-up in the same category.
Figure 3.10 – Industrial Supply by Sqft (EGi, 2014)
3.65 The greatest amount of floorspace available in total is in Tipton (1,223,332 sqft), whereas the greatest number of units available are in West Bromwich (48 units), closely followed by Tipton (46 units). Wednesbury has the lowest supply of units, with only 17 available. The category with the greatest availability in Sandwell is the 2,501 – 5,000 sqft units (59 available).
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3.66 In the past there was an excess supply of employment land in Sandwell. The BCCS identified the need to reduce the available (predominantly secondary industrial) employment land from 1,251 hectares in 2009 to 850 hectares in 2026. This was carried forward in the Site Allocations and Delivery DPD which allocated some of the existing local employment land for residential use.
3.67 As noted in the earlier Black Country market section there is a high prevalence of contaminated brownfield land. This is an issue of particular significance in Sandwell where the levels of contamination and the desire to reduce this contaminated land are greatest. The quantum of local quality employment land earmarked for change of use to residential development is almost double that of its Black Country neighbours at 574 hectares. This compares to 229 hectares in Dudley, 212 hectares in Walsall and 234 hectares in Wolverhampton, up to the 2026 period (Black Country Employment Land Study, 2008).
3.68 Much of the employment land is generally of low quality (local) standard. There is an aspiration to upgrade from 192 ha of high quality land (2009) to 466 ha (2026) (BCCS, 2011). This is to be focussed in the regeneration corridors and West Bromwich. The industrial market thus exhibits fairly high levels of activity in comparison with the office market due to this oversupply of stock.
3.69 Across the Borough there have been 62 implemented industrial developments (2006-2013) split between; 25 B2 applications, 11 mixed industrial (B2-B8), and 26 B8 use class. B2 and B2-B8 mixed units have tended to be predominantly 400 sqm (4,300 sqft) and below. Above 400 sqm (4,300 sqft) the unit sizes are spread disparately with the largest B2 development being 3,605 sqm (38,800 sqft). Of the B8 developments the majority have been below 1,000 sqm (14 out of 25) and disparately spread from 1,000 – 10,000 sqm (10,000 – 107,600 sqft). The number of implemented applications broadly equates to 9 per annum across the Borough.
3.70 The Employment Land Review (2008) sets out that demand for B1c/B2 space is expected to fall by approximately 350,000 sqm (3.7m sqft) between 2011 and 2026 and for B8 use by approximately 40,000 sqm (430,000 sqft). There is therefore depressed demand for the provision of more industrial accommodation in Sandwell. This is greatly affected by the present oversupply of industrial land, hence the market for secondhand industrial property is in fact fairly active, with 3,529 industrial leasehold deals recorded (Property Data, EGi 2014). Demand for industrial units is thus fairly buoyant, but predominantly provided for by the existing supply of cheaper stock.
3.71 The key areas where demand is focussed are in: West Bromwich (including Hill Top and Great Bridge), Oldbury, Smethwick, Tipton and Wednesbury. The number of deals recorded in West
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Bromwich equates to 23 per annum, with 17 in Tipton, 19 in Oldbury, 9 in Smethwick, 13 in Wednesbury, 3 in Rowley Regis, and 5 per annum in Cradley Heath. The agent/developer consultation have confirmed greater demand is likely to be apparent in locations closest/with easiest access to the motorway, as is frequently the case for industrial property.
3.72 Across the Borough prime rents are estimated to be in the region of £54 psm - £65 psm (£5-£6 psf) as per deals done data for smaller units, and £43 psm - £54 psm (£4-£5 psf) for larger units. Agent/developer consultation confirmed that use types (B2/B8) tend to be interchangeable thus rent differentials are based on property characteristics and size rather than use type. Again generalisation is fraught with difficulty in that property is not homogenous, and a large variety of factors influence the value of a unit. Consultation has indicated that there may be rent differentials between motorway and less prominent locations although there is no consensus, and any location differentials are not clearly reflected in the data gathered via deals done/available properties.
3.73 Typical incentives are thought to be between 6 months’ rent free for 5 year lease, or 12-18 months for a 10 year lease. This is however highly changeable as a property with good motorway access may not receive any incentive. Properties in less prominent locations are less likely to be rented at all, thus incentives may be greater.
3.74 Yield data is not readily available at the Sandwell level. Prime rents and yields as per the Q3 2013 CBRE Rents and Yields Monitor for the West Midlands region were 7.32 in Q2, and 7.24 in Q3. Yields again are highly variable and are to be adjusted to local rent levels. Consultations with Agents have confirmed that yields are driven by length of lease and the quality of the covenant.
Land Values
3.75 Land values for industrial land are generally at the £250,000 per acre value for fully serviced decontaminated sites. A range of values has been given from agents and developers (£250,000 - £300,000 per acre). Land values are thought to be consistent across the Borough with no particularly high or low value areas. Land may be at the lower end of the scale for less prominent locations (with poor access) and at the higher end of the scale for motorway (roadside) locations. However this is not a rule applicable across the board as again locational factors, access, contamination, and physical attributes and site specifics all influence this value.
Retail
3.76 This section provides an overview of the retail market in Sandwell creating an understanding of retail development viability in Sandwell.
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3.77 In the Roger Tyms CIL Scoping Study (2011) retail is divided by convenience and comparison retailing and location i.e. in town and out of town (retail parks). In Sandwell for the CIL charging schedule high level estimates were given for retail floorspace development. For convenience retailing of all sizes/locations a charge of £150 psm was recommended, comparison retailing in town and district centres £0 psm, and comparison out of town at £125 psm.
3.78 Falling consumer demand is reducing retail rents and the viability of schemes in town and out of town. The key retail location in Sandwell is West Bromwich followed to a much lesser extent by town centres such as Oldbury, or local and district centres such as Smethwick (Policy CEN2 BCCS, 2011). Future retail development is to be concentrated in Strategic Centres, and other centres within regeneration corridors (i.e. Oldbury). There is an aspiration to provide 65,000 sqm (7m sqft) (2006-2026) of additional comparison retail floorspace in West Bromwich.
3.79 Across the Borough the hierarchy of centres is reflected in the number of deals delivered in each location. From 2006 – 2013 there have been 42 deals within the town centre of West Bromwich, 5 deals in Oldbury, 6 in Wednesbury, 6 in Smethwick, 4 in Tipton, and 2 in Rowley Regis. West Bromwich is the hub of retail activity, although even here the low number of reported deals is indicative of the limited retail market across Sandwell. Across the Borough there are very few properties advertised, many of which are secondary, lower quality units particularly outside of West Bromwich.
3.80 Consumer demand in Sandwell is low, dictated by low average disposable income levels and wages in the Borough.
3.81 As stated in the Roger Tyms report comparison retailing and convenience retailing perform in different ways. Most high streets in town comparison retailing have stalled outside of London due to weak consumer demand, constraints on development finance and poor retail occupier performance. Many of schemes are therefore not viable. In West Bromwich in 2013, a new retail scheme opened. This opened in July and delivered circa 18,000 sqm (194,000 sqft) of comparison floorspace but on the back of a 13,000 sqm (140,000 sqft) Tesco, which drove the viability of that particular scheme.
3.82 Out of town retail units generally have greater levels of viability than retail schemes in town centres, although certain out of town schemes are struggling in terms of delivery (CIL Scoping Study, 2011). This is clearly demonstrated within Sandwell in relation to the stalled Junction retail park in Oldbury.
3.83 Out of town mall style development with associated parking remains strong, although there are no schemes coming forward in Sandwell of this nature.
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3.84 Convenience retailing continues to grow as operators seek to expand their market share in and out of town. Convenience retailing is generally viable across a range of locations (CIL Scoping Study, 2011).
3.85 Comparison in town: Rents are falling across the region, indicative of falling levels of consumer demand. This is particularly prevalent in town centre comparison retailing. Shop units on the high street have achieved rents on an overall basis between £130 - £408 psm (£12.11 - £37.91 psf). The average rent on West Bromwich high street is £239 psm (£22 psf) overall, although shopping centre rents are much higher than this level at £860 psm (£80 psf). This is considerably lower outwith West Bromwich where average rents are around £108 psm (£10 psf) in district and local centres. West Bromwich is the only notable comparison retail centre, thus exhibits higher values than other locations. In particular, locations such as Smethwick exhibit low rents and have a very small retail offer. Other than West Bromwich other settlements/centres have no/limited prime retail offer.
3.86 Comparison out of town (Retail Warehouse): No out of town deals with values available have been recorded post 2006 within Sandwell (property data, 2014) thus information has been gathered via agent/developer consultation. Around £161 psm (£15 psf) is thought to be an average value, however this was being achieved in the peak, and a lower value may be applicable now. However, no present values/comparables are available to confirm the shift in this value (Agent consultation).
3.87 Convenience: Rents are between £160 and £215 psm (£15 psf - £20 psf), with incentives for convenience (foodstores) delivered through rent frees, with a 6 to 12 month rent free common. Agent consultation has confirmed that the recent Tesco development and another development by Sainsbury’s within Sandwell were freehold transactions rather than leasehold. Some information is available regarding rents paid by discount retailers; which is thought to sit at around £108 - £130 psm (£10 - £12 psf).
3.88 Yield data is not readily available at the Sandwell level. Prime rents and yields as per the Q3 2013 CBRE Rents and Yields Monitor for the West Midlands region for all shops were 6.84% in Q2, and 6.82% in Q3, however yields in the district/local centres are around 8 to 9%. Yields for convenience retailing (food stores of 450 sqm (4,800 sqft)) are expected to be in the region of 5.75% with larger stores at around 5%. Agent consultation has indicated that yields in West Bromwich for a prime pitch in the town centre considerably higher than during the pre-crash peak (7%), with major centres now at 8-12%.
3.89 To prepare our CIL appraisals we have had to incorporate an estimate of the land cost to the developer. The figures that we have assumed in the CIL financial appraisals has been
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informed by our market research and the completion of residual appraisals which allow us to derive the potential land payment after taking the value of a development and subtracting all the costs associated with that scheme.
3.90 Sensitivity analyses for each of the residual appraisals were completed in order to establish a range of prospective land values for each proposed retail scheme. There is a broad range of values and this is to be expected, given that each scheme will have different values and costs. The most attractive schemes will be competed for and thus will generate the highest land values to be paid.
3.91 In preparing the CIL financial appraisals we have generally adopted the mid-range of land value. This is justified by the potential variation in the attractiveness and characteristics of schemes and thus values and costs will vary. Also by taking this approach we are mindful of not affecting the viability of future developments from occurring.
3.92 The land values that we have adopted range from £100,000 per acre for retail units outside the strategic centre, £300,000 per acre for units within the Strategic Centre, to £570,000 per acre for retail warehouses and foodstore land values between £450,000 per acre (280 sqm unit) to £1.0 m per acre (5,000 sqm unit).
Hotels
3.93 The viability of new hotels is determined entirely by the trading potential of the scheme which is dependent on the location and the existing stock of bedrooms in the vicinity. Since 2009 it is apparent that the trading performance in several major cities may have been adversely affected by the supply of new hotels developed during the previous cycle. Debt remains the greatest challenge to the market which demands strict criteria of location, sector and brand / management.
3.94 The budget / roadside hotel sector is dominated by the big chains such as Travelodge and Premier Inn. There is some flexibility as to whether developments are freehold or leasehold, but often hotels are developed in partnership with developers as part of a wider mixed use commercial or retail park scheme. Rents are generally £3,000 – 3,500 per bedroom. Yields are subject to a significant range (6-9%) with Travelodge recently being subject of a company voluntary arrangement (CVA) to restructure its debt and its covenant has still to be property tested.
3.95 More upmarket hotels are even more difficult to prove viable. Most upmarket hotel brands are represented in Birmingham city centre. Most new hotels are developed using a Management Contracting business model whereby the developer / investor takes the risk and the hotel chain
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Sandwell Metropolitan Borough Council CIL Viability Assessment March 2014
operates the hotel for a fee. Due to the expensive fit-out the viability is often only achieved for the developer by the hotel bringing footfall and vitality to a wider scheme.
3.96 Other independent boutique hotels have similar challenges and their success or failure usually depends on the strength of the management and the quality and location of the asset. These hotels are often opened in refurbished properties which would not necessarily be captured by CIL (if no new floorspace is developed).
Conclusions
3.97 The results of the property market analysis confirm that market generalisations are fraught with difficulty due to the heterogeneous nature of property and the large number of variables affecting the values, rents and yields achieved.
3.98 The marginal viability of schemes may however be considered and accounted for in the viability testing by assuming the highest rents within the sector. If a scheme is not viable at this higher value then it will not be viable in any less desirable locations.
3.99 The current property market across the Borough is generally one of low value.
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Sandwell Metropolitan Borough Council CIL Viability Assessment March 2014
4 Development Typologies
4.1 In this section of the report we identify the key core strategy policies related to the various uses proposed across the Borough as well as analysis of development that has been undertaken in recent years. This analysis coupled with the market analysis undertaken in Section 3 defines the development typologies that we have tested as part of this viability study.
Residential
Planning Policy
4.2 The Council’s policy framework is set out in the BCCS. The key planning policy relevant to residential uses is:
HOU2 Housing Density, Type and Accessibility
The density and type of new housing provided on each site will be informed by:
The need for a range of types and sizes of accommodation to meet identified sub regional and local needs;
The level of accessibility by sustainable transport to residential services, including any improvements to be secured through development;
The need to achieve high quality design and minimise amenity impacts, taking into account the characteristics and mix of uses in the area where the proposal is located.
Each authority will aim to provide an overall mix of house types over the plan period, tailored to best meet local and sub-regional needs. Developments of 15 dwellings or more should provide a range of house types and sizes that will meet the accommodation needs of both existing and future residents, in line with information available from the Strategic Housing Market assessment and Housing Needs Surveys and with reference to the standards in Table 8. All developments will aim to achieve a minimum net density of 35 dwellings per hectare, except where higher densities would prejudice historic character and local distinctiveness as defined in Policy ENV2.
4.3 Table 4.1 below illustrates the number of sites allocated for development within the Core Strategy based on whether the site is in one of the five regeneration corridors, out of corridor or the Strategic Centre. These figures are based on the sites allocated with the Sandwell Site Allocations and Delivery Development Plan Document (August 2011) and the West Bromwich
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Area Action Plan (August 2011). The split in terms of number of units per scheme is based on: the core strategy; the development monitoring data provided by the Council, and typical
scheme sizes.
Number Out of Strategic of Regeneration Corridor (Number of Sites) Corridor Centre Units 8 9 12 13 16 Sites
1 1 1 1 0 0 0 0
2-14* 15 9 15 4 3 3 0
15-50 15 22 15 9 6 18 2
51-250 12 12 12 11 2 7 12
251+ 0 3 3 0 0 1** 4
Total Number of 1,738 2,637 2,818 1,389 578 1,969 3,365 Units Table 4.1 – Residential Allocations
*The reason for considering schemes up to 14 units is that over 15 units the Council’s Affordable Housing Policy becomes effective. ** This site (Land at Friar Park Road, Wednesbury) is the single largest site in the Borough with 633 units proposed.
4.4 Table 4.2 below sets out the development densities and type splits (i.e. percentage of flats and houses) as set out in Table 8 of the BCCS. The percentage splits in terms of unit sizes (i.e. 1 bed or 2 beds) are based on the size of the proposed scheme and market demand for those units. However, having consider development monitoring data and reviewed the market, it is clear that there is a very limited apartment (flat) market in Sandwell, and therefore the percentage of apartments to be provided within Strategic Centre has been reduced and a split based on actual market trends (review of scheme being delivered/planned) has been adopted (i.e. 38% 2 bed, 40% 3 bed and 22% 4 bed).
Density 1 Bed 2 Bed 1 Bed 2 Bed 3 Bed 4+ Bed Location (Units per Flat Flat House House House House Hectare)
Out of Corridor 35 - - 20% 40% 20% 20% In Corridor 45-60 10% 10% 30% 40% 10% Strategic Centre 60+ 25% 25% 25% 25%
Table 4.2 – BCCS Development Densities & Mix
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4.5 With regards to Affordable Housing, the Council’s policy in the core strategy is as follows:
HOU3 Delivering Affordable Housing
The Local Authorities will aim to provide a minimum 11,000 new affordable dwellings between 2006 and 2026, in partnership with developers and the Homes and Communities Agency. Local Planning Authorities will seek to secure 25% affordable housing on all sites of 15 dwellings or more where this is financially viable. The tenure and type of affordable units sought will be determined on a site by site basis, based on best available information regarding housing need, site surroundings and viability considerations. On sites where 25% affordable housing is proven not to be viable, the maximum proportion of affordable housing will be sought which will not undermine the development’s viability, subject to achieving optimum tenure mix and securing other planning obligations necessary for the development to gain planning permission. Financial viability assessments conforming to an agreed methodology will be required and, where necessary, independently appraised by the local planning authority at the cost of the applicant. Claw back and other flexible arrangements will be sought through planning agreements, wherever possible, to allow for changing market conditions in future years.
4.6 In terms of tenure split for the affordable housing, we have been advised by the Council Officers and Registered Providers to assume the following:
50% Affordable Rented at 50% discount from market value
50% Intermediate (as defined in the former PPS3) at 40% discount from market value.
4.7 The assumptions on the discount to market values are based on consultations with Registered Providers of affordable housing. Note that the schemes that we have tested (apart from schemes less than 14 units) all include 25% affordable housing.
Development Monitoring Information
4.8 With regards to residential development completions during the period 2006 to 2013, an analysis of the development monitoring data suggests that the majority of development has been small scale i.e. below 14 units, see Table 4.3 below.
4.9 From development plan monitoring data the largest residential scheme consisted of 71 units. The majority of development has been focused in Corridors 8, 12, 13, 16 and in the Strategic Centre.
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Number of Units Number of schemes Flats Houses 1 60 192 2 – 14 154 392 15 – 50 60 46 51 – 250 4 2 250+ 0 0 Table 4.3 – Residential Completions 2006-2014
4.10 Although, a number of large scale sites have been allocated within the Core Strategy, the reality is that the majority of the schemes are of a smaller scale. This may in part be due to phasing undertaken by the developer of a larger site, for example, there were a number of entries in the development monitoring data for the same scheme for a site in Cape Hill.
Development Typologies
4.11 Based on the site allocations and the development monitoring data, we have devised the following development typologies to be tested in the CIL viability model.
Land Use Density 1-14 Residential Dwellings 35 units per ha 50 Residential Dwellings 60 units per ha 150 Residential Dwellings 35 – 60 units per ha 350 Residential Dwellings 35 – 60 units per ha
Table 4.4 – Residential Development Typologies
4.12 Based on the core strategy the residential development over the plan period is likely to take place across the Borough with the majority of this focused on the Strategic Centre of West Bromwich and Corridors 8, 9 and 12. However, at this stage the above typologies have been tested for both high and low value areas as identified in section 2 above.
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Offices and Industrial
Planning Policy
4.13 The aspiration in the Core Strategy and Site Allocations DPD is to replace redundant industrial land in none strategic locations (outside strategic centres and regeneration corridors) with housing. The aim is thus for a reduction in the amount of employment land available, with emphasis on updating obsolete stock. This aspiration and surplus of employment land makes the efficiency of the CIL charge low, as most developments are likely take place on existing brownfield land, (and may therefore provide little net additional floorspace). Furthermore brownfield sites experience high abnormal costs due to the industrial legacy of the Black Country further inhibiting impetus for development.
4.14 Industrial space is to be centred within the regeneration corridors, and offices in the Strategic centre of West Bromwich. Development is to be concentrated in the regeneration corridors. Corridors 8 and 12 have the greatest potential for high quality strategic employment land (HQSE) whereas 9, 13 and 16 will have a more residential focus providing land of local employment standard. The Strategic Centre West Bromwich is to focus on the provision of high quality office space.
4.15 The corridors are:
Corridor 8: Hill Top - This area is identified as an area of Potential High Quality Strategic Employment (HQSE area). Within this HQSE 33.5ha of industrial land has been identified as being development opportunities.
Corridor 9: Dudley Port / Tividale / Brades Village - The Strategy for this corridor is to use the available obsolete employment land to create attractive urban residential environments.
Corridor 12: Oldbury / West Bromwich / Smethwick - A significant level of various types of employment land will be retained within this corridor, aiming to uplift it to HQSE.
Corridor 13: Jewellery Line-Rowley Regis - Employment land is local standard but provides valuable employment. In the west are Portsersfield Industrial Estate, Corngreaves Trading Estate and Cradley Business Park. In the North employment land stretches from Waterfall Lane to Doulton Road. In the East on Cakemore Road.
Corridor 16: Coseley, Tipton / Princes End. The corridor is to provide high quality residential and local standard employment land.
4.16 This distinction between HQSE and local employment land may need to be reflected in the CIL typologies to test viability. They provide a clear divide between potentially lower and higher
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value areas, in keeping with present SMBC policy. However, in respect of CIL we have not identified clear differential in market values.
Development Monitoring Information
4.17 Offices: Since 2006 there have been 35 office (B1 use type) completions across Sandwell Borough, totalling 5 per annum on average. The sizes range from 32 sqm (345 sqft) to 13,115 sqm (141,000 sqft). Discounting the largest development at 13,115 sqm (Providence Place), the largest development was 4,100 sqm (44,000 sqft). 15 of these offices have been 120 sqm (1,290 sqft) and below. The range is diverse and not concentrated at any one end of the scale at any location. Developments over 100 sqm (1,076 sqft) have been concentrated in: West Bromwich, Tipton, Smethwick, Wednesbury and Oldbury with no completions recorded elsewhere.
4.18 Some office developments have however come forward as part of a mixed development (B1/B2, B1/B2/B8, and B1/B8). There have been 66 completions over the 2006-2013 periods the vast majority of these (58 out of 61) have been B1/B2/B8. Smaller developments (100 – 400 sqm (1,076 – 4,300 sqft), 37 developments in total) have been concentrated at: Rounds Green Road, Oldbury; Percy Business Park, Oldbury; Tividale, Oldbury; Gold Green, West Bromwich; Charles Street, Great Bridge. Within the 400-1,000 sqm range, mixed use development (7 in total) has been concentrated at West Bromwich and Cradley Heath. Sites of 1,000 – 7,575 sqm (10,760 – 81,500 sqft) (19 sites in total) have been in West Bromwich, Oldbury, Cradley Business Park, Smethwick, Cradley Heath, Wednesbury and Great Bridge.
4.19 For the mixed use and singular office (B1) only completions the skew is towards the smaller end of the market. It is appropriate (confirmed by market research and experience) to differentiate between larger scale office developments and smaller. For the larger offices no development has taken been place over 4,100 sqm (44,100 sqft), other than the BT development, which at that size is an anomaly at almost double the average large size. We have tested 2,000 sqm (21,500 sqft) offices as this is at the larger end of the scale that has been delivered in the locality. For the smaller offices the most frequently occurring offices are still at the smaller end of the scale sitting at 100 - 400 sqm (1,076 – 4,300 sqft). To encompass the breadth of potential completions (including 400 sqm +) we have tested 400 sqm (4,300 sqft) within our CIL viability model.
4.20 Industrial (B2 – B8) - In all there were 25 B2 developments within a size range of 106 sqm (1,140 sqft) to 3,605 sqm (38,800 sqft), 12 of which were below 400 sqm (4,300 sqft) and spread disparately over the larger sizes. Using the same rationale as the offices, 400 sqm
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(4,300 sqft) has been chosen as it represents the point where frequent smaller completions turn into larger more disparately delivered schemes. It is thus a broadly representative midpoint.
4.21 There are 11 B2-B8 developments, of which 7 are sized between 200 sqm (2,152 sqft) and then 4,000 sqm (43,055 sqft). There have been 26 B8 development completions the majority of which have been below 1,000 sqm (10,800 sqft) and disparately spread from 1,000 – 10,000 sqm (10,800 – 108,000 sqft). Similarly these developments have centred in West Bromwich, Oldbury, Smethwick and Great Bridge. Again using the same rationale as above but skewing upwards slightly due to the large differential between 1,000 – 10,000 sqm (10,760 – 107,600 sqft), 2,000 sqm (21,500 sqft) is thought to be representative across the completion spectrum. We have also been informed by Planning Officers, that a number of larger B8 units are expected to be delivered in the future and therefore we have also tested units of circa 5,000 sqm (53,800 sqft).
Development Typologies
4.22 From this information on completions it is possible to identify key areas in which development has taken place and where activity has been recorded. Furthermore the Site Allocations DPD and Core Strategy identify the future spatial aspirations for development, these are noted as Strategic centres (West Bromwich) or regeneration corridors. This spatial planning policy fits with where the development has taken place and where deals have been recorded. Utilising these information sources we can identify the key locations for office and industrial development.
Office key locations – West Bromwich, Tipton, Smethwick, Wednesbury, Oldbury and Great Barr
Industrial key locations – West Bromwich, Oldbury, Smethwick, Cradley Heath, Rowley Regis, Tipton and Great Bridge.
4.23 The development typologies in Table 4.5 below have been based upon the most frequently occurring sizes gleaned from the development completions monitoring report.
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Land Use
Offices: 400 sqm Offices: 2,000 sqm Industrial (B2): 400 sqm Industrial Warehousing (B8): 2,000 sqm Industrial Warehousing (B8): 5,000 sqm
Table 4.5 – Office & Industrial Development Typologies
Retail
Planning Policy
4.24 The Core Strategy envisages a “network of vibrant and attractive town, district and local centres across the Black Country, each offering an appropriate choice of facilities.” Within the Strategic Centres development up to 345,000 sqm is anticipated. In policy CEN1 West Bromwich is identified as the key Strategic Centre, which will provide the higher order functions. Other centres are defined as Town Centres and District & Local Centres to form a hierarchy. Policy CEN7 controls out of centre development with a presumption in favour of development in centres.
Strategic Centre Town Centres District/Local Centres
West Bromwich Oldbury Smethwick High Street – District Centre Cape Hill Carter’s Green Blackheath Langley Cradley Heath Smethwick High Street (Lower) Great Bridge Stones Cross Wednesbury Hamstead Bearwood Rood End Queens Head – Bristnall Owen Street Scott Arms Tipton Quinton Princes End Old Hill
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Lion Farm West Cross Whiteheath
Table 4.6 – Sandwell Hierarchy of Centres
4.25 Policy CN3 identifies up to 45,000 sqm of new floorspace up to 2021 and then a further 20,000 sqm up to 2026. It is noted that any convenience retail development over 500 sqm will be subject to a retail impact assessment.
4.26 Under policy CEN4 – regeneration of town centres states that the appropriate development considered to be (up to) 650 sqm convenience and 500 sqm comparison. CEN5 covers smaller District and Local centres and here appropriate development is considered to comprise up to 500 sqm net for convenience retail and 200 sqm comparison or leisure.
Development Monitoring Information
4.27 The graphs below have been generated from development monitoring data provided by the Council from 2006 onwards. Figure 4.1 indicates the amount of completions in a year by use. The predominance of A1 Retail is plain to see and it is the leading use by floorspace every year.
Gross Development Completions by Year and Use (Sqm) 10,000 9,000 8,000 7,000
6,000 A1 Retail 5,000
Sqm A2 Financial 4,000 A3 Restaurants and Cafes 3,000 2,000 A5 Hot Food Takeaway 1,000 0 NB: 21,549.4 sqft of A1 Retail floorspace was developed in 2007/08 Figure 4.1– Development Completions by Year and Use (Sqm)
4.28 Figure 4.2 shows the average development size in square meters in each year by the A use classes.
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Gross Development Completions by Year and Use (Sqm Average) 2500
2000
1500 A1 Retail
1000 A2 Financial
A3 Restaurants and Cafes Average Sqm Average 500 A5 Hot Food Takeaway
0
Figure 4.2 – Development Completions by Use and Year (Sqm Average)
4.29 On this basis the emphasis is slightly different with A2 financial being significant early in the range and A1 remaining the leading category with average applications sizes being in the order of 500 sqm. The scale of A3 and A5 applications have grown more recently, however they as with A2 financial all fall below the 500 sqm level.
4.30 Figure 4.3 illustrates the average size for all of the completions over the period 2006 – 2013.
208 A1 Retail
A2 Financial
231 610 A3 Restaurants and Cafes A5 Hot Food Takeaway
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Figure 4.3 – Development Completions Overall Average Size by Use (Sqm)
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Development Typology
4.31 With the exception of A1 retail, which has been skewed by the large completion in 2007/8, the majority of completions are below 500 sqm confirming the Core Strategy position of generally expecting applications up to 500 sqm. With convenience retailing there are and will continue to be exceptions and therefore this will need to be reflected in the typologies.
4.32 In selecting the typologies one has to also reflect the nature of the locations where development may take place. In Sandwell these are generally urbanised Town and District Centres where the potential of constructing larger units is restrictive due to the need for land assembly and other similar constraints.
4.33 With regards to defining different types of retail units, we have referred to recent definitions that have been accepted by the Planning Inspectorate (PINS) in respect of other CIL charging schedules:
Retail units are those within Use Classes A1-A5 extending to 280 sqm, but excluding convenience (food) and retail warehouses.
Retail Warehouses are large stores specialising in the sale of household goods (such as carpets, furniture and electrical goods), DIY items and other range of goods, catering for mainly car-borne customers.
Superstores/supermarkets are shopping destinations in their own right where weekly food shopping needs are met and which can also include non-food floorspace as part of the overall mix of the unit.
4.34 The typologies tested therefore comprise:
Land Use Retail unit (A1 to A5*) extending to 280 sqm Retail Unit (A1 to A5*) extending to 280 sqm – Strategic Centre Retail warehouse of 1,500 sqm Supermarket of 280 sqm Supermarket of 1,500 sqm Supermarket of 5,000 sqm
Table 4.7 – Retail Development Typologies *Excluding convenience and retail warehouses.
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4.35 This scale of development is the most likely to be proposed for development in Sandwell, due to the nature and scale of the market.
Hotels
Planning Policy
4.36 The Core Strategy policy CEN3 Growth in Strategic Centres sets out an aspiration to grow the tourism economy within the Black Country. The development of Hotel and other cultural and leisure facilities are anticipated to come forwards with the Strategic Centre of West Bromwich. Policy EMP6 is also relevant and makes clear that “…facilities which support the visitor economy and the business tourism sector will also be encouraged and promoted…”
Development Monitoring Information
4.37 Examination of the Development Monitoring information shows that there have only been 3 schemes completed. Of these one was an extension, another a small development of 30 rooms combined with a showroom and the third a new standalone development located close to the M5 off Wolverhampton Road. This latter development extends to 3,707 sqm.
Development Typology
4.38 Taking into consideration current planning policy and discussions we have had with Planning Officers. We understand that there are a number potential hotel developments in the pipeline which could come forward during the plan period and therefore we have tested a 100 bed Hotel at the viability stage. However, it is also important to note that operators examine carefully market potential in terms of room rates (income) and occupancy factors. It is highly likely that across Sandwell such development will be marginal in viability terms, especially when sites are likely to be brownfield and as such will be costly to develop.
Non-Residential Institutions, Assembly & Leisure
Planning Policy
4.39 The Core Strategy policy CEN3 Growth in Strategic Centres sets out an aspiration to grow the tourism economy within the Black Country. Specifically the development of a cinema is anticipated to come forwards within the Strategic Centre of West Bromwich (together with Walsall and Wolverhampton).
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Development Monitoring Information
4.40 The Development Monitoring information shows that Class D1 and D2 developments have generally been civic developments and not commercial leisure. For instance the Class D1 developments of which there are three comprise a school, birthing centre and place of worship.
Development Typology
4.41 The New Square (Tesco) development in West Bromwich Town Centre opened in 2013 and includes a 6 screen cinema operated by Reel Cinemas. The likelihood of there being further demand for another cinema in the Sandwell area is likely to be minimal. Furthermore it is highly likely that the development of a cinema would need to be cross subsidised by other higher value use development which would be A1 or A3 development and the fact that you normally have to pay the operator a premium to come into a scheme. A CIL would therefore not be appropriate and this would affect the prospect and viability of delivering a cinema. Other D1 and D2 uses are generally non-commercial and funded by the public or community therefore do not generate surpluses from which a CIL can be realised.
Summary of Development Typologies
4.42 To summarise the development typologies we have tested as part of our CIL viability analysis are as follows:
Residential
Land Use
Scheme 1 1-14 Residential Dwellings (High & Low Value Areas) Scheme 2 50 Residential Dwellings (High & Low Value Areas) Scheme 3 150 Residential Dwellings (High & Low Value Areas) Scheme 4 350 Residential Dwellings (High & Low Value Areas)
Table 4.8 – Residential Development Typologies
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Sandwell Metropolitan Borough Council CIL Viability Assessment March 2014
Commercial
Land Use Scheme 5 Office (B1)s: 400 sqm Scheme 6 Offices (B1): 2,000 sqm Scheme 7 Industrial (B2): 400 sqm Scheme 8 Industrial Warehousing (B8): 2,000 sqm Scheme 9 Industrial Warehousing (B8): 5,000 sqm Scheme 10 Retail unit (A1 to A5*) extending to 280 sqm Scheme 11 Retail Unit (A1 to A5*) extending to 280 sqm – Strategic Centre Scheme 12 Retail warehouse of 1,500 sqm Scheme 13 Supermarket of 280 sqm Scheme 14 Supermarket of 1,500 sqm Scheme 15 Supermarket of 5,000 sqm Scheme 16 Hotel (C1): 100 Beds
Table 4.9 – Commercial Development Typologies *Excluding convenience and retail warehouses.
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5 Viability Analysis
5.1 In this section of the report we set out our methodology to establish the viability of the various development typologies described above. We have appraised each of the development typologies having regard to open market land values and normal levels of developers profit to establish whether there is any development surplus which could form CIL.
5.2 This section should be read in conjunction with our excel viability models contained at Appendix 1 and 2.
Development Economics
5.3 The property market and policy review above underpins the development typologies and the basis of the economic viability analysis.
5.4 The general principle is that the CIL will be levied on the increase in land value resulting from the grant of planning permission. However, there are fundamental differences between the land economics for every development scheme is different. Therefore in order to derive the potential CIL and understand the ‘appropriate balance’ it is important to understand the micro economic principles which underpin the viability analysis.
5.5 The viability model is a residual appraisal model as recommended in the report by the Local Housing Delivery Group, Viability Testing Local Plans (the Harman report).10 Figure 5.1 below, illustrates the principles of a viability appraisal.
10 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report)
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Figure 5.1 – Elements Required for a Viability Assessment (Harman)11
Gross Development Value
5.6 Figure 5.2 below, illustrates some of the items that might make up the gross development value of any particular scheme. The valuation approach will depend upon whether the scheme is residential (e.g. comparable approach) or commercial (e.g. investment approach: rent £ per annum capitalised at the appropriate yield %).
Figure 5.2 – Gross Development Value
11 Local Housing Delivery Group, Local Government Association / Home Builders Federation / NHBC (20 June 2012) Viability Testing Local Plans, Advice for planning practitioners, Edition 1 (the ‘Harman’ report) page 25
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5.7 In order to keep the generic models manageable we have valued residential development typologies by reference to benchmark house values for each unit type e.g. 2 bed, 3 bed, 4 bed houses and 1 bed, 2 bed apartment types.
5.8 In terms of average unit sizes, we have reviewed the Council’s Supplementary Planning Residential Design Guidance - Appendix 3 (2004) and also compared these against a number of schemes currently being promoted by developers across the Borough. The differential between the design standards and what is being delivered is minimal and therefore we have adopted the Council’s design standards for the purposes of our viability model.
SMBC Scheme 1 Scheme 2 Scheme 3 Scheme 4 Type Standards Sqft Sqft Sqft Sqft Sqft
1 Bed Flat 538 - 606 - - 2 Bed Flat 700 624 660 652 - 2 Bed House 700 766 694 730 699 3 Bed House 860 915 900 1,109 946 4 Bed House 1,076 1,076 1,163 1,298 1,110 Table 5.1 –Average Unit Sizes
5.9 In terms of commercial property, we have used an investment approach to valuation based on the estimated rental value (per sq ft) for the use type and capitalised by the appropriate yield taking into account investment purchasers’ costs. The yield for any particular property will depend upon the location of the property; the specification; use; and crucially the covenant strength of the tenant. For this exercise we have had regard to market yield benchmarks and discussions with property agents.
5.10 It is important to be cognisant of all income streams e.g. temporary income and ground rents, but only to the extent that this is relevant on generic schemes. The residential scheme we have tested are generally housing led (as opposed to apartments) so we have excluded ground rents. We have also ignored other temporary income as this is site specific.
5.11 Figure 5.3 below illustrates the typical direct expenditure (i.e. excluding land and profit) on a scheme. This includes all aspects of pre-construction; construction; and post construction (marketing and sales) costs.
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Figure 5.3 – Direct Expenditure
5.12 Construction cost information has been derived from the BCIS (Building Cost Information Service) and has been weighted to reflect the Sandwell market.
5.13 From the market research and discussions with agents and developers a significant risk to property development in the Sandwell District is the extent of any decontamination, remediation and site clearance costs required in order to redevelop brownfield sites (which make up the majority of the development sites in the District). These site clearance costs can be significant sum, but are also subject to significant variation. Within the viability models we have included a benchmark sum of £75,000 per acres for decontamination, remediation and site clearance costs (including demolition) in the absence of site specific information.
Threshold Land Values
5.14 The land values adopted are based on market land values as far as we have been able to ascertain from a range of sources including: VOA, reported deals, agents and developer consultations. These land values reflect the ‘prices paid’ for land and sites in the Sandwell Borough for various potential uses. The land values assumptions exclude the cost of decontamination and/or site clearance which is included as a separate cost item in the viability models (see above).
5.15 A very important aspect when considering CIL is an appreciation of how the property market for land works in practice. Developers have to secure sites and premises in a competitive environment and therefore have to equal or exceed the landowners’ aspirations as to value for the landowner to sell. From the developers’ perspective, this price has to be agreed often many years before commencement of the development. The developer has to subsume all the risk of: ground conditions; obtaining planning permission; funding the development; finding purchasers; increases in constructions costs; and changes to the economy and market demand
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etc. The ‘profit’ on the appraisal is not actual profit until the development is realised. The appraised profit is a “gamble that all of the above costs and risks can be managed and delivered on budget”. This is a significant amount of work for the developer to manage; but this is the role of the developer and to do so the developer is entitled to a ‘normal’ developers’ profit (see below).
5.16 To mitigate some of these risks developers and landowners often agree to share some of these risk by entering into arrangements such as ‘subject to planning’ land purchases’ and / or overage agreements whereby the developer shares any ‘super-profit’ over the normal benchmark.
5.17 From the landowners’ perspective, they will have a preconceived concept of the value or worth of their site. This could be fairly straight-forward to value, for example, in the case of greenfield agricultural land which is subject to per hectare benchmarks. However, in the case of brownfield sites (which accounts for the majority of land in Sandwell), the ‘existing use’ value could be a lot more subjective depending upon the previous use of the property; the condition of the premises; and/or any income from temporary lets, car parking and advertising hoardings etc. Also, whilst (say) a former manufacturing building could have been state-of-the-art when it was first purchased by the landowner, in a redevelopment context it might now be the subject of depreciation and obsolescence which the landowner finds difficult to reconcile. Accordingly, the existing use value is much more subjective in a brownfield context.
5.18 Furthermore, where there is a possibility of development the landowner will often have regard to ‘hope value’. Hope value is the element of open market value of a property in excess of the existing use value, reflecting the prospect of some more valuable future use or development. It takes account of the uncertain nature or extent of such prospects, including the time which would elapse before one could expect planning permission to be obtained or any relevant constraints overcome, so as to enable the more valuable use to be implemented12. Therefore in a rising market landowners may often have high aspirations of value beyond that which the developer can justify in terms of risk and in a falling market the land owner my simply ‘do nothing’ and not sell in the prospect of a better market returning in the future. The actual amount paid in any particular transaction is the purchase price and this crystallises the value for the landowner.
5.19 Hence land ‘value’ and ‘price’ are two very different concepts which need to be understood fully when formulating planning policy and CIL. The incidence of any tax/CIL to a certain extent depends on this relationship and the individual circumstances. For example, a farmer with a long-term greenfield site might have limited ‘value’ aspirations for agricultural land – but huge
12 Estates Gazette Glossary of Property Terms
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‘price’ aspirations for residential development. Whereas an existing factory owner has a much higher value in terms of ‘sunk’ costs and investment into the existing use and the tipping point between this and redevelopment is much more marginal.
Threshold Land Value Assumptions
5.20 In order to ensure our viability analysis is robust we have sought to model brownfield scenarios within our development typologies (see Table 4.8 and 4.9).
5.21 The land values adopted are based on market land values (subject to a discount of 25% as set out in paragraphs 2.19 and 2.20) as far as we have been able to ascertain from a range of sources including: actual S106 viability appraisals, reported deals, agents and developer consultations. These land values reflect the ‘prices paid’ for land and sites in the borough for various potential uses. The land values assumptions exclude the cost of decontamination and/or site clearance which is included as a separate cost item in the viability models.
Use £ per acre Use £ per acre
Residential £168,750 Retail Units £100,000
Offices £225,000 Retail Units – Strategic Centre £300,000
Industrial £188,000 Supermarkets < 280 sqm £450,000
Hotel £100,000 Supermarkets 1,500 sqm £700,000
Retail Warehouse £570,000 Supermarket 5,000 sq m £1,000,000
Table 5.2 – Threshold Land Value assumptions
Balance
5.22 In order to determine whether the CIL is affordable (viable) one must compare the appraised residual land value with the threshold land value.
5.23 Figure 5.1 clearly shows when a scheme is viable and not viable. A scheme is viable if the total of all the costs of development including land acquisition, planning obligations and profit are less than the GDV of the scheme. Conversely, if the GDV is less than the total costs of development (including land, S106s and profit) the scheme will be unviable.
5.24 If the balance is positive then the policy is viable. If the balance is negative then the policy is not viable and the CIL rates should be reviewed.
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5.25 This approach is summarised in figure 5.4 below.
Gross Development Value (net of affordable housing)
less Policy Requirements (e.g. CSH, CIL)
less Profit, Finance and Overhead
less Development Costs
= Residual Land Value (gross)
less Site Acquisition Costs / Finance on Land
= Residual Land Value (net)
less Threshold Land Value
= if positive, policy is viable,
if negative, policy is not viable
Figure 5.4 – CIL Viability Summary
Viability Modelling
5.26 Using the information from the evidence base we have developed a series of viability models to appraise the hypothetical development typologies identified above (Tables 4.8 and 4.9). This is based on a simple residual appraisal model which tests the ‘margin’ for CIL beyond actual land values and ‘normal’ developers profit. This is to ensure that CIL can be accommodated without the development scenario becoming unviable.
5.27 Any ‘super’ development surplus beyond ‘normal’ profit and appropriate land values represents an amount of £ for CIL.
5.28 In order to advise on any development surplus for CIL we have benchmarked land values from the market research. We have calculated the site area required for each development typology based upon the development densities typical of each typology as set out in the Core strategy or as recommended by Sandwell MBC.
5.29 In the event that there is a deficit in the appraisal taking into account market land values and normal developer’s profit, this shows that there is no capacity to levy CIL for that particular
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typology. Where there is a development surplus after market land values and normal profit, this is an amount that can potentially be captured as CIL.
5.30 Where this is the case, the CIL rate per square meter could be up to the appraised surplus divided by the amount of appraised floorspace to give a rate that the typology can afford to pay, however, the actual rate will need to take into account the maximum infrastructure funding gap and the appropriate balance test i.e. to have sufficient headroom to accommodate changes in the market.
5.31 Finally, once the model has been run for the different development typologies we have carried out a sensitivity analysis on the value (+/- 10%) and construction cost assumptions (+/- 15%) to understand the potential implications of changes in the market on any surplus for CIL. This is important as CIL should not be set at the limits of viability given that markets and economic circumstances change.
Assumptions
5.32 The viability model has been populated with the following value and cost assumptions based upon our market research.
Residential Values
5.33 Table 5.3 below sets out our baseline residential value assumptions from section 3 above:
Dwelling Type £ Price – For New Build Property
Low Value High Value
1 Bed Flat £100,000 £100,000
1 Bed Flat £125,000 £125,000
2 Bed House £150,000 £160,000
3 Bed House £160,000 £195,000
4 Bed House £190,000 £225,000
Table 5.3 – Residential Value Assumptions
S106/S278 Costs & Affordable Housing
5.34 Given that CIL is to replace (pooled S106) once adopted (or after April 2015 when it will be no longer possible to use pooled S106s). Existing ‘tariff’ based S106s’ for infrastructure provision
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(e.g. for education provision or green space etc.) will no longer be legitimate particularly if the infrastructure (e.g. schools) is defined in the Section 123 List. However, other S106s/S278 costs may continue after CIL is adopted, these are likely to include on site infrastructure works associated with a development scheme. We have allowed for a S106/S278 figure of £1,000 per residential unit and between £25 psm to £75 psm on the commercial depending on the typology, for example, S106/S278 costs are likely to be higher for a 5,000 sqm supermarket than a 400 sqm office development.
5.35 Affordable housing is currently exempt from CIL and therefore has to be delivered by S106. Affordable housing policies have therefore been taken into consideration in the viability modelling. In accordance with Policy HOU3 we have allowed for affordable housing with our appraisals based upon:
25% affordable housing, of which:
o 50% is Social Rented at a 50% discount to market values, and
o 50% is Intermediate tenure based on a 40% discount to market values.
Commercial Values
5.36 Table 5.4 below sets out our commercial valuation assumptions from Section 2 above:
Use Rent Yield Incentives
B1 Offices £175 psm (£16.25 psf) 7.75% 18 months rent free
B2 Industrial £60 psm (£5.57 psf) 7.25% 12 months rent free
B8 Warehouse £48 psm (£4.50 psf) 7 – 7.25% 12 months rent free
Retail Units £161 - £204 psm 8% - 8.5% 12-18 months rent free (£15 – £19 psf)
Retail Warehouse £161 psm (£15 psf) 7% 12 months rent free
Food Store £161 – £215 psm 5..25 – 5.75% 12 months rent free (£15 – £20 psf)
Hotel £3,500 per bed 7.0% 12 months rent free
Table 5.4 – Commercial Value Assumptions
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Construction Costs
5.37 Table 5.5 below sets out our baseline construction cost assumptions from BCIS (see paragraph 5.12 above):
Use BCIS £ per sqm / £ per sq ft
Houses £852 psm / £79.00 psf
Apartments £982 psm / £91.00 psf
B1 Offices £1,184 psm / £110 psf
B2 Industrial £609 psm / £57 psf
B8 Warehouse £422 / £39 psf
Retail £725 / £68 psf
Retail Warehouse £575 psm / £53 psf
Food Store £1011 - £1,191 psm / £94 – 1111 psf
Hotel £37,000 per bed
Table 5.5 – Construction Cost Assumptions
Generic Cost Assumptions
5.38 Table 5.6 below sets out our baseline other cost assumptions.
Item Assumption
Stamp Duty Land Tax (SDLT) % rates from HMRC website
Acquisition Agent Fees 1%
Acquisition Legal Fees 0.5%
Statutory Planning Fees From Planning Portal online calculator
Demolition and Site Clearance including £75,000 per acre decontamination and remediation
External Works including utilities 10% allowance
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Contingency 5%
Professional Fees 8-12%
Sale Agents 1%
Sale Legals 0.5%
Letting Agents 15%
Letting Legals 5%
Marketing & Promotion 1-3%
Table 5.6 – Other Appraisal Cost Assumptions
Profit, Finance and Overhead
5.39 These are the indirect costs of development.
5.40 The cost of finance for any particular development depends upon the source of the funding (e.g. bank finance, corporate finance, shareholder equity etc) and the perceived risk of the project. We have incorporated finance costs in our appraisals based on Table 5.7:
Finance Fees 2% (of the total project cost) finance fees
Interest on development costs 7% interest calculated on a cashflow basis
Interest on land 7% interest for 1 year
Table 5.7 – Finance Assumptions
5.41 Developers profit and overhead again vary from sector-to-sector, scheme-to-scheme and developer-to-developer.
5.42 There are different measures of profit for example - % on cost, % on GDV, IRR (Internal Rate of Return), ROCE (Return on Capital Employed) etc. Similarly, developers will have different requirements for the treatment of overheads. So for example a PLC house-builder who is funded by shareholder capital may prefer to analyse schemes on a ROCE or IRR measure net of overheads whereas a local builder may take a simpler approach of % on value (and account for their overheads and time out of gross profit).
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5.43 The RICS Guidance on Financial Viability in Planning13 describes the different types of developer and the requirements for profit in more detail. It notes that commercial developers tend to seek a return on cost, usually expressed as a percentage of the total development cost and the residential sector seeks a return on the GDV, commonly referred to as the sales margin14.
5.44 For the purposes of our appraisals we have adopted the following assumptions (Table 5.8):
Private for Sale Residential Profit 20% Sales Margin on GDV
Affordable Housing Profit 6% on Transfer Values
Commercial Profit 20% Profit on Cost
Table 5.8 – Profit Assumptions
13 RICS Professional Guidance England (August 2012) Financial viability in planning, 1st edition guidance note GN 94/2012 Appendix E 14 RICS Professional Guidance England (August 2012) Financial viability in planning, 1st edition guidance note GN 94/2012 paragraph E.3.2.8.1
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6 Appraisal Outputs
6.1 We have modelled a range of residential and commercial typologies (please see tables 4.8 and 4.9) and the results of the appraisals and the sensitivities are shown in the tables below. The baseline scenario is shown in the centre of the matrix (100% values and 100% costs) and in the top left hand cell. This figure is the amount available from which a CIL Levy will be paid or not, depending on where the figure is a positive (i.e. surplus) or negative (i.e. a deficit). Normal developers profit and market land value are included in the model. The figures in the table represent the surplus/deficit for CIL.
6.2 We have also undertaken a sensitivity analysis to test the implications of increased development values on the ability to generate a surplus i.e. demonstrating the potential impact that improvements in market conditions (i.e. values) could have in terms of the amount of surplus that can be generated from a scheme.
6.3 The sensitivity on gross development values is shown across the columns ranging from 90% (i.e. a 10% drop in values) to 115% (i.e. a 15% increase in values). This is a manifold approach to values whereby any combination of changes to rents and yields are reflected in the GDV sensitivity.
6.4 The sensitivity on costs relates to construction costs rate psf and is shown down the rows. This is in steps of 5% ranging from 90% (i.e. a 10% drop in costs) to 115% (i.e. a 15% increase in costs). Again, we need to demonstrate the impact that changes in cost could have on the surplus available for CIL.
Residential Typologies
6.5 We set out in the tables below the results of our viability model and sensitivity analysis for the residential development typologies.
Residential Corridors (Low Value Areas)
6.6 We set out in the tables below (Tables 6.1 – 6.4) the results of our viability model and sensitivity analysis for the residential areas which are not high value.
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Table 6.1 – Scheme 1: 1–14 Residential Dwellings (Low Value) Results
149,130 90% 95% 100% 105% 110% 90% 132,413 323,886 523,681 723,476 923,271 95% (61,333) 140,771 332,149 531,944 731,739 100% (251,187) (52,975) 149,130 340,412 540,207 105% (443,791) (242,733) (44,617) 157,488 348,675 110% (649,270) (435,146) (234,279) (36,258) 165,846 115% (870,694) (639,717) (426,501) (225,825) (27,900)
Table 6.2 – Scheme 2: 50 Residential Dwellings (Low Value) Results
463,195 90% 95% 100% 105% 110% 90% 460,387 999,453 1,538,519 2,077,585 2,616,652 95% (49,496) 461,791 1,000,857 1,539,923 2,078,989 100% (592,358) (48,059) 463,195 1,002,261 1,541,327 105% (1,144,453) (590,904) (46,622) 464,599 1,003,665 110% (1,770,847) (1,142,933) (589,450) (45,185) 466,003 115% (2,407,134) (1,769,186) (1,141,412) (587,996) (43,747)
Table 6.3 – Scheme 3: 150 Residential Dwelling (Low Value) Results
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1,214,486 90% 95% 100% 105% 110% 90% 1,263,572 2,550,669 3,837,766 5,124,863 6,411,960 95% (48,068) 1,239,029 2,526,126 3,813,223 5,100,320 100% (1,334,319) (72,611) 1,214,486 2,501,583 3,788,680 105% (2,715,180) (1,359,443) (97,154) 1,189,943 2,477,040 110% (4,267,417) (2,744,225) (1,384,566) (121,697) 1,165,400 115% (5,819,653) (4,296,461) (2,773,270) (1,409,690) (146,240)
Table 6.4 – Scheme 4: 350 Residential Dwelling (Low Value) Results
6.7 All the schemes within the low value areas show a positive return (see Table 6.5 below); this is primarily due to the fact that the sales values are at a sufficient level to generate a surplus whilst achieving the Council’s 25% affordable housing requirements and also a developer’s profit of 20% profit on GDV on the private element and 6% profit on GDV on the affordable housing.
6.8 Scheme 2, 1-14 Residential Units shows a relatively high surplus compared to the other scheme (i.e. the 50 unit scheme), this is due to the fact that we have assumed that only houses will be built and there is no requirement for affordable housing with this number of units.
Scheme Development Typology Surplus/Deficit
1 1-14 Residential Dwellings £132,013 2 50 Residential Dwellings £149,130 3 150 Residential Dwellings £463,195
4 350 Residential Dwellings £1,214,486
Table 6.5: Residential Development Results – Low Value Area
6.9 With regards to the sensitivity analysis, a decrease in values by 5% or 5% increase in costs result in all of the schemes becoming marginal. If the values increase by 5% then there is a significant improvement in the surplus available for CIL. Although, it is also important to note that with an increase in values, you are also likely to see an increase in build costs as result for an increased demand for materials/labour; however, even under this scenario (i.e. values up 5% and costs up 5%) the schemes generate a surplus.
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Residential – High Value Areas
6.10 We set out in the tables below the results of our viability model and sensitivity analysis for the residential typologies in the perceived high value areas.
344,194 90% 95% 100% 105% 110% 90% 275,235 368,054 460,873 553,692 646,511 95% 216,895 309,714 402,533 495,352 588,171 100% 162,910 251,375 344,194 437,013 529,832 105% 103,903 197,783 285,854 378,673 471,492 110% 44,897 138,777 227,515 320,334 413,153 115% (9,402) 79,771 173,651 261,995 354,814
Table 6.6 – Scheme 1: 1–14 Residential Dwellings (High Value) Results
752,188 90% 95% 100% 105% 110% 90% 670,741 906,264 1,097,023 1,327,100 1,557,177 95% 475,942 711,465 906,727 1,136,804 1,366,881 100% 281,143 516,665 752,188 946,509 1,176,586 105% 86,344 321,866 557,389 792,911 986,291 110% (100,527) 127,067 362,589 598,112 833,635 115% (297,579) (59,333) 167,790 403,313 638,835
Table 6.7 – Scheme 2: 50 Residential Dwellings (High Value) Results
1,897,947 90% 95% 100% 105% 110% 90% 1,744,438 2,358,076 2,971,714 3,585,352 4,198,990 95% 1,207,555 1,821,192 2,434,830 3,048,468 3,662,106 100% 670,671 1,284,309 1,897,947 2,511,584 3,125,222 105% 133,787 747,425 1,361,063 1,974,701 2,588,338 110% (373,160) 210,541 824,179 1,437,817 2,051,455 115% (914,136) (294,589) 287,295 900,933 1,514,571
Table 6.8– Scheme 3: 150 Residential Dwelling (High Value) Results
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4,783,858 90% 95% 100% 105% 110% 90% 4,474,812 5,919,790 7,364,767 8,809,744 10,254,721 95% 3,184,358 4,629,335 6,074,312 7,519,289 8,964,266 100% 1,893,903 3,338,881 4,783,858 6,228,835 7,673,812 105% 603,449 2,048,426 3,493,403 4,938,380 6,383,358 110% (687,005) 757,972 2,202,949 3,647,926 5,092,903 115% (1,947,502) (532,483) 912,494 2,357,471 3,802,449
Table 6.9 – Scheme 4: 350 Residential Dwelling (High Value) Results
6.11 In the high value areas, as with the low value areas all of the schemes show a surplus, see Table 6.10 below. The higher sales value in the high value areas clearly improves the viability of the schemes and their ability to pay a CIL charge.
Scheme Development Typology Surplus/Deficit
1 14 Residential Dwellings £344,194
2 50 Residential Dwellings £752,188 3 150 Residential Dwellings £1,897,947 4 350 Residential Dwellings £4,783,858
Table 6.10: Residential Development Value Results – High Value
6.12 With regards to the sensitivity analysis, even of the values were to fall by 5% or if the costs increased by 5% then all schemes are still showing a significant surplus.
6.13 It is also important to note that the impact of sales values falling by 5% would result in the amount of surplus being available for CIL being reduced on average by approximately 30% and therefore even small changes in values and costs could have a significant impact on the viability of the schemes and their ability to pay a CIL charge. It is important to note that when setting the CIL charges, there needs to be sufficient margins to accommodate changes in the scheme (i.e. values/costs) without making the schemes unviable.
Commercial Typologies
6.14 We set out in the tables below the results of our viability model and sensitivity analysis for the commercial development typologies:
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(231,819) 90% 95% 100% 105% 110% 90% (218,045) (186,980) (155,915) (124,850) (93,785) 95% (255,997) (224,932) (193,867) (162,802) (131,737) 100% (293,949) (262,884) (231,819) (200,754) (169,689) 105% (331,902) (300,836) (269,771) (238,706) (207,641) 110% (369,854) (338,789) (307,723) (276,658) (245,593) 115% (407,806) (376,741) (345,676) (314,610) (283,545)
Table 6.11 – Scheme 5 : Offices 400 sq m Results
(1,063,529) 90% 95% 100% 105% 110% 90% (991,848) (836,539) (681,230) (525,921) (370,612) 95% (1,182,998) (1,027,688) (872,379) (717,070) (561,761) 100% (1,374,147) (1,218,838) (1,063,529) (908,219) (752,910) 105% (1,565,296) (1,409,987) (1,254,678) (1,099,369) (944,060) 110% (1,756,446) (1,601,136) (1,445,827) (1,290,518) (1,135,209) 115% (1,947,595) (1,792,286) (1,636,976) (1,481,667) (1,326,358)
Table 6.12 – Scheme 6: Offices 2,000 sq m Results
(228,776) 90% 95% 100% 105% 110% 90% (217,553) (203,501) (189,448) (175,395) (161,343) 95% (237,217) (223,165) (209,112) (195,059) (181,007) 100% (256,881) (242,828) (228,776) (214,723) (200,670) 105% (276,545) (262,492) (248,440) (234,387) (220,334) 110% (296,209) (282,156) (268,103) (254,051) (239,998) 115% (315,873) (301,820) (287,767) (273,715) (259,662)
Table 6.13 – Scheme 7 – Industrial 400 sq m Results
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(673,819) 90% 95% 100% 105% 110% 90% (651,092) (594,326) (537,560) (480,795) (424,029) 95% (719,221) (662,455) (605,690) (548,924) (492,158) 100% (787,350) (730,585) (673,819) (617,053) (560,288) 105% (855,479) (798,714) (741,948) (685,182) (628,417) 110% (923,609) (866,843) (810,077) (753,312) (696,546) 115% (991,738) (934,972) (878,207) (821,441) (764,675)
Table 6.14 – Scheme 8 – Industrial Warehousing 2,000 sq m Results
(1,623,648) 90% 95% 100% 105% 110% 90% (1,566,830) (1,424,916) (1,283,002) (1,141,088) (999,174) 95% (1,737,154) (1,595,239) (1,453,325) (1,311,411) (1,169,497) 100% (1,907,477) (1,765,563) (1,623,648) (1,481,734) (1,339,820) 105% (2,077,800) (1,935,886) (1,793,971) (1,652,057) (1,510,143) 110% (2,248,123) (2,106,209) (1,964,295) (1,822,380) (1,680,466) 115% (2,418,446) (2,276,532) (2,134,618) (1,992,704) (1,850,789)
Table 6.15 – Scheme 9: Industrial Warehousing 5,000 sq m Results
(39,833) 90% 95% 100% 105% 110% 90% (42,724) (24,892) (7,060) 9,262 25,401 95% (59,111) (41,278) (23,446) (5,614) 10,571 100% (75,497) (57,665) (39,833) (22,000) (4,259) 105% (91,884) (74,052) (56,219) (38,387) (20,554) 110% (108,270) (90,438) (72,606) (54,773) (36,941) 115% (124,657) (106,825) (88,992) (71,160) (53,328)
Table 6.16 – Scheme 10: Retail Units 280 sq m (District Centres) Results
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46,735 90% 95% 100% 105% 110% 90% 34,618 55,506 76,395 97,284 118,172 95% 19,788 40,677 61,565 82,454 103,343 100% 4,958 25,847 46,735 67,624 88,513 105% (9,872) 11,017 31,906 52,794 73,683 110% (25,680) (3,813) 17,076 37,964 58,853 115% (42,067) (18,986) 2,246 23,135 44,023
Table 6.17 – Scheme 11: Retail Units 280 sq m (Strategic Centre) Results
312,180 90% 95% 100% 105% 110% 90% 176,106 305,063 434,019 562,975 691,932 95% 115,187 244,143 373,099 502,056 631,012 100% 54,267 183,223 312,180 441,136 570,092 105% (6,653) 122,303 251,260 380,216 509,172 110% (67,573) 61,384 190,340 319,296 448,253 115% (128,492) 464 129,420 258,377 387,333
Table 6.18 – Scheme 12: Retail Warehouse 1,500 sq m Results
9,620 90% 95% 100% 105% 110% 90% (10,893) 19,834 50,561 81,289 112,016 95% (31,364) (637) 30,090 60,818 91,545 100% (51,835) (21,108) 9,620 40,347 71,074 105% (72,306) (41,579) (10,851) 19,876 50,603 110% (92,777) (62,050) (31,322) (595) 30,132 115% (113,463) (82,521) (51,793) (21,066) 9,661
Table 6.19 - Scheme 13: Foodstore 280 sq m Results
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299,490 90% 95% 100% 105% 110% 90% 146,846 352,773 558,700 764,627 970,553 95% 17,241 223,168 429,095 635,022 840,949 100% (112,363) 93,564 299,490 505,417 711,344 105% (241,968) (36,041) 169,886 375,813 581,739 110% (371,572) (165,646) 40,281 246,208 452,135 115% (496,315) (295,250) (89,323) 116,603 322,530
Table 6.20 – Scheme 14: Foodstore 1,500 sq m Results
1,122,534 90% 95% 100% 105% 110% 90% 437,417 1,215,792 1,994,166 2,772,541 3,550,915 95% 1,601 779,975 1,558,350 2,336,724 3,115,099 100% (434,215) 344,159 1,122,534 1,900,908 2,679,283 105% (870,031) (91,657) 686,718 1,465,092 2,243,467 110% (1,305,847) (527,473) 250,902 1,029,276 1,807,651 115% (1,741,663) (963,289) (184,914) 593,460 1,371,835
Table 6.21 – Scheme 15: Foodstore 5,000 sq m Results
(1,859,991) 90% 95% 100% 105% 110% 90% (1,688,609) (1,475,629) (1,262,650) (1,049,670) (836,690) 95% (1,987,280) (1,774,300) (1,561,320) (1,348,341) (1,135,361) 100% (2,285,951) (2,072,971) (1,859,991) (1,647,011) (1,434,032) 105% (2,584,621) (2,371,642) (2,158,662) (1,945,682) (1,732,702) 110% (2,883,292) (2,670,312) (2,457,333) (2,244,353) (2,031,373) 115% (3,181,963) (2,968,983) (2,756,003) (2,543,024) (2,330,044)
Table 6.22 – Scheme 16: Hotel 100 Beds Results
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6.15 As set out in the market analysis office, industrial and hotel developments are not viable and therefore do not generate a surplus even after testing for 10% improvement in values as part of the sensitivity analysis. Thus suggesting that CIL is not feasible for these uses.
6.16 With regards to retail, we have tested retail units up to 280 sq m in the Strategic Centre of West Bromwich and within the local/district centres. Clearly, West Bromwich is the main (and strongest) centre within the Borough and therefore achieves higher rents and keener yields compared to the local/district centres. This has been reflected in the viability model and hence why a surplus is generated in the strategic centre, whereas retail units of 280 sqm are unviable in all other locations.
6.17 As expected, retail warehouses and supermarket developments (apart from supermarkets below 280 sqm) generate a surplus given the rents that are achieved and the fact that foodstore operators are seen as good covenant strength and therefore investors are still keen to acquire these types of development. This is reflected in the strong investment yields which are driving viability. Clearly, as the market improves these uses will generate greater surpluses.
6.18 The 280 sqm supermarket unit is only marginally viable; this is due to the lower rents and yields associated with this type of unit i.e. a unit of this size if likely to be occupied by an independent retailer who will have a weaker covenant, unable to pay high rents compared to major supermarket operators, and therefore a less secure investment (i.e. weaker yield).
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7 Conclusions & Recommendations
7.1 The principle of CIL is to attempt to ‘capture’ some of the development surplus over and above normal developers profit and market land values. Developers have a minimum amount of profit they can accept to stay in business and landowners have a minimum sale price (sometimes dictated by the price they paid for the site). Hence there is much more scope for the incidence of any tax to be pushed down to the landowner in the greenfield context - or where land has been in a single ownership for a considerable period of time.
7.2 CIL will contribute an additional direct cost to the scheme and therefore consideration needs to be given to the incidence of the tax. For example, if direct costs go up, this will need to be borne by the landowners or the developer. Where there is a significant difference between the existing use value and the development value of the site (e.g. greenfield windfall sites) the incidence of the tax is more likely to be passed back to the landowner. However, where risks and margins are much tighter (e.g. in a brownfield regeneration context such as Sandwell), there is less scope to pass the CIL to the landowner but the developer must maintain their margin due to the significant risks involved particularly in relation to securing funding. The result is most likely to be a deferment of development until the market improves or some other public sector intervention take place to ‘unlock’ the scheme.
Economics of Brownfield Land
7.3 The appraisal analysis highlights some qualitative aspects of the general approach to CIL which is relevant when considering the ‘appropriate balance’.
7.4 Fundamentally, CIL is a form of ‘tax’ on development as a contribution to infrastructure. By definition, any differential rate of tax/CIL, this will have a distorting effect on the pattern of land uses. The question as to how this will distort the market will depend upon how the CIL is applied.
7.5 Also, consideration must be given to the ‘incidence’ of the tax i.e. who ultimately is responsible for paying it i.e. the developer out of profit, or the landowner out of price (or a bit from each).
7.6 This is particularly relevant in the context of brownfield sites. Any CIL on brownfield redevelopment sites will impact on the timing and rate of redevelopment. This will have a direct effect on economic development, jobs and growth.
7.7 In the brownfield context redevelopment takes place at a point in time when buildings are economically obsolete (as opposed to physically obsolete). Over time the existing use value of buildings falls as the operating costs increase, depreciation kicks in and the rent falls (by
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comparison with modern equivalent buildings). In contrast the value of the next best alternative use of the site increases over time due to development pressure in the urban context (assuming there is general economic growth in the economy). Physical obsolescence occurs when the decreasing existing use value crosses the rising alternative use value.
7.8 However, this is not the trigger for redevelopment. Redevelopment requires costs to be incurred on site demolition, clearance, remediation, and new build construction costs. These costs have to be deducted from the alternative use value ‘curve’. The effect is to extend the time period to achieve the point where redevelopment is viable.
7.9 This is absolutely fundamental for the viability and redevelopment of brownfield sites. Any Tariff, Tax or Obligation which increases the costs of redevelopment will depress the net alternative use value and simply extend the timescale to when the alternative use value exceeds the existing use value to precipitate redevelopment.
7.10 Contrast this with the situation for development on greenfield land. Greenfield sites are constrained by the planning designation. Once a site is ‘released’ for development there is significant step up in development value – which makes the development economics much more accommodating. There is much more scope to capture development gain, without postponing the timing of development – albeit we are mindful that there are very few Greenfield/major urban extension sites in Sandwell.
7.11 This difference between the development ‘gain’ in the context of a greenfield windfall site and the slow-burn redevelopment of brownfield sites is absolutely fundamental to the success of any regime to capture development ‘gain’ or ‘value’. It is also key to the ‘incidence’ of the tax i.e. whether the developer or the land owner carries the burden of the tax.
7.12 It is important to remember that whilst CIL came out of the 2007 Housing Green Paper, it has its roots in the Barker review following PGS. PGS failed because of the valuation issues across all forms of development including brownfield, commercial and residential. Similarly previous attempts to tax betterment in 1947 ‘Development Charge’, 1967 ‘Betterment Levy’ and the 1973 ‘Development Gains Tax’ have all ended in repeal.
7.13 This historical context and land economics is fundamental for the success of the CIL in Sandwell.
7.14 The market is very fragile for all types of development and particularly redevelopment of brownfield land. Residential development on greenfield windfall sites will remain viable, almost regardless of the market, because of the substantial uplift in value from agricultural land use. However, Sandwell does not have this luxury as the majority of the proposed development is
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planned to take place within the existing Regeneration Corridors or Strategic Centre i.e. primarily brownfield locations. These sites have the potential to deliver substantial numbers of housing in the urban areas and are sustainable in all respects.
7.15 Sandwell should have a supply of development sites for housing, employment and other uses. However, given the outputs of the viability assessment we have suggested CIL rates so as not to stymie redevelopment.
Charging Rates on Use Basis
7.16 The objective is to ensure that the Council’s CIL Charging Schedule is sufficiently robust and sound in viability terms and that the charges set are not so onerous that it makes development across the Borough unviable - striking an appropriate balance in order to ensure that schemes that are viable do not become unviable because of CIL.
7.17 To calculate the maximum CIL rate we have divided the surplus (if any) shown in tables 6.1 – 6.9 and 6.11 – 6.22 by the amount of floorspace proposed under each development typology to arrive at a rate per sqm.
7.18 In table 7.1 below we set out the maximum CIL that could be payable under each development typology, however, to allow for changes in the market, build costs or unforeseen circumstances and to give sufficient ‘headroom’ in the CIL rate we have suggested that the CIL rate should be 30% of the maximum. The reason for such a big discount is demonstrated by the sensitivity analysis we have undertaken, for example, a 5% reduction in residential values alone results in the surplus available for CIL being reduced by approximately 30% and hence the needed to allow for sufficient ‘headroom’ to accommodate changes in costs/values so as not make schemes unviable and stop development.
7.19 In respect of the residential elements only, the private residential floorspace has been used to calculate the CIL rate per sqm. Although the residential market has seen improvement in recent years we have discounted the maximum rate by 70% to reflect the need to ensure that schemes do not become unviable as a result of CIL. Furthermore the ground conditions/contamination of majority of the brownfield land across the borough will continue have an impact on scheme viability. The discount we have suggested allows for a significant margin which can accommodate potential changes in values in values/costs without impacting on scheme viability.
7.20 With regards to Scheme 2 (14 residential units or below) in both low and high value areas, this typology is showing a significant surplus primarily due to the fact that a scheme of this size benefits from some economies of scale and also the fact that the number of units proposed is
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below the threshold at which the Council’s affordable housing requirements come into effect. In accordance with the latest CIL Guidance (February 2014) we have therefore considered setting differential rate based on the scale of development proposed (i.e. number of units being developed); we discuss this in further detail below.
7.21 On commercial elements, the maximum rate per sqm has also been reduced by 70% to provide a CIL rate which again allows for a significant margin which can accommodate potential changes in values/costs without impacting on scheme viability and reflects the difficulties associated with developing on brownfield land, the majority of which needs remediation.
Maximum CIL Rate Typology £ psm £ psm @ 30%
Scheme Residential 1 14 residential Dwellings: Low value Areas £112 £34 High Value Areas £292 £88
2 50 residential Dwellings Low Value Areas £51 £15 High Value Areas £255 £77
3 150 Residential Dwellings Low Value Areas £55 £17 High Value Areas £223 £67
4 350 Residential Dwellings (In/out Corridors) Low Value Areas £61 £18 High Value Areas £241 £72
Commercial Maximum CIL Rate Scheme Typology £ psm £ psm @ 30% 5 Office (B1): 2,000 sq m £0 £0 6 Industrial (B2): 400 sq m £0 £0 7 Industrial Warehousing (B8): 2,000 sq m £0 £0 8 Industrial Warehousing (B8): 5,000 sq m £0 £0 9 Retail Units (A1 to A5*) 280 sq m £0 £0 (Local/District Centres)* 10 Retail Units (A1 to A5*) 280 sq m (Strategic £167 £50 Centre)*
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11 Retail Warehouse: 1,500 sq m £208 £62 12 Supermarket: 280 sqm £34 £10 13 Supermarket: 1,500 sq m £197 £60 14 Supermarket: 5,000 sq m £225 £68 15 Hotel: 100 beds £0 £0
Table 7.1 – Summary of Potential CIL Levy *Excluding convenience and retail warehouses.
Draft Charging Schedule
7.22 Having run the development appraisal model for hypothetical schemes for all the typologies the results show that there is a significant challenge to viability across the Borough. Only retail and residential uses show any development surplus for CIL. With regards to retail, generally these schemes often take a significant number of years to come to fruition; have complex and expensive land assembly issues and require substantial developers profit to maintain the commitment to delivery.
7.23 We have devised a draft charging schedule to reflect the outcomes of the viability analysis and take into account the need to have an ‘appropriate balance’ that allows for sufficient headroom in the levy rates so not to impact on the viability (i.e. delivery) of the scheme even if market conditions (values/costs) change significantly. We have also taken into consideration the need to keep the CIL Charging Schedule relatively simple and straightforward. Please refer to table 7.2 below.
7.24 Retail: As a result of the market and viability analysis it is clear that nearly all types of retail are viable cross Sandwell, apart from unit shops (up to 280 sqm) outside the strategic centre of West Bromwich, which are unviable. Supermarkets of less than 280 sqm are also marginal in terms of viability and therefore we have recommended a nil rate for these two typologies and a range of rates for the other retail development typologies.
7.25 Residential: We recommend a rate of £30 psm for any residential schemes between 1-14 units and £15 psm for all other residential developments (i.e. 15 units plus). The different rates are supported by the viability analysis which clearly shows that residential schemes between 1-14 units are more viable than the other development typologies and therefore can afford to pay a higher CIL rate.
7.26 Although, we have tested both high and low value areas, it is important to note that the majority of the planned development is actually proposed within the low value areas (see paragraphs 3.10 and 4.9); coupled with the fact that the high value areas are actually quite small (as shown
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on the heat maps in Figures 3.2 and 3.3), we have recommended that no differentiation is made between high and low value areas and a single charging zone is adopted for the whole borough; thus keeping the Charging Schedule simple and straightforward.
7.27 Offices, Industrial and Hotels: The market values generated by these uses are currently insufficient to cover the costs associated with these schemes and therefore are unviable, which means that they are not able to pay a CIL.
7.28 Other Uses: With regards to leisure and education uses, as we explained in the development typologies sections, these uses are rarely viable and therefore are unable to pay a CIL rate.
Development Typology CIL Rate £ psm
Supermarkets/Superstores >280 sqm and Retail £60 Warehouses
Retail Units (A1 to A5*) (Strategic Centre Only) £50
Residential: 1- 14 Units £30
£15 Residential: 15 units plus
Offices Industrial Industrial Warehousing Retail Units (A1 to A5*) Outside Strategic Centre £Nil Supermarkets/superstores < 280 sqm Hotel Leisure Education Residential Care Homes Table 7.2. - Sandwell MBC Draft CIL Charging Schedule *Excluding convenience and retail warehouses.
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Next Steps
7.29 Before proceeding with a CIL Charging Schedule the Council needs to consider whether sufficient CIL will be collected to generate a surplus over and above the cost of implementing and monitoring the CIL Charging schedule. The Council needs to take a view as the level of floorspace that is realistically likely to come forward over the Core Strategy period and multiply these figures by the CIL rates in Table 7.2 above to see whether there is sufficient surplus to cover the administration costs on an annual basis and make pursing a CIL worthwhile at this stage.
7.30 CIL regulations require that local authorities spend the CIL’s revenue on the infrastructure needed to support the development of their area and therefore it is important that the Council clearly identifies the required infrastructure and the associated funding gap. The Council cannot collect more CIL revenue than is required to fund the infrastructure and therefore the potential revenue that could be generated needs to be tested against the infrastructure funding gap, and in the unlikely event, that excess revenue is generated then the rates will need to be amended accordingly. It is also important to note that in addition to the CIL, it is still possible to secure S106 monies from schemes, if the proposed S106 items relate to the scheme and not to a wider infrastructure requirement (on the S123 List).
7.31 As we have set above Sandwell is substantially a brownfield area with minimal greenfield development opportunities, and therefore the ability for schemes to subsume these additional costs may be difficult. The Council needs to carefully consider the implications of CIL on the development pipeline and the impact on jobs and growth in the Borough.
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Appendix 1 – Residential Development Appraisals
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Appendix 2 – Commercial Development Appraisals
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140226 Sandwell CIL Residential Viability Models v2.4 Residential control panel
Net sales (NIA) Floor areas - (sqm) 2 bed houses 65.0 3 bed houses 80.0 4 bed houses 100.0 5 bed houses 0.0 2 bed bungalows 0.0 1 bed apartment 50.0 2 bed apartment 65.0
Open Market values (£) - Low Value (£ psm) High Value(£ psm) 2 bed houses 2,308 2,462 3 bed houses 2,000 2,438 4 bed houses 1,900 2,250 5 bed houses 0 0 2 bed bungalows 0 0 1 bed apartment 2,000 2,000 2 bed apartment 1,846 1,923
Affordable Housing Low Value - Low Value High Value RP Transfer Values (£): Social Rented 50% of MV Intermediate 60% of MV 2 bed houses 75,010 80,015 90,012 96,018 3 bed houses 80,000 97,500 96,000 117,000 4 bed houses 95,000 112,500 114,000 135,000 5 bed houses 0 0 0 0 2 bed bungalows 0 0 0 0 1 bed apartment 50,000 50,000 60,000 60,000 2 bed apartment 59,995 62,498 71,994 74,997
CIL psm Site Specific S106/278 1,000 per dwelling
Construction Costs - Demolition and Site Clearance (allowance) 75,000 per acre Houses Build Costs (BCIS) 852.00 psm Bungalow Build Costs (BCIS) 0.00 psm Apartment Build Costs (BCIS) 982.00 psm Extra over for CSH 0.00 psm
Developers Profit - On private for sale 20.00% On affordable housing pre-sale 6.00%
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SCHEME DETAILS
Net sales (NIA) Net to Gross % Gross (GIA) Floor areas - (sqm) (sqft) % (sqm) (sqft) 2 bed houses 65.0 700 100.0% 65.0 700 3 bed houses 80.0 861 100.0% 80.0 861 4 bed houses 100.0 1,076 100.0% 100.0 1,076 1 bed apartment 50.0 538 82.0% 61.0 656 2 bed apartment 65.0 700 82.0% 79.3 853
Unit mix - # units mix% total floor area (GIA sqm) 2 bed houses 3 21% 195.0 3 bed houses 6 43% 480.0 4 bed houses 5 36% 500.0 1 bed apartment 0 0% 0.0 2 bed apartment 0 0% 0.0 14 100% 1,175.0
Open Market values (£) - £ psm £ 2 bed houses 2,308 150,020 3 bed houses 2,000 160,000 4 bed houses 1,900 190,000 1 bed apartment 2,000 100,000 2 bed apartment 1,846 119,990
Affordable Housing - Policy requirement % 0% Policy Tenure split 50% Social Rented 50% Affd Rent/Int. 100% RP Transfer Values (£): 80% % of MV 2 bed houses 75,010 Social Rented 90,012 Affd Rent/Int. 3 bed houses 80,000 Social Rented 96,000 Affd Rent/Int. 4 bed houses 95,000 Social Rented 114,000 Affd Rent/Int. 5 bed houses 0 Social Rented 0 Affd Rent/Int. 2 bed bungalows 0 Social Rented 0 Affd Rent/Int. 1 bed apartment 50,000 Social Rented 60,000 Affd Rent/Int. 2 bed apartment 59,995 Social Rented 71,994 Affd Rent/Int.
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GROSS DEVELOPMENT VALUE
Private for Sale GDV - 2 bed houses 3 @ 150,020 450,060 3 bed houses 6 @ 160,000 960,000 4 bed houses 5 @ 190,000 950,000 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 100,000 - 2 bed apartment 0 @ 119,990 - 14 (rounded) 2,360,060 Social Rented GDV - 2 bed houses 0 @ 75,010 - 3 bed houses 0 @ 80,000 - 4 bed houses 0 @ 95,000 - 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 50,000 - 2 bed apartment 0 @ 59,995 - 0 (rounded) - Intermediate GDV - 2 bed houses 0 @ 90,012 - 3 bed houses 0 @ 96,000 - 4 bed houses 0 @ 114,000 - 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 60,000 - 2 bed apartment 0 @ 71,994 - 0 (rounded) - 14.00 (total)
GDV 2,360,060
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (20,000) Statutory Planning Fees (5,390) CIL 0.00 psm (on private for sale) - Site Specific S106/278 1,000 per dwelling (14,000)
Construction Costs - Demolition and Site Clearance (allowance) 0.99 acres @ 75,000 per acre (74,130) Houses Build Costs (BCIS) 1,175.0 sqm @ 852 psm (1,001,100) Bungalow Build Costs (BCIS) 0.0 sqm @ 0 psm - Apartment Build Costs (BCIS) 0.0 sqm @ 982 psm - Extra over for CSH 1,175.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 1,001,100 @ 10% (100,110) Contingency 1,175,340 @ 5% (58,767)
Professional Fees 1,234,107 @ 8% (98,729)
Disposal Costs - Sale Agents Costs 2,360,060 GDV @ 1.00% (23,601) Sale Legal Costs 2,360,060 GDV @ 0.50% (11,800) Marketing and Promotion 2,360,060 GDV @ 3.00% (70,802)
Finance Costs - Finance Fees 1,478,428 @ 2.00% (29,569)
Interest on Development Costs 7.00% APR 0.565% pcm (42,417)
Developers Profit - On private for sale 2,360,060 @ 20.00% (472,012) On affordable housing pre-sale 0 @ 6.00% - (blended) 20.00%
TOTAL COSTS (2,022,426)
RESIDUAL LAND VALUE Residual Land Value (gross) 337,634 SDLT 337,634 @ (10,129) Acquisition Agent fees 337,634 @ 1.0% (3,376) Acquisition Legal fees 337,634 @ 0.5% (1,688) Interest on Land 337,634 @ 7.0% (23,634) Residual Land Value (net) 21,343 per plot (check) 298,806
TRESHOLD LAND VALUE Residential density per ha 35 units per hectare Site Area 0.40 ha 0.99 acres Threshold Land Value 168,750 £ per acre 416,981 £ per ha Threshold Land Value 11,914 per plot (check) 166,793
BALANCE Surplus/(Deficit) 132,013
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SENSITIVITY ANALYSIS
CIL £/psm Surplus/(Deficit) 132,013 0 5 10 15 20 5% 108,475 103,084 97,693 92,302 86,911 10% 84,936 79,829 74,722 69,615 64,508 Affordable Housing % 15% 61,398 56,574 56,690 51,757 46,825 20% 42,484 37,842 33,199 28,557 23,915 25% 18,413 14,061 9,709 5,357 1,005 30% (5,657) (9,719) (13,781) (17,843) (21,905)
Green = viable for given level of affordable housing and CIL Red = not viable for given level of affordable housing and CIL
Values Surplus/(Deficit) 132,013 90% 95% 100% 105% 110% 90% 90,250 169,806 249,362 323,317 401,974 95% 36,058 111,131 190,688 270,244 343,963 Construction costs 100% (23,942) 57,412 132,013 211,570 285,952 105% (83,027) (2,588) 73,339 152,895 232,452 110% (143,690) (61,437) 18,765 94,221 173,777 115% (207,843) (122,101) (41,235) 40,119 115,103
Green = viable Red = not viable
CIL £/psm
Green = viable Red = not viable
Affordable Housing Commuted Sum Full GDV (no AH) 2,360,060 AH discount from GDV 0 AH contribution £/dwelling 0 £ / dwelling (total scheme) AH contribution £ psm 0.00 £ psm (total scheme)
NOTES
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SCHEME DETAILS
Net sales (NIA) Net to Gross % Gross (GIA) Floor areas - (sqm) (sqft) % (sqm) (sqft) 2 bed houses 65.0 700 100.0% 65.0 700 3 bed houses 80.0 861 100.0% 80.0 861 4 bed houses 100.0 1,076 100.0% 100.0 1,076 1 bed apartment 50.0 538 82.0% 61.0 656 2 bed apartment 65.0 700 82.0% 79.3 853
Unit mix - # units mix% total floor area (GIA sqm) 2 bed houses 19 38% 1,235.0 3 bed houses 20 40% 1,600.0 4 bed houses 11 22% 1,100.0 1 bed apartment 0% 0.0 2 bed apartment 0% 0.0 50 100% 3,935.0
Open Market values (£) - £ psm £ 2 bed houses 2,308 150,020 3 bed houses 2,000 160,000 4 bed houses 1,900 190,000 1 bed apartment 2,000 100,000 2 bed apartment 1,846 119,990
Affordable Housing - Policy requirement % 25% Policy Tenure split 50% Social Rented 50% Affd Rent/Int. 100% 2 bed houses 75,010 Social Rented 90,012 Affd Rent/Int. 3 bed houses 80,000 Social Rented 96,000 Affd Rent/Int. 4 bed houses 95,000 Social Rented 114,000 Affd Rent/Int. 5 bed houses 0 Social Rented 0 Affd Rent/Int. 2 bed bungalows 0 Social Rented 0 Affd Rent/Int. 1 bed apartment 50,000 Social Rented 60,000 Affd Rent/Int. 2 bed apartment 59,995 Social Rented 71,994 Affd Rent/Int.
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GROSS DEVELOPMENT VALUE
Private for Sale GDV - 2 bed houses 14 @ 150,020 2,137,785 3 bed houses 15 @ 160,000 2,400,000 4 bed houses 8 @ 190,000 1,567,500 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 100,000 - 2 bed apartment 0 @ 119,990 - 38 (rounded) 6,105,285 Social Rented GDV - 2 bed houses 2 @ 75,010 178,149 3 bed houses 3 @ 80,000 200,000 4 bed houses 1 @ 95,000 130,625 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 50,000 - 2 bed apartment 0 @ 59,995 - 6 (rounded) 508,774 Intermediate GDV - 2 bed houses 2 @ 90,012 213,779 3 bed houses 3 @ 96,000 240,000 4 bed houses 1 @ 114,000 156,750 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 60,000 - 2 bed apartment 0 @ 71,994 - 6 (rounded) 610,529 50.00 (total)
GDV 7,224,587
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (25,000) Statutory Planning Fees (19,250) CIL 0.00 psm (on private for sale) - Site Specific S106/278 1,000 per dwelling (50,000)
Construction Costs - Demolition and Site Clearance (allowance) 3.53 acres @ 75,000 per acre (264,750) Houses Build Costs (BCIS) 3,935.0 sqm @ 852 psm (3,352,620) Bungalow Build Costs (BCIS) 0.0 sqm @ 0 psm - Apartment Build Costs (BCIS) 0.0 sqm @ 982 psm - Extra over for CSH 3,935.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 3,352,620 @ 10% (335,262) Contingency 3,952,632 @ 5% (197,632)
Professional Fees 4,150,264 @ 8% (332,021)
Disposal Costs - Sale Agents Costs 6,105,285 GDV @ 1.50% (91,579) Sale Legal Costs 7,224,587 GDV @ 0.50% (36,123) Marketing and Promotion 6,105,285 GDV @ 3.00% (183,159)
Finance Costs - Finance Fees 4,887,395 @ 2.00% (97,748)
Interest on Development Costs 7.00% APR 0.565% pcm (100,009)
Developers Profit - On private for sale 6,105,285 @ 20.00% (1,221,057) On affordable housing pre-sale 1,119,302 @ 6.00% (67,158) (blended) 17.83%
TOTAL COSTS (6,373,368)
RESIDUAL LAND VALUE Residual Land Value (gross) 851,219 SDLT 851,219 @ (34,049) Acquisition Agent fees 851,219 @ 1.0% (8,512) Acquisition Legal fees 851,219 @ 0.5% (4,256) Interest on Land 851,219 @ 7.0% (59,585) Residual Land Value (net) 14,896 per plot (check) 744,817
TRESHOLD LAND VALUE Residential density per ha 35 units per hectare Site Area 1.43 ha 3.53 acres Threshold Land Value 168,750 £ per acre 416,981 £ per ha Threshold Land Value 11,914 per plot (check) 595,688
BALANCE Surplus/(Deficit) 149,130
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SENSITIVITY ANALYSIS
CIL £/psm Surplus/(Deficit) 149,130 0 5 10 15 20 5% 453,030 435,384 417,738 400,093 382,447 10% 374,927 358,210 341,493 324,776 308,059 Affordable Housing % 15% 296,823 281,035 275,200 259,229 243,258 20% 228,136 213,104 198,073 183,042 168,010 25% 149,130 135,038 120,946 106,854 92,762 30% 70,124 56,971 43,819 30,666 17,514
Green = viable for given level of affordable housing and CIL Red = not viable for given level of affordable housing and CIL
Values Surplus/(Deficit) 149,130 90% 95% 100% 105% 110% 90% 132,413 323,886 523,681 723,476 923,271 95% (61,333) 140,771 332,149 531,944 731,739 Construction costs 100% (251,187) (52,975) 149,130 340,412 540,207 105% (443,791) (242,733) (44,617) 157,488 348,675 110% (649,270) (435,146) (234,279) (36,258) 165,846 115% (870,694) (639,717) (426,501) (225,825) (27,900)
Green = viable Red = not viable
CIL £/psm
Green = viable Red = not viable
Affordable Housing Commuted Sum Full GDV (no AH) 8,140,380 AH discount from GDV 915,793 AH contribution £/dwelling 18,316 £ / dwelling (total scheme) AH contribution £ psm 232.73 £ psm (total scheme)
NOTES
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SCHEME DETAILS
Net sales (NIA) Net to Gross % Gross (GIA) Floor areas - (sqm) (sqft) % (sqm) (sqft) 2 bed houses 65.0 700 100.0% 65.0 700 3 bed houses 80.0 861 100.0% 80.0 861 4 bed houses 100.0 1,076 100.0% 100.0 1,076 1 bed apartment 50.0 538 82.0% 61.0 656 2 bed apartment 65.0 700 82.0% 79.3 853
Unit mix - # units mix% total floor area (GIA sqm) 2 bed houses 45 30% 2,925.0 3 bed houses 60 40% 4,800.0 4 bed houses 15 10% 1,500.0 1 bed apartment 15 10% 914.6 2 bed apartment 15 10% 1,189.0 150 100% 11,328.7
Open Market values (£) - £ psm £ 2 bed houses 2,308 150,020 3 bed houses 2,000 160,000 4 bed houses 1,900 190,000 1 bed apartment 2,000 100,000 2 bed apartment 1,846 119,990
Affordable Housing - Policy requirement % 25% Policy Tenure split 50% Social Rented 50% Affd Rent/Int. 100% 2 bed houses 75,010 Social Rented 90,012 Affd Rent/Int. 3 bed houses 80,000 Social Rented 96,000 Affd Rent/Int. 4 bed houses 95,000 Social Rented 114,000 Affd Rent/Int. 5 bed houses 0 Social Rented 0 Affd Rent/Int. 2 bed bungalows 0 Social Rented 0 Affd Rent/Int. 1 bed apartment 50,000 Social Rented 60,000 Affd Rent/Int. 2 bed apartment 59,995 Social Rented 71,994 Affd Rent/Int.
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GROSS DEVELOPMENT VALUE
Private for Sale GDV - 2 bed houses 34 @ 150,020 5,063,175 3 bed houses 45 @ 160,000 7,200,000 4 bed houses 11 @ 190,000 2,137,500 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 11 @ 100,000 1,125,000 2 bed apartment 11 @ 119,990 1,349,888 113 (rounded) 16,875,563 Social Rented GDV - 2 bed houses 6 @ 75,010 421,931 3 bed houses 8 @ 80,000 600,000 4 bed houses 2 @ 95,000 178,125 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 2 @ 50,000 93,750 2 bed apartment 2 @ 59,995 112,491 19 (rounded) 1,406,297 Intermediate GDV - 2 bed houses 6 @ 90,012 506,318 3 bed houses 8 @ 96,000 720,000 4 bed houses 2 @ 114,000 213,750 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 2 @ 60,000 112,500 2 bed apartment 2 @ 71,994 134,989 19 (rounded) 1,687,556 150.00 (total)
GDV 19,969,416
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (50,000) Statutory Planning Fees (30,549) CIL 0.00 psm (on private for sale) - Site Specific S106/278 1,000 per dwelling (150,000)
Construction Costs - Demolition and Site Clearance (allowance) 7.41 acres @ 75,000 per acre (555,975) Houses Build Costs (BCIS) 9,225.0 sqm @ 852 psm (7,859,700) Bungalow Build Costs (BCIS) 0.0 sqm @ 0 psm - Apartment Build Costs (BCIS) 2,103.7 sqm @ 982 psm (2,065,793) Extra over for CSH 11,328.7 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 9,925,493 @ 10% (992,549) Contingency 11,474,017 @ 5% (573,701)
Professional Fees 12,047,718 @ 8% (963,817)
Disposal Costs - Sale Agents Costs 16,875,563 GDV @ 1.00% (168,756) Sale Legal Costs 19,969,416 GDV @ 0.50% (99,847) Marketing and Promotion 16,875,563 GDV @ 3.00% (506,267)
Finance Costs - Finance Fees 14,016,954 @ 2.00% (280,339)
Interest on Development Costs 7.00% APR 0.565% pcm (82,813)
Developers Profit - On private for sale 16,875,563 @ 20.00% (3,375,113) On affordable housing pre-sale 3,093,853 @ 6.00% (185,631) (blended) 17.83%
TOTAL COSTS (17,940,849)
RESIDUAL LAND VALUE Residual Land Value (gross) 2,028,566 SDLT 2,028,566 @ (142,000) Acquisition Agent fees 2,028,566 @ 1.0% (20,286) Acquisition Legal fees 2,028,566 @ 0.5% (10,143) Interest on Land 2,028,566 @ 7.0% (142,000) Residual Land Value (net) 11,428 per plot (check) 1,714,138
TRESHOLD LAND VALUE Residential density per ha 50 units per hectare Site Area 3.00 ha 7.41 acres Threshold Land Value 168,750 £ per acre 416,981 £ per ha Threshold Land Value 8,340 per plot (check) 1,250,944
BALANCE Surplus/(Deficit) 463,195
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SENSITIVITY ANALYSIS
CIL £/psm Surplus/(Deficit) 463,195 0 5 10 15 20 5% 1,368,742 1,319,948 1,271,154 1,222,360 1,173,566 10% 1,142,355 1,096,130 1,049,904 1,003,678 957,452 Affordable Housing % 15% 915,969 872,311 828,653 784,995 741,337 20% 689,582 648,492 607,402 566,312 525,223 25% 463,195 464,333 424,899 385,466 346,033 30% 272,021 235,216 198,412 161,607 124,803
Green = viable for given level of affordable housing and CIL Red = not viable for given level of affordable housing and CIL
Values Surplus/(Deficit) 463,195 90% 95% 100% 105% 110% 90% 460,387 999,453 1,538,519 2,077,585 2,616,652 95% (49,496) 461,791 1,000,857 1,539,923 2,078,989 Construction costs 100% (592,358) (48,059) 463,195 1,002,261 1,541,327 105% (1,144,453) (590,904) (46,622) 464,599 1,003,665 110% (1,770,847) (1,142,933) (589,450) (45,185) 466,003 115% (2,407,134) (1,769,186) (1,141,412) (587,996) (43,747)
Green = viable Red = not viable
CIL £/psm
Green = viable Red = not viable
Affordable Housing Commuted Sum Full GDV (no AH) 22,500,750 AH discount from GDV 2,531,334 AH contribution £/dwelling 16,876 £ / dwelling (total scheme) AH contribution £ psm 223.45 £ psm (total scheme)
NOTES
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SCHEME DETAILS
Net sales (NIA) Net to Gross % Gross (GIA) Floor areas - (sqm) (sqft) % (sqm) (sqft) 2 bed houses 65.0 700 100.0% 65.0 700 3 bed houses 80.0 861 100.0% 80.0 861 4 bed houses 100.0 1,076 100.0% 100.0 1,076 1 bed apartment 50.0 538 82.0% 61.0 656 2 bed apartment 65.0 700 82.0% 79.3 853
Unit mix - # units mix% total floor area (GIA sqm) 2 bed houses 104 30% 6,760.0 3 bed houses 140 40% 11,200.0 4 bed houses 36 10% 3,600.0 1 bed apartment 35 10% 2,134.1 2 bed apartment 35 10% 2,774.4 350 100% 26,468.5
Open Market values (£) - £ psm £ 2 bed houses 2,308 150,020 3 bed houses 2,000 160,000 4 bed houses 1,900 190,000 1 bed apartment 2,000 100,000 2 bed apartment 1,846 119,990
Affordable Housing - Policy requirement % 25% Policy Tenure split 50% Social Rented 50% Affd Rent/Int. 100% 2 bed houses 75,010 Social Rented 90,012 Affd Rent/Int. 3 bed houses 80,000 Social Rented 96,000 Affd Rent/Int. 4 bed houses 95,000 Social Rented 114,000 Affd Rent/Int. 5 bed houses 0 Social Rented 0 Affd Rent/Int. 2 bed bungalows 0 Social Rented 0 Affd Rent/Int. 1 bed apartment 50,000 Social Rented 60,000 Affd Rent/Int. 2 bed apartment 59,995 Social Rented 71,994 Affd Rent/Int.
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GROSS DEVELOPMENT VALUE
Private for Sale GDV - 2 bed houses 78 @ 150,020 11,701,560 3 bed houses 105 @ 160,000 16,800,000 4 bed houses 27 @ 190,000 5,130,000 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 26 @ 100,000 2,625,000 2 bed apartment 26 @ 119,990 3,149,738 263 (rounded) 39,406,298 Social Rented GDV - 2 bed houses 13 @ 75,010 975,130 3 bed houses 18 @ 80,000 1,400,000 4 bed houses 5 @ 95,000 427,500 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 4 @ 50,000 218,750 2 bed apartment 4 @ 59,995 262,478 44 (rounded) 3,283,858 Intermediate GDV - 2 bed houses 13 @ 90,012 1,170,156 3 bed houses 18 @ 96,000 1,680,000 4 bed houses 5 @ 114,000 513,000 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 4 @ 60,000 262,500 2 bed apartment 4 @ 71,994 314,974 44 (rounded) 3,940,630 350.00 (total)
GDV 46,630,785
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (100,000) Statutory Planning Fees (53,549) CIL 0.00 psm (on private for sale) - Site Specific S106/278 1,000 per dwelling (350,000)
Construction Costs - Demolition and Site Clearance (allowance) 14.41 acres @ 75,000 per acre (1,081,063) Houses Build Costs (BCIS) 21,560.0 sqm @ 852 psm (18,369,120) Bungalow Build Costs (BCIS) 0.0 sqm @ 0 psm - Apartment Build Costs (BCIS) 4,908.5 sqm @ 982 psm (4,820,183) Extra over for CSH 26,468.5 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 23,189,303 @ 10% (2,318,930) Contingency 26,589,296 @ 5% (1,329,465)
Professional Fees 27,918,761 @ 10% (2,791,876)
Disposal Costs - Sale Agents Costs 39,406,298 GDV @ 1.00% (394,063) Sale Legal Costs 46,630,785 GDV @ 0.50% (233,154) Marketing and Promotion 39,406,298 GDV @ 3.00% (1,182,189)
Finance Costs - Finance Fees 33,023,591 @ 2.00% (660,472)
Interest on Development Costs 7.00% APR 0.565% pcm (316,163)
Developers Profit - On private for sale 39,406,298 @ 20.00% (7,881,260) On affordable housing pre-sale 7,224,488 @ 6.00% (433,469) (blended) 17.83%
TOTAL COSTS (42,314,955)
RESIDUAL LAND VALUE Residual Land Value (gross) 4,315,830 SDLT 4,315,830 @ (302,108) Acquisition Agent fees 4,315,830 @ 1.0% (43,158) Acquisition Legal fees 4,315,830 @ 0.5% (21,579) Interest on Land 4,315,830 @ 7.0% (302,108) Residual Land Value (net) 10,420 per plot (check) 3,646,877
TRESHOLD LAND VALUE Residential density per ha 60 units per hectare Site Area 5.83 ha 14.41 acres Threshold Land Value 168,750 £ per acre 416,981 £ per ha Threshold Land Value 6,950 per plot (check) 2,432,391
BALANCE Surplus/(Deficit) 1,214,486
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SENSITIVITY ANALYSIS
CIL £/psm Surplus/(Deficit) 1,214,486 0 5 10 15 20 5% 3,366,432 3,238,820 3,111,208 2,983,596 2,855,984 10% 2,828,445 2,707,550 2,586,654 2,465,759 2,344,863 Affordable Housing % 15% 2,290,459 2,176,280 2,062,101 1,947,922 1,833,743 20% 1,752,473 1,645,010 1,537,547 1,430,085 1,322,622 25% 1,214,486 1,113,740 1,012,994 912,247 811,501 30% 676,500 582,470 488,440 394,410 300,380
Green = viable for given level of affordable housing and CIL Red = not viable for given level of affordable housing and CIL
Values Surplus/(Deficit) 1,214,486 90% 95% 100% 105% 110% 90% 1,263,572 2,550,669 3,837,766 5,124,863 6,411,960 95% (48,068) 1,239,029 2,526,126 3,813,223 5,100,320 Construction costs 100% (1,334,319) (72,611) 1,214,486 2,501,583 3,788,680 105% (2,715,180) (1,359,443) (97,154) 1,189,943 2,477,040 110% (4,267,417) (2,744,225) (1,384,566) (121,697) 1,165,400 115% (5,819,653) (4,296,461) (2,773,270) (1,409,690) (146,240)
Green = viable Red = not viable
CIL £/psm
Green = viable Red = not viable
Affordable Housing Commuted Sum Full GDV (no AH) 52,541,730 AH discount from GDV 5,910,945 AH contribution £/dwelling 16,888 £ / dwelling (total scheme) AH contribution £ psm 223.32 £ psm (total scheme)
NOTES
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SCHEME DETAILS
Net sales (NIA) Net to Gross % Gross (GIA) Floor areas - (sqm) (sqft) % (sqm) (sqft) 2 bed houses 65.0 700 100.0% 65.0 700 3 bed houses 80.0 861 100.0% 80.0 861 4 bed houses 100.0 1,076 100.0% 100.0 1,076 1 bed apartment 50.0 538 82.0% 61.0 656 2 bed apartment 65.0 700 82.0% 79.3 853
Unit mix - # units mix% total floor area (GIA sqm) 2 bed houses 3 21% 195.0 3 bed houses 6 43% 480.0 4 bed houses 5 36% 500.0 1 bed apartment 0 0% 0.0 2 bed apartment 0 0% 0.0 14 100% 1,175.0
Open Market values (£) - £ psm £ 2 bed houses 2,462 160,030 3 bed houses 2,438 195,000 4 bed houses 2,250 225,000 1 bed apartment 2,000 100,000 2 bed apartment 1,923 124,995
Affordable Housing - Policy requirement % 0% Policy Tenure split 50% Social Rented 50% Affd Rent/Int. 100% RP Transfer Values (£): 80% % of MV 2 bed houses 80,015 Social Rented 96,018 Affd Rent/Int. 3 bed houses 97,500 Social Rented 117,000 Affd Rent/Int. 4 bed houses 112,500 Social Rented 135,000 Affd Rent/Int. 5 bed houses 0 Social Rented 0 Affd Rent/Int. 2 bed bungalows 0 Social Rented 0 Affd Rent/Int. 1 bed apartment 50,000 Social Rented 60,000 Affd Rent/Int. 2 bed apartment 62,498 Social Rented 74,997 Affd Rent/Int.
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GROSS DEVELOPMENT VALUE
Private for Sale GDV - 2 bed houses 3 @ 160,030 480,090 3 bed houses 6 @ 195,000 1,170,000 4 bed houses 5 @ 225,000 1,125,000 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 100,000 - 2 bed apartment 0 @ 124,995 - 14 (rounded) 2,775,090 Social Rented GDV - 2 bed houses 0 @ 80,015 - 3 bed houses 0 @ 97,500 - 4 bed houses 0 @ 112,500 - 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 50,000 - 2 bed apartment 0 @ 62,498 - 0 (rounded) - Intermediate GDV - 2 bed houses 0 @ 96,018 - 3 bed houses 0 @ 117,000 - 4 bed houses 0 @ 135,000 - 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 60,000 - 2 bed apartment 0 @ 74,997 - 0 (rounded) - 14.00 (total)
GDV 2,775,090
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (25,000) Statutory Planning Fees (5,390) CIL 0.00 psm (on private for sale) - Site Specific S106/278 1,000 per dwelling (14,000)
Construction Costs - Demolition and Site Clearance (allowance) 0.99 acres @ 75,000 per acre (74,130) Houses Build Costs (BCIS) 1,175.0 sqm @ 852 psm (1,001,100) Bungalow Build Costs (BCIS) 0.0 sqm @ 0 psm - Apartment Build Costs (BCIS) 0.0 sqm @ 982 psm - Extra over for CSH 1,175.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 1,001,100 @ 10% (100,110) Contingency 1,175,340 @ 5% (58,767)
Professional Fees 1,234,107 @ 8% (98,729)
Disposal Costs - Sale Agents Costs 2,775,090 GDV @ 1.00% (27,751) Sale Legal Costs 2,775,090 GDV @ 0.50% (13,875) Marketing and Promotion 2,775,090 GDV @ 3.00% (83,253)
Finance Costs - Finance Fees 1,502,105 @ 2.00% (30,042)
Interest on Development Costs 7.00% APR 0.565% pcm (40,401)
Developers Profit - On private for sale 2,775,090 @ 20.00% (555,018) On affordable housing pre-sale 0 @ 6.00% - (blended) 20.00%
TOTAL COSTS (2,127,566)
RESIDUAL LAND VALUE Residual Land Value (gross) 647,524 SDLT 647,524 @ (25,901) Acquisition Agent fees 647,524 @ 1.0% (6,475) Acquisition Legal fees 647,524 @ 0.5% (3,238) Interest on Land 647,524 @ 7.0% (45,327) Residual Land Value (net) 40,470 per plot (check) 566,584
TRESHOLD LAND VALUE Residential density per ha 35 units per hectare Site Area 0.40 ha 0.99 acres Threshold Land Value 225,000 £ per acre 555,975 £ per ha Threshold Land Value 15,885 per plot (check) 222,390
BALANCE Surplus/(Deficit) 344,194
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SENSITIVITY ANALYSIS
CIL £/psm Surplus/(Deficit) 344,194 20 40 60 80 100 5% 295,451 274,010 252,570 231,130 214,627 10% 269,276 248,964 228,653 213,263 192,719 Affordable Housing % 15% 243,102 223,919 209,616 190,214 170,811 20% 216,928 203,687 185,426 167,164 148,903 25% 195,475 178,355 161,235 144,115 126,995 30% 169,001 153,023 137,044 121,065 105,087
Green = viable for given level of affordable housing and CIL Red = not viable for given level of affordable housing and CIL
Values Surplus/(Deficit) 344,194 90% 95% 100% 105% 110% 90% 275,235 368,054 460,873 553,692 646,511 95% 216,895 309,714 402,533 495,352 588,171 Construction costs 100% 162,910 251,375 344,194 437,013 529,832 105% 103,903 197,783 285,854 378,673 471,492 110% 44,897 138,777 227,515 320,334 413,153 115% (9,402) 79,771 173,651 261,995 354,814
Green = viable Red = not viable
CIL £/psm
Green = viable Red = not viable
Affordable Housing Commuted Sum Full GDV (no AH) 2,775,090 AH discount from GDV 0 AH contribution £/dwelling 0 £ / dwelling (total scheme) AH contribution £ psm 0.00 £ psm (total scheme)
NOTES
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SCHEME DETAILS
Net sales (NIA) Net to Gross % Gross (GIA) Floor areas - (sqm) (sqft) % (sqm) (sqft) 2 bed houses 65.0 700 100.0% 65.0 700 3 bed houses 80.0 861 100.0% 80.0 861 4 bed houses 100.0 1,076 100.0% 100.0 1,076 1 bed apartment 50.0 538 82.0% 61.0 656 2 bed apartment 65.0 700 82.0% 79.3 853
Unit mix - # units mix% total floor area (GIA sqm) 2 bed houses 19 38% 1,235.0 3 bed houses 20 40% 1,600.0 4 bed houses 11 22% 1,100.0 1 bed apartment 0% 0.0 2 bed apartment 0% 0.0 50 100% 3,935.0
Open Market values (£) - £ psm £ 2 bed houses 2,462 160,030 3 bed houses 2,438 195,000 4 bed houses 2,250 225,000 1 bed apartment 2,000 100,000 2 bed apartment 1,923 124,995
Affordable Housing - Policy requirement % 25% 2 bed houses 80,015 Social Rented 96,018 Affd Rent/Int. 3 bed houses 97,500 Social Rented 117,000 Affd Rent/Int. 4 bed houses 112,500 Social Rented 135,000 Affd Rent/Int. 5 bed houses 0 Social Rented 0 Affd Rent/Int. 2 bed bungalows 0 Social Rented 0 Affd Rent/Int. 1 bed apartment 50,000 Social Rented 60,000 Affd Rent/Int. 2 bed apartment 62,498 Social Rented 74,997 Affd Rent/Int.
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GROSS DEVELOPMENT VALUE
Private for Sale GDV - 2 bed houses 14 @ 160,030 2,280,428 3 bed houses 15 @ 195,000 2,925,000 4 bed houses 8 @ 225,000 1,856,250 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 100,000 - 2 bed apartment 0 @ 124,995 - 38 (rounded) 7,061,678 Social Rented GDV - 2 bed houses 2 @ 80,015 190,036 3 bed houses 3 @ 97,500 243,750 4 bed houses 1 @ 112,500 154,688 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 50,000 - 2 bed apartment 0 @ 62,498 - 6 (rounded) 588,473 Intermediate GDV - 2 bed houses 2 @ 96,018 228,043 3 bed houses 3 @ 117,000 292,500 4 bed houses 1 @ 135,000 185,625 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 0 @ 60,000 - 2 bed apartment 0 @ 74,997 - 6 (rounded) 706,168 50.00 (total)
GDV 8,356,318
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (25,000) Statutory Planning Fees (19,250) CIL 0.00 psm (on private for sale) - Site Specific S106/278 1,000 per dwelling (50,000)
Construction Costs - Demolition and Site Clearance (allowance) 3.53 acres @ 75,000 per acre (264,750) Houses Build Costs (BCIS) 3,935.0 sqm @ 852 psm (3,352,620) Bungalow Build Costs (BCIS) 0.0 sqm @ 0 psm - Apartment Build Costs (BCIS) 0.0 sqm @ 982 psm - Extra over for CSH 3,935.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 3,352,620 @ 10% (335,262) Contingency 3,952,632 @ 5% (197,632)
Professional Fees 4,150,264 @ 8% (332,021)
Disposal Costs - Sale Agents Costs 7,061,678 GDV @ 1.00% (70,617) Sale Legal Costs 8,356,318 GDV @ 0.50% (41,782) Marketing and Promotion 7,061,678 GDV @ 3.00% (211,850)
Finance Costs - Finance Fees 4,900,783 @ 2.00% (98,016)
Interest on Development Costs 7.00% APR 0.565% pcm (79,716)
Developers Profit - On private for sale 7,061,678 @ 20.00% (1,412,336) On affordable housing pre-sale 1,294,641 @ 6.00% (77,678) (blended) 17.83%
TOTAL COSTS (6,568,529)
RESIDUAL LAND VALUE Residual Land Value (gross) 1,787,790 SDLT 1,787,790 @ (89,389) Acquisition Agent fees 1,787,790 @ 1.0% (17,878) Acquisition Legal fees 1,787,790 @ 0.5% (8,939) Interest on Land 1,787,790 @ 7.0% (125,145) Residual Land Value (net) 30,929 per plot (check) 1,546,438
TRESHOLD LAND VALUE Residential density per ha 35 units per hectare Site Area 1.43 ha 3.53 acres Threshold Land Value 225,000 £ per acre 555,975 £ per ha Threshold Land Value 15,885 per plot (check) 794,250
BALANCE Surplus/(Deficit) 752,188
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SENSITIVITY ANALYSIS
CIL £/psm Surplus/(Deficit) 752,188 20 40 60 80 100 5% 1,006,937 936,810 905,996 834,209 762,422 10% 920,470 893,047 825,038 757,030 689,021 Affordable Housing % 15% 872,542 808,311 744,081 679,851 615,621 20% 784,028 723,576 663,124 602,672 542,220 25% 695,514 638,840 582,167 525,493 468,819 30% 607,000 554,105 501,209 448,314 395,418
Green = viable for given level of affordable housing and CIL Red = not viable for given level of affordable housing and CIL
Values Surplus/(Deficit) 752,188 90% 95% 100% 105% 110% 90% 670,741 906,264 1,097,023 1,327,100 1,557,177 95% 475,942 711,465 906,727 1,136,804 1,366,881 Construction costs 100% 281,143 516,665 752,188 946,509 1,176,586 105% 86,344 321,866 557,389 792,911 986,291 110% (100,527) 127,067 362,589 598,112 833,635 115% (297,579) (59,333) 167,790 403,313 638,835
Green = viable Red = not viable
CIL £/psm
Green = viable Red = not viable
Affordable Housing Commuted Sum Full GDV (no AH) 9,415,570 AH discount from GDV 1,059,252 AH contribution £/dwelling 21,185 £ / dwelling (total scheme) AH contribution £ psm 269.19 £ psm (total scheme)
NOTES
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SCHEME DETAILS
Net sales (NIA) Net to Gross % Gross (GIA) Floor areas - (sqm) (sqft) % (sqm) (sqft) 2 bed houses 65.0 700 100.0% 65.0 700 3 bed houses 80.0 861 100.0% 80.0 861 4 bed houses 100.0 1,076 100.0% 100.0 1,076 1 bed apartment 50.0 538 82.0% 61.0 656 2 bed apartment 65.0 700 82.0% 79.3 853
Unit mix - # units mix% total floor area (GIA sqm) 2 bed houses 45 30% 2,925.0 3 bed houses 60 40% 4,800.0 4 bed houses 15 10% 1,500.0 1 bed apartment 15 10% 914.6 2 bed apartment 15 10% 1,189.0 150 100% 11,328.7
Open Market values (£) - £ psm £ 2 bed houses 2,462 160,030 3 bed houses 2,438 195,000 4 bed houses 2,250 225,000 1 bed apartment 2,000 100,000 2 bed apartment 1,923 124,995
Affordable Housing - Policy requirement % 25% 2 bed houses 80,015 Social Rented 96,018 Affd Rent/Int. 3 bed houses 97,500 Social Rented 117,000 Affd Rent/Int. 4 bed houses 112,500 Social Rented 135,000 Affd Rent/Int. 5 bed houses 0 Social Rented 0 Affd Rent/Int. 2 bed bungalows 0 Social Rented 0 Affd Rent/Int. 1 bed apartment 50,000 Social Rented 60,000 Affd Rent/Int. 2 bed apartment 62,498 Social Rented 74,997 Affd Rent/Int.
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GROSS DEVELOPMENT VALUE
Private for Sale GDV - 2 bed houses 34 @ 160,030 5,401,013 3 bed houses 45 @ 195,000 8,775,000 4 bed houses 11 @ 225,000 2,531,250 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 11 @ 100,000 1,125,000 2 bed apartment 11 @ 124,995 1,406,194 113 (rounded) 19,238,456 Social Rented GDV - 2 bed houses 6 @ 80,015 450,084 3 bed houses 8 @ 97,500 731,250 4 bed houses 2 @ 112,500 210,938 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 2 @ 50,000 93,750 2 bed apartment 2 @ 62,498 117,183 19 (rounded) 1,603,205 Intermediate GDV - 2 bed houses 6 @ 96,018 540,101 3 bed houses 8 @ 117,000 877,500 4 bed houses 2 @ 135,000 253,125 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 2 @ 60,000 112,500 2 bed apartment 2 @ 74,997 140,619 19 (rounded) 1,923,846 150.00 (total)
GDV 22,765,507
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (50,000) Statutory Planning Fees (30,549) CIL 0.00 psm (on private for sale) - Site Specific S106/278 1,000 per dwelling (150,000)
Construction Costs - Demolition and Site Clearance (allowance) 7.41 acres @ 75,000 per acre (555,975) Houses Build Costs (BCIS) 9,225.0 sqm @ 852 psm (7,859,700) Bungalow Build Costs (BCIS) 0.0 sqm @ 0 psm - Apartment Build Costs (BCIS) 2,103.7 sqm @ 982 psm (2,065,793) Extra over for CSH 11,328.7 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 9,925,493 @ 10% (992,549) Contingency 11,474,017 @ 5% (573,701)
Professional Fees 12,047,718 @ 8% (963,817)
Disposal Costs - Sale Agents Costs 19,238,456 GDV @ 1.00% (192,385) Sale Legal Costs 22,765,507 GDV @ 0.50% (113,828) Marketing and Promotion 19,238,456 GDV @ 3.00% (577,154)
Finance Costs - Finance Fees 14,125,450 @ 2.00% (282,509)
Interest on Development Costs 7.00% APR 0.565% pcm (78,267)
Developers Profit - On private for sale 19,238,456 @ 20.00% (3,847,691) On affordable housing pre-sale 3,527,050 @ 6.00% (211,623) (blended) 17.83%
TOTAL COSTS (18,545,540)
RESIDUAL LAND VALUE Residual Land Value (gross) 4,219,966 SDLT 4,219,966 @ (295,398) Acquisition Agent fees 4,219,966 @ 1.0% (42,200) Acquisition Legal fees 4,219,966 @ 0.5% (21,100) Interest on Land 4,219,966 @ 7.0% (295,398) Residual Land Value (net) 23,772 per plot (check) 3,565,872
TRESHOLD LAND VALUE Residential density per ha 50 units per hectare Site Area 3.00 ha 7.41 acres Threshold Land Value 225,000 £ per acre 555,975 £ per ha Threshold Land Value 11,120 per plot (check) 1,667,925
BALANCE Surplus/(Deficit) 1,897,947
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SENSITIVITY ANALYSIS
CIL £/psm Surplus/(Deficit) 1,897,947 20 40 60 80 100 5% 2,734,618 2,540,539 2,346,460 2,152,381 1,958,302 10% 2,487,145 2,303,281 2,119,417 1,935,552 1,751,688 Affordable Housing % 15% 2,239,672 2,066,023 1,892,373 1,718,724 1,545,074 20% 1,992,199 1,828,764 1,665,330 1,501,895 1,338,460 25% 1,744,726 1,591,506 1,438,286 1,285,066 1,131,846 30% 1,497,254 1,354,248 1,211,243 1,068,237 925,232
Green = viable for given level of affordable housing and CIL Red = not viable for given level of affordable housing and CIL
Values Surplus/(Deficit) 1,897,947 90% 95% 100% 105% 110% 90% 1,744,438 2,358,076 2,971,714 3,585,352 4,198,990 95% 1,207,555 1,821,192 2,434,830 3,048,468 3,662,106 Construction costs 100% 670,671 1,284,309 1,897,947 2,511,584 3,125,222 105% 133,787 747,425 1,361,063 1,974,701 2,588,338 110% (373,160) 210,541 824,179 1,437,817 2,051,455 115% (914,136) (294,589) 287,295 900,933 1,514,571
Green = viable Red = not viable
CIL £/psm
Green = viable Red = not viable
Affordable Housing Commuted Sum Full GDV (no AH) 25,651,275 AH discount from GDV 2,885,768 AH contribution £/dwelling 19,238 £ / dwelling (total scheme) AH contribution £ psm 254.73 £ psm (total scheme)
NOTES
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SCHEME DETAILS
Net sales (NIA) Net to Gross % Gross (GIA) Floor areas - (sqm) (sqft) % (sqm) (sqft) 2 bed houses 65.0 700 100.0% 65.0 700 3 bed houses 80.0 861 100.0% 80.0 861 4 bed houses 100.0 1,076 100.0% 100.0 1,076 1 bed apartment 50.0 538 82.0% 61.0 656 2 bed apartment 65.0 700 82.0% 79.3 853
Unit mix - # units mix% total floor area (GIA sqm) 2 bed houses 104 30% 6,760.0 3 bed houses 140 40% 11,200.0 4 bed houses 36 10% 3,600.0 1 bed apartment 35 10% 2,134.1 2 bed apartment 35 10% 2,774.4 350 100% 26,468.5
Open Market values (£) - £ psm £ 2 bed houses 2,462 160,030 3 bed houses 2,438 195,000 4 bed houses 2,250 225,000 1 bed apartment 2,000 100,000 2 bed apartment 1,923 124,995
Affordable Housing - Policy requirement % 25% 2 bed houses 80,015 Social Rented 96,018 Affd Rent/Int. 3 bed houses 97,500 Social Rented 117,000 Affd Rent/Int. 4 bed houses 112,500 Social Rented 135,000 Affd Rent/Int. 5 bed houses 0 Social Rented 0 Affd Rent/Int. 2 bed bungalows 0 Social Rented 0 Affd Rent/Int. 1 bed apartment 50,000 Social Rented 60,000 Affd Rent/Int. 2 bed apartment 62,498 Social Rented 74,997 Affd Rent/Int.
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GROSS DEVELOPMENT VALUE
Private for Sale GDV - 2 bed houses 78 @ 160,030 12,482,340 3 bed houses 105 @ 195,000 20,475,000 4 bed houses 27 @ 225,000 6,075,000 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 26 @ 100,000 2,625,000 2 bed apartment 26 @ 124,995 3,281,119 263 (rounded) 44,938,459 Social Rented GDV - 2 bed houses 13 @ 80,015 1,040,195 3 bed houses 18 @ 97,500 1,706,250 4 bed houses 5 @ 112,500 506,250 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 4 @ 50,000 218,750 2 bed apartment 4 @ 62,498 273,427 44 (rounded) 3,744,872 Intermediate GDV - 2 bed houses 13 @ 96,018 1,248,234 3 bed houses 18 @ 117,000 2,047,500 4 bed houses 5 @ 135,000 607,500 5 bed houses 0 @ 0 - 2 bed bungalows 0 @ 0 - 1 bed apartment 4 @ 60,000 262,500 2 bed apartment 4 @ 74,997 328,112 44 (rounded) 4,493,846 350.00 (total)
GDV 53,177,176
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (100,000) Statutory Planning Fees (53,549) CIL 0.00 psm (on private for sale) - Site Specific S106/278 1,000 per dwelling (350,000)
Construction Costs - Demolition and Site Clearance (allowance) 14.41 acres @ 75,000 per acre (1,081,063) Houses Build Costs (BCIS) 21,560.0 sqm @ 852 psm (18,369,120) Bungalow Build Costs (BCIS) 0.0 sqm @ 0 psm - Apartment Build Costs (BCIS) 4,908.5 sqm @ 982 psm (4,820,183) Extra over for CSH 26,468.5 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 23,189,303 @ 10% (2,318,930) Contingency 26,589,296 @ 5% (1,329,465)
Professional Fees 27,918,761 @ 10% (2,791,876)
Disposal Costs - Sale Agents Costs 44,938,459 GDV @ 1.00% (449,385) Sale Legal Costs 53,177,176 GDV @ 0.50% (265,886) Marketing and Promotion 44,938,459 GDV @ 3.00% (1,348,154)
Finance Costs - Finance Fees 33,277,610 @ 2.00% (665,552)
Interest on Development Costs 7.00% APR 0.565% pcm (252,538)
Developers Profit - On private for sale 44,938,459 @ 20.00% (8,987,692) On affordable housing pre-sale 8,238,717 @ 6.00% (494,323) (blended) 17.83%
TOTAL COSTS (43,677,714)
RESIDUAL LAND VALUE Residual Land Value (gross) 9,499,462 SDLT 9,499,462 @ (664,962) Acquisition Agent fees 9,499,462 @ 1.0% (94,995) Acquisition Legal fees 9,499,462 @ 0.5% (47,497) Interest on Land 9,499,462 @ 7.0% (664,962) Residual Land Value (net) 22,934 per plot (check) 8,027,045
TRESHOLD LAND VALUE Residential density per ha 60 units per hectare Site Area 5.83 ha 14.41 acres Threshold Land Value 225,000 £ per acre 555,975 £ per ha Threshold Land Value 9,266 per plot (check) 3,243,188
BALANCE Surplus/(Deficit) 4,783,858
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SENSITIVITY ANALYSIS
CIL £/psm Surplus/(Deficit) 4,783,858 20 40 60 80 100 5% 6,718,963 6,233,771 5,748,580 5,263,388 4,778,196 10% 6,139,425 5,679,770 5,220,114 4,760,459 4,300,804 Affordable Housing % 15% 5,559,887 5,125,768 4,691,649 4,257,531 3,823,412 20% 4,980,349 4,571,767 4,163,184 3,754,602 3,346,019 25% 4,400,812 4,017,766 3,634,719 3,251,673 2,868,627 30% 3,821,274 3,463,764 3,106,254 2,748,745 2,391,235
Green = viable for given level of affordable housing and CIL Red = not viable for given level of affordable housing and CIL
Values Surplus/(Deficit) 4,783,858 90% 95% 100% 105% 110% 90% 4,474,812 5,919,790 7,364,767 8,809,744 10,254,721 95% 3,184,358 4,629,335 6,074,312 7,519,289 8,964,266 Construction costs 100% 1,893,903 3,338,881 4,783,858 6,228,835 7,673,812 105% 603,449 2,048,426 3,493,403 4,938,380 6,383,358 110% (687,005) 757,972 2,202,949 3,647,926 5,092,903 115% (1,947,502) (532,483) 912,494 2,357,471 3,802,449
Green = viable Red = not viable
CIL £/psm
Green = viable Red = not viable
Affordable Housing Commuted Sum Full GDV (no AH) 59,917,945 AH discount from GDV 6,740,769 AH contribution £/dwelling 19,259 £ / dwelling (total scheme) AH contribution £ psm 254.67 £ psm (total scheme)
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Offices 400.0 4,306 85.0% 340.0 3,660 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 400.0 4,306 340.0 3,660
GROSS DEVELOPMENT VALUE sqft £ psf £ Offices 3,660 @ 16.25 59,472 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 59,472
Yield @ 7.75% capitalised rent 767,383 less Rent Free / Void allowance 18 months rent (89,208) Purchasers costs @ 5.76% (36,935) 641,240
GDV 641,240
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (25,000) Statutory Planning Fees (2,053) CIL 0.00 psm GIA - Site Specific S106/278 (allowance) (4,000)
Construction Costs - Demolition and Site Clearance (allowance) 0.13 acres @ 75,000 per acre (9,884) Offices 400.0 sqm @ 1,184 psm (473,600) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 400.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 473,600 @ 10% (47,360) Contingency 530,844 @ 5% (26,542)
Professional Fees 557,386 @ 10% (55,739)
Disposal Costs - Letting Agents Costs 59,472 ERV @ 15.00% (8,921) Letting Legal Costs 59,472 ERV @ 5.00% (2,974) Investment Sale Agents Costs 641,240 GDV @ 1.00% (6,412) Investment Sale Legal Costs 641,240 GDV @ 0.50% (3,206) Marketing and Promotion 641,240 GDV @ 1.00% (6,412)
Finance Costs - Finance Fees 672,104 @ 2.00% (13,442)
Interest on Development Costs 7.00% APR 0.565% pcm (17,293)
Developers Profit - % on costs 702,839 @ 20.00% (140,568)
TOTAL COSTS (843,407)
RESIDUAL LAND VALUE Residual Land Value (gross) (202,167) SDLT - @ - Acquisition Agent fees - @ 1.0% - Acquisition Legal fees - @ 0.5% - Interest on Land - @ 7.0% - Residual Land Value (net) (202,167)
TRESHOLD LAND VALUE Site density 7,500 sqm per hectare 75% site coverage Site Area 0.05 ha 0.13 acres Threshold Land Value 225,000 £ per acre 555,975 £ per ha Threshold Land Value 29,652
BALANCE Surplus/(Deficit) (231,819)
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) (231,819) 90% 95% 100% 105% 110% 90% (218,045) (186,980) (155,915) (124,850) (93,785) 95% (255,997) (224,932) (193,867) (162,802) (131,737) Construction costs 100% (293,949) (262,884) (231,819) (200,754) (169,689) 105% (331,902) (300,836) (269,771) (238,706) (207,641) 110% (369,854) (338,789) (307,723) (276,658) (245,593) 115% (407,806) (376,741) (345,676) (314,610) (283,545)
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Offices 2,000.0 21,528 85.0% 1,700.0 18,299 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 2,000.0 21,528 1,700.0 18,299
GROSS DEVELOPMENT VALUE sqft £ psf £ Offices 18,299 @ 16.25 297,361 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 297,361
Yield @ 7.75% capitalised rent 3,836,916 less Rent Free / Void allowance 18 months rent (446,042) Purchasers costs @ 5.76% (184,677) 3,206,198
GDV 3,206,198
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (25,000) Statutory Planning Fees (10,267) CIL 0.00 psm GIA - Site Specific S106/278 (allowance) (20,000)
Construction Costs - Demolition and Site Clearance (allowance) 0.66 acres @ 75,000 per acre (49,420) Offices 2,000.0 sqm @ 1,184 psm (2,368,000) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 2,000.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 2,368,000 @ 10% (236,800) Contingency 2,654,220 @ 5% (132,711)
Professional Fees 2,786,931 @ 10% (278,693)
Disposal Costs - Letting Agents Costs 297,361 ERV @ 15.00% (44,604) Letting Legal Costs 297,361 ERV @ 5.00% (14,868) Investment Sale Agents Costs 3,206,198 GDV @ 1.00% (32,062) Investment Sale Legal Costs 3,206,198 GDV @ 0.50% (16,031) Marketing and Promotion 3,206,198 GDV @ 1.00% (32,062)
Finance Costs - Finance Fees 3,260,518 @ 2.00% (65,210)
Interest on Development Costs 7.00% APR 0.565% pcm (108,827)
Developers Profit - % on costs 3,434,555 @ 20.00% (686,911)
TOTAL COSTS (4,121,466)
RESIDUAL LAND VALUE Residual Land Value (gross) (915,269) SDLT - @ - Acquisition Agent fees - @ 1.0% - Acquisition Legal fees - @ 0.5% - Interest on Land - @ 7.0% - Residual Land Value (net) (915,269)
TRESHOLD LAND VALUE Site density 7,500 sqm per hectare 75% site coverage Site Area 0.27 ha 0.66 acres Threshold Land Value 225,000 £ per acre 555,975 £ per ha Threshold Land Value 148,260
BALANCE Surplus/(Deficit) (1,063,529)
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) (1,063,529) 90% 95% 100% 105% 110% 90% (991,848) (836,539) (681,230) (525,921) (370,612) 95% (1,182,998) (1,027,688) (872,379) (717,070) (561,761) Construction costs 100% (1,374,147) (1,218,838) (1,063,529) (908,219) (752,910) 105% (1,565,296) (1,409,987) (1,254,678) (1,099,369) (944,060) 110% (1,756,446) (1,601,136) (1,445,827) (1,290,518) (1,135,209) 115% (1,947,595) (1,792,286) (1,636,976) (1,481,667) (1,326,358)
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Industrial 400.0 4,306 100.0% 400.0 4,306 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 400.0 4,306 400.0 4,306
GROSS DEVELOPMENT VALUE sqft £ psf £ Industrial 4,306 @ 5.57 23,983 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 23,983
Yield @ 7.25% capitalised rent 330,795 less Rent Free / Void allowance 12 months rent (23,983) Purchasers costs @ 5.76% (16,710) 290,102
GDV 290,102
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (25,000) Statutory Planning Fees (2,053) CIL 0.00 psm GIA - Site Specific S106/278 (allowance) (4,000)
Construction Costs - Demolition and Site Clearance (allowance) 0.24 acres @ 75,000 per acre (17,863) Industrial 400.0 sqm @ 609 psm (243,600) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 400.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 243,600 @ 10% (24,360) Contingency 285,823 @ 5% (14,291)
Professional Fees 300,114 @ 10% (30,011)
Disposal Costs - Letting Agents Costs 23,983 ERV @ 15.00% (3,597) Letting Legal Costs 23,983 ERV @ 5.00% (1,199) Investment Sale Agents Costs 290,102 GDV @ 1.00% (2,901) Investment Sale Legal Costs 290,102 GDV @ 0.50% (1,451) Marketing and Promotion 290,102 GDV @ 1.00% (2,901)
Finance Costs - Finance Fees 373,228 @ 2.00% (7,465)
Interest on Development Costs 7.00% APR 0.565% pcm (14,393)
Developers Profit - % on costs 395,085 @ 20.00% (79,017)
TOTAL COSTS (474,103)
RESIDUAL LAND VALUE Residual Land Value (gross) (184,000) SDLT - @ - Acquisition Agent fees - @ 1.0% - Acquisition Legal fees - @ 0.5% - Interest on Land - @ 7.0% - Residual Land Value (net) (184,000)
TRESHOLD LAND VALUE Site density 4,150 sqm per hectare 42% site coverage Site Area 0.10 ha 0.24 acres Threshold Land Value 188,000 £ per acre 464,548 £ per ha Threshold Land Value 44,776
BALANCE Surplus/(Deficit) (228,776)
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) (228,776) 90% 95% 100% 105% 110% 90% (217,553) (203,501) (189,448) (175,395) (161,343) 95% (237,217) (223,165) (209,112) (195,059) (181,007) Construction costs 100% (256,881) (242,828) (228,776) (214,723) (200,670) 105% (276,545) (262,492) (248,440) (234,387) (220,334) 110% (296,209) (282,156) (268,103) (254,051) (239,998) 115% (315,873) (301,820) (287,767) (273,715) (259,662)
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Industrial 2,000.0 21,528 100.0% 2,000.0 21,528 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 2,000.0 21,528 2,000.0 21,528
GROSS DEVELOPMENT VALUE sqft £ psf £ Industrial 21,528 @ 4.50 96,878 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 96,878
Yield @ 7.25% capitalised rent 1,336,246 less Rent Free / Void allowance 12 months rent (96,878) Purchasers costs @ 5.76% (67,500) 1,171,868
GDV 1,171,868
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (25,000) Statutory Planning Fees (10,267) CIL 0.00 psm GIA - Site Specific S106/278 (allowance) (20,000)
Construction Costs - Demolition and Site Clearance (allowance) 1.19 acres @ 75,000 per acre (89,313) Industrial 2,000.0 sqm @ 422 psm (844,000) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 2,000.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 844,000 @ 10% (84,400) Contingency 1,017,713 @ 5% (50,886)
Professional Fees 1,068,599 @ 10% (106,860)
Disposal Costs - Letting Agents Costs 96,878 ERV @ 15.00% (14,532) Letting Legal Costs 96,878 ERV @ 5.00% (4,844) Investment Sale Agents Costs 1,171,868 GDV @ 1.00% (11,719) Investment Sale Legal Costs 1,171,868 GDV @ 0.50% (5,859) Marketing and Promotion 1,171,868 GDV @ 1.00% (11,719)
Finance Costs - Finance Fees 1,279,398 @ 2.00% (25,588)
Interest on Development Costs 7.00% APR 0.565% pcm (46,521)
Developers Profit - % on costs 1,351,507 @ 20.00% (270,301)
TOTAL COSTS (1,621,808)
RESIDUAL LAND VALUE Residual Land Value (gross) (449,940) SDLT - @ - Acquisition Agent fees - @ 1.0% - Acquisition Legal fees - @ 0.5% - Interest on Land - @ 7.0% - Residual Land Value (net) (449,940)
TRESHOLD LAND VALUE Site density 4,150 sqm per hectare 42% site coverage Site Area 0.48 ha 1.19 acres Threshold Land Value 188,000 £ per acre 464,548 £ per ha Threshold Land Value 223,879
BALANCE Surplus/(Deficit) (673,819)
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) (673,819) 90% 95% 100% 105% 110% 90% (651,092) (594,326) (537,560) (480,795) (424,029) 95% (719,221) (662,455) (605,690) (548,924) (492,158) Construction costs 100% (787,350) (730,585) (673,819) (617,053) (560,288) 105% (855,479) (798,714) (741,948) (685,182) (628,417) 110% (923,609) (866,843) (810,077) (753,312) (696,546) 115% (991,738) (934,972) (878,207) (821,441) (764,675)
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Industrial 5,000.0 53,821 100.0% 5,000.0 53,821 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 5,000.0 53,821 5,000.0 53,821
GROSS DEVELOPMENT VALUE sqft £ psf £ Industrial 53,821 @ 4.50 242,195 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 242,195
Yield @ 7.25% capitalised rent 3,340,614 less Rent Free / Void allowance 12 months rent (242,195) Purchasers costs @ 5.76% (168,749) 2,929,670
GDV 2,929,670
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (25,000) Statutory Planning Fees (17,132) CIL 0.00 psm GIA - Site Specific S106/278 (allowance) (50,000)
Construction Costs - Demolition and Site Clearance (allowance) 2.98 acres @ 75,000 per acre (223,283) Industrial 5,000.0 sqm @ 422 psm (2,110,000) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 5,000.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 2,110,000 @ 10% (211,000) Contingency 2,544,283 @ 5% (127,214)
Professional Fees 2,671,497 @ 10% (267,150)
Disposal Costs - Letting Agents Costs 242,195 ERV @ 15.00% (36,329) Letting Legal Costs 242,195 ERV @ 5.00% (12,110) Investment Sale Agents Costs 2,929,670 GDV @ 1.00% (29,297) Investment Sale Legal Costs 2,929,670 GDV @ 0.50% (14,648) Marketing and Promotion 2,929,670 GDV @ 1.00% (29,297)
Finance Costs - Finance Fees 3,152,460 @ 2.00% (63,049)
Interest on Development Costs 7.00% APR 0.565% pcm (112,509)
Developers Profit - % on costs 3,328,019 @ 20.00% (665,604)
TOTAL COSTS (3,993,622)
RESIDUAL LAND VALUE Residual Land Value (gross) (1,063,952) SDLT - @ - Acquisition Agent fees - @ 1.0% - Acquisition Legal fees - @ 0.5% - Interest on Land - @ 7.0% - Residual Land Value (net) (1,063,952)
TRESHOLD LAND VALUE Site density 4,150 sqm per hectare 42% site coverage Site Area 1.20 ha 2.98 acres Threshold Land Value 188,000 £ per acre 464,548 £ per ha Threshold Land Value 559,696
BALANCE Surplus/(Deficit) (1,623,648)
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) (1,623,648) 90% 95% 100% 105% 110% 90% (1,566,830) (1,424,916) (1,283,002) (1,141,088) (999,174) 95% (1,737,154) (1,595,239) (1,453,325) (1,311,411) (1,169,497) Construction costs 100% (1,907,477) (1,765,563) (1,623,648) (1,481,734) (1,339,820) 105% (2,077,800) (1,935,886) (1,793,971) (1,652,057) (1,510,143) 110% (2,248,123) (2,106,209) (1,964,295) (1,822,380) (1,680,466) 115% (2,418,446) (2,276,532) (2,134,618) (1,992,704) (1,850,789)
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Retail 280.0 3,014 80.0% 224.0 2,411 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 280.0 3,014 224.0 2,411
GROSS DEVELOPMENT VALUE sqft £ psf £ Retail 2,411 @ 15.00 36,168 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 36,168
Yield @ 8.50% capitalised rent 425,502 less Rent Free / Void allowance 12 months rent (36,168) Purchasers costs @ 5.76% (21,204) 368,130
GDV 368,130
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (30,000) Statutory Planning Fees (1,437) CIL 0.00 psm GIA - Site Specific S106/278 (allowance) (7,500)
Construction Costs - Demolition and Site Clearance (allowance) 0.05 acres @ 75,000 per acre (3,844) Retail 280.0 sqm @ 725 psm (203,000) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 280.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 203,000 @ 10% (20,300) Contingency 227,144 @ 5% (11,357)
Professional Fees 238,501 @ 10% (23,850)
Disposal Costs - Letting Agents Costs 36,168 ERV @ 15.00% (5,425) Letting Legal Costs 36,168 ERV @ 5.00% (1,808) Investment Sale Agents Costs 368,130 GDV @ 1.00% (3,681) Investment Sale Legal Costs 368,130 GDV @ 0.50% (1,841) Marketing and Promotion 368,130 GDV @ 1.00% (3,681)
Finance Costs - Finance Fees 317,725 @ 2.00% (6,355)
Interest on Development Costs 7.00% APR 0.565% pcm (11,619)
Developers Profit - % on costs 335,698 @ 20.00% (67,140)
TOTAL COSTS (402,838)
RESIDUAL LAND VALUE Residual Land Value (gross) (34,708) SDLT - @ - Acquisition Agent fees - @ 1.0% - Acquisition Legal fees - @ 0.5% - Interest on Land - @ 7.0% - Residual Land Value (net) (34,708)
TRESHOLD LAND VALUE Site density 13,500 sqm per hectare 135% site coverage Site Area 0.02 ha 0.05 acres Threshold Land Value 100,000 £ per acre 247,100 £ per ha Threshold Land Value 5,125
BALANCE Surplus/(Deficit) (39,833)
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) (39,833) 90% 95% 100% 105% 110% 90% (42,724) (24,892) (7,060) 9,262 25,401 95% (59,111) (41,278) (23,446) (5,614) 10,571 Construction costs 100% (75,497) (57,665) (39,833) (22,000) (4,259) 105% (91,884) (74,052) (56,219) (38,387) (20,554) 110% (108,270) (90,438) (72,606) (54,773) (36,941) 115% (124,657) (106,825) (88,992) (71,160) (53,328)
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Retail 280.0 3,014 80.0% 224.0 2,411 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 280.0 3,014 224.0 2,411
GROSS DEVELOPMENT VALUE sqft £ psf £ Retail 2,411 @ 19.00 45,812 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 45,812
Yield @ 8.00% capitalised rent 572,655 less Rent Free / Void allowance 18 months rent (68,719) Purchasers costs @ 5.76% (27,446) 476,491
GDV 476,491
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (30,000) Statutory Planning Fees (1,437) CIL psm GIA - Site Specific S106/278 (allowance) (7,500)
Construction Costs - Demolition and Site Clearance (allowance) 0.05 acres @ 75,000 per acre (3,844) Retail 280.0 sqm @ 725 psm (203,000) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 280.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 203,000 @ 10% (20,300) Contingency 227,144 @ 5% (11,357)
Professional Fees 238,501 @ 10% (23,850)
Disposal Costs - Letting Agents Costs 45,812 ERV @ 15.00% (6,872) Letting Legal Costs 45,812 ERV @ 5.00% (2,291) Investment Sale Agents Costs 476,491 GDV @ 1.00% (4,765) Investment Sale Legal Costs 476,491 GDV @ 0.50% (2,382) Marketing and Promotion 476,491 GDV @ 1.00% (4,765)
Finance Costs - Finance Fees 322,363 @ 2.00% (6,447)
Interest on Development Costs 7.00% APR 0.565% pcm (11,073)
Developers Profit - % on costs 339,884 @ 20.00% (67,977)
TOTAL COSTS (407,860)
RESIDUAL LAND VALUE Residual Land Value (gross) 68,630 SDLT 68,630 @ (686) Acquisition Agent fees 68,630 @ 1.0% (686) Acquisition Legal fees 68,630 @ 0.5% (343) Interest on Land 68,630 @ 7.0% (4,804) Residual Land Value (net) 62,111
TRESHOLD LAND VALUE Site density 13,500 sqm per hectare 135% site coverage Site Area 0.02 ha 0.05 acres Threshold Land Value 300,000 £ per acre 741,300 £ per ha Threshold Land Value 15,375
BALANCE Surplus/(Deficit) 46,735
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) 46,735 90% 95% 100% 105% 110% 90% 34,618 55,506 76,395 97,284 118,172 95% 19,788 40,677 61,565 82,454 103,343 Construction costs 100% 4,958 25,847 46,735 67,624 88,513 105% (9,872) 11,017 31,906 52,794 73,683 110% (25,680) (3,813) 17,076 37,964 58,853 115% (42,067) (18,986) 2,246 23,135 44,023
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Retail 1,500.0 16,146 100.0% 1,500.0 16,146 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 1,500.0 16,146 1,500.0 16,146
GROSS DEVELOPMENT VALUE sqft £ psf £ Retail 16,146 @ 15.00 242,195 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 242,195
Yield @ 7.00% capitalised rent 3,459,921 less Rent Free / Void allowance 12 months rent (242,195) Purchasers costs @ 5.76% (175,247) 3,042,480
GDV 3,042,480
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (30,000) Statutory Planning Fees (7,700) CIL psm GIA - Site Specific S106/278 (allowance) (75,000)
Construction Costs - Demolition and Site Clearance (allowance) 1.32 acres @ 75,000 per acre (99,281) Retail 1,500.0 sqm @ 575 psm (862,500) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 1,500.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 862,500 @ 10% (86,250) Contingency 1,048,031 @ 5% (52,402)
Professional Fees 1,100,433 @ 10% (110,043)
Disposal Costs - Letting Agents Costs 242,195 ERV @ 15.00% (36,329) Letting Legal Costs 242,195 ERV @ 5.00% (12,110) Investment Sale Agents Costs 3,042,480 GDV @ 1.00% (30,425) Investment Sale Legal Costs 3,042,480 GDV @ 0.50% (15,212) Marketing and Promotion 3,042,480 GDV @ 1.00% (30,425)
Finance Costs - Finance Fees 1,447,677 @ 2.00% (28,954)
Interest on Development Costs 7.00% APR 0.565% pcm (42,849)
Developers Profit - % on costs 1,519,479 @ 20.00% (303,896)
TOTAL COSTS (1,823,375)
RESIDUAL LAND VALUE Residual Land Value (gross) 1,219,105 SDLT 1,219,105 @ (48,764) Acquisition Agent fees 1,219,105 @ 1.0% (12,191) Acquisition Legal fees 1,219,105 @ 0.5% (6,096) Interest on Land 1,219,105 @ 7.0% (85,337) Residual Land Value (net) 1,066,717
TRESHOLD LAND VALUE Site density 2,800 sqm per hectare 28% site coverage Site Area 0.54 ha 1.32 acres Threshold Land Value 570,000 £ per acre 1,408,470 £ per ha Threshold Land Value 754,538
BALANCE Surplus/(Deficit) 312,180
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) 312,180 90% 95% 100% 105% 110% 90% 176,106 305,063 434,019 562,975 691,932 95% 115,187 244,143 373,099 502,056 631,012 Construction costs 100% 54,267 183,223 312,180 441,136 570,092 105% (6,653) 122,303 251,260 380,216 509,172 110% (67,573) 61,384 190,340 319,296 448,253 115% (128,492) 464 129,420 258,377 387,333
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Retail 280.0 3,014 100.0% 280.0 3,014 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 280.0 3,014 280.0 3,014
GROSS DEVELOPMENT VALUE sqft £ psf £ Retail 3,014 @ 15.00 45,210 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 45,210
Yield @ 5.75% capitalised rent 786,255 less Rent Free / Void allowance 12 months rent (45,210) Purchasers costs @ 5.76% (40,359) 700,685
GDV 700,685
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (30,000) Statutory Planning Fees (1,437) CIL 0.00 psm GIA - Site Specific S106/278 (allowance) (14,000)
Construction Costs - Demolition and Site Clearance (allowance) 0.25 acres @ 75,000 per acre (18,533) Retail 280.0 sqm @ 1,011 psm (283,080) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 280.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 283,080 @ 10% (28,308) Contingency 329,921 @ 5% (16,496)
Professional Fees 346,417 @ 10% (34,642)
Disposal Costs - Letting Agents Costs 45,210 ERV @ 15.00% (6,781) Letting Legal Costs 45,210 ERV @ 5.00% (2,260) Investment Sale Agents Costs 700,685 GDV @ 1.00% (7,007) Investment Sale Legal Costs 700,685 GDV @ 0.50% (3,503) Marketing and Promotion 700,685 GDV @ 1.00% (7,007)
Finance Costs - Finance Fees 453,055 @ 1.00% (4,531)
Interest on Development Costs 7.00% APR 0.565% pcm (15,072)
Developers Profit - % on costs 472,657 @ 20.00% (94,531)
TOTAL COSTS (567,189)
RESIDUAL LAND VALUE Residual Land Value (gross) 133,497 SDLT 133,497 @ (1,335) Acquisition Agent fees 133,497 @ 1.0% (1,335) Acquisition Legal fees 133,497 @ 0.5% (667) Interest on Land 133,497 @ 7.0% (9,345) Residual Land Value (net) 120,815
TRESHOLD LAND VALUE Site density 2,800 sqm per hectare 28% site coverage Site Area 0.10 ha 0.25 acres Threshold Land Value 450,000 £ per acre 1,111,950 £ per ha Threshold Land Value 111,195
BALANCE Surplus/(Deficit) 9,620
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) 9,620 90% 95% 100% 105% 110% 90% (10,893) 19,834 50,561 81,289 112,016 95% (31,364) (637) 30,090 60,818 91,545 Construction costs 100% (51,835) (21,108) 9,620 40,347 71,074 105% (72,306) (41,579) (10,851) 19,876 50,603 110% (92,777) (62,050) (31,322) (595) 30,132 115% (113,463) (82,521) (51,793) (21,066) 9,661
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Retail 1,500.0 16,146 100.0% 1,500.0 16,146 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 1,500.0 16,146 1,500.0 16,146
GROSS DEVELOPMENT VALUE sqft £ psf £ Retail 16,146 @ 18.00 290,633 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 290,633
Yield @ 5.50% capitalised rent 5,284,244 less Rent Free / Void allowance 6 months rent (145,317) Purchasers costs @ 5.76% (279,881) 4,859,046
GDV 4,859,046
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (30,000) Statutory Planning Fees (7,700) CIL psm GIA - Site Specific S106/278 (allowance) (75,000)
Construction Costs - Demolition and Site Clearance (allowance) 1.32 acres @ 75,000 per acre (99,281) Retail 1,500.0 sqm @ 1,191 psm (1,786,500) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 1,500.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 1,786,500 @ 10% (178,650) Contingency 2,064,431 @ 5% (103,222)
Professional Fees 2,167,653 @ 12% (260,118)
Disposal Costs - Letting Agents Costs 290,633 ERV @ 15.00% (43,595) Letting Legal Costs 290,633 ERV @ 5.00% (14,532) Investment Sale Agents Costs 4,859,046 GDV @ 1.00% (48,590) Investment Sale Legal Costs 4,859,046 GDV @ 0.50% (24,295) Marketing and Promotion 4,859,046 GDV @ 1.00% (48,590)
Finance Costs - Finance Fees 2,720,074 @ 2.00% (54,401)
Interest on Development Costs 7.00% APR 0.565% pcm (107,000)
Developers Profit - % on costs 2,881,476 @ 20.00% (576,295)
TOTAL COSTS (3,457,771)
RESIDUAL LAND VALUE Residual Land Value (gross) 1,401,275 SDLT 1,401,275 @ (56,051) Acquisition Agent fees 1,401,275 @ 1.0% (14,013) Acquisition Legal fees 1,401,275 @ 0.5% (7,006) Interest on Land 1,401,275 @ 7.0% (98,089) Residual Land Value (net) 1,226,115
TRESHOLD LAND VALUE Site density 2,800 sqm per hectare 28% site coverage Site Area 0.54 ha 1.32 acres Threshold Land Value 700,000 £ per acre 1,729,700 £ per ha Threshold Land Value 926,625
BALANCE Surplus/(Deficit) 299,490
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) 299,490 90% 95% 100% 105% 110% 90% 146,846 352,773 558,700 764,627 970,553 95% 17,241 223,168 429,095 635,022 840,949 Construction costs 100% (112,363) 93,564 299,490 505,417 711,344 105% (241,968) (36,041) 169,886 375,813 581,739 110% (371,572) (165,646) 40,281 246,208 452,135 115% (496,315) (295,250) (89,323) 116,603 322,530
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: GIA (sqm) GIA (sqft) Net to Gross % NIA (sqm) NIA (sqft) Retail 5,000.0 53,821 100.0% 5,000.0 53,821 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 5,000.0 53,821 5,000.0 53,821
GROSS DEVELOPMENT VALUE sqft £ psf £ Retail 53,821 @ 20.00 1,076,420 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 1,076,420
Yield @ 5.25% capitalised rent 20,503,238 less Rent Free / Void allowance 12 months rent (1,076,420) Purchasers costs @ 5.76% (1,058,042) 18,368,777
GDV 18,368,777
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (100,000) Statutory Planning Fees (17,132) CIL psm GIA - Site Specific S106/278 (allowance) (375,000)
Construction Costs - Demolition and Site Clearance (allowance) 4.41 acres @ 100,000 per acre (441,250) Retail 5,000.0 sqm @ 1,191 psm (5,955,000) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 5,000.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 5,955,000 @ 10% (595,500) Contingency 6,991,750 @ 5% (349,588)
Professional Fees 7,341,338 @ 12% (880,961)
Disposal Costs - Letting Agents Costs 1,076,420 ERV @ 15.00% (161,463) Letting Legal Costs 1,076,420 ERV @ 5.00% (53,821) Investment Sale Agents Costs 18,368,777 GDV @ 1.00% (183,688) Investment Sale Legal Costs 18,368,777 GDV @ 0.50% (91,844) Marketing and Promotion 18,368,777 GDV @ 1.00% (183,688)
Finance Costs - Finance Fees 9,388,934 @ 2.00% (187,779)
Interest on Development Costs 7.00% APR 0.565% pcm (459,141)
Developers Profit - % on costs 10,035,853 @ 20.00% (2,007,171)
TOTAL COSTS (12,043,024)
RESIDUAL LAND VALUE Residual Land Value (gross) 6,325,753 SDLT 6,325,753 @ (253,030) Acquisition Agent fees 6,325,753 @ 1.0% (63,258) Acquisition Legal fees 6,325,753 @ 0.5% (31,629) Interest on Land 6,325,753 @ 7.0% (442,803) Residual Land Value (net) 5,535,034
TRESHOLD LAND VALUE Site density 2,800 sqm per hectare 28% site coverage Site Area 1.79 ha 4.41 acres Threshold Land Value 1,000,000 £ per acre 2,471,000 £ per ha Threshold Land Value 4,412,500
BALANCE Surplus/(Deficit) 1,122,534
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) 1,122,534 90% 95% 100% 105% 110% 90% 437,417 1,215,792 1,994,166 2,772,541 3,550,915 95% 1,601 779,975 1,558,350 2,336,724 3,115,099 Construction costs 100% (434,215) 344,159 1,122,534 1,900,908 2,679,283 105% (870,031) (91,657) 686,718 1,465,092 2,243,467 110% (1,305,847) (527,473) 250,902 1,029,276 1,807,651 115% (1,741,663) (963,289) (184,914) 593,460 1,371,835
Green = viable Red = not viable
NOTES
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SCHEME DETAILS
Floor areas: Beds Net to Gross % NIA (sqm) NIA (sqft) Hotel 100 beds 100.0 100.0% 100.0 1,076 - 0 85.0% 0.0 0 - 0 100.0% 0.0 0 total floor area 100.0 0 100.0 1,076
GROSS DEVELOPMENT VALUE Beds Per Room £ Hotel 100 beds 100 @ 3,500.00 350,000 - 0 @ - - 0 @ -
Estimated Gross Rental Value per annum 350,000
Yield @ 7.00% capitalised rent 5,000,000 less Rent Free / Void allowance 12 months rent (350,000) Purchasers costs @ 5.76% (253,253) 4,396,747
GDV 4,396,747
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DEVELOPMENT COSTS
Initial Payments - Planning Application Professional Fees and reports (allowance) (25,000) Statutory Planning Fees (5,360) CIL 0.00 psm GIA - Site Specific S106/278 (allowance) (32,500)
Construction Costs - Demolition and Site Clearance (allowance) 0.03 acres @ 75,000 per acre (2,471) Hotel 100 beds 100.0 Rooms 37,000 per room (3,700,000) - 0.0 psm - - 0.0 sqm @ psm - Extra over for BREEAM 100.0 sqm @ 0 psm - External works inc. utilities reinforcement (allowance) 3,700,000 @ 10% (370,000) Contingency 4,072,471 @ 5% (203,624)
Professional Fees 4,276,095 @ 10% (427,609)
Disposal Costs - Letting Agents Costs 350,000 ERV @ 15.00% (52,500) Letting Legal Costs 350,000 ERV @ 5.00% (17,500) Investment Sale Agents Costs 4,396,747 GDV @ 1.00% (43,967) Investment Sale Legal Costs 4,396,747 GDV @ 0.50% (21,984) Marketing and Promotion 4,396,747 GDV @ 1.00% (43,967)
Finance Costs - Finance Fees 4,946,483 @ 2.00% (98,930)
Interest on Development Costs 7.00% APR 0.565% pcm (165,791)
Developers Profit - % on costs 5,211,203 @ 20.00% (1,042,241)
TOTAL COSTS (6,253,444)
RESIDUAL LAND VALUE Residual Land Value (gross) (1,856,696) SDLT - @ - Acquisition Agent fees - @ 1.0% - Acquisition Legal fees - @ 0.5% - Interest on Land - @ 7.0% - Residual Land Value (net) (1,856,696)
TRESHOLD LAND VALUE Site density 7,500 sqm per hectare 75% site coverage Site Area 0.01 ha 0.03 acres Threshold Land Value 100,000 £ per acre 247,100 £ per ha Threshold Land Value 3,295
BALANCE Surplus/(Deficit) (1,859,991)
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SENSITIVITY ANALYSIS
Values Surplus/(Deficit) (1,859,991) 90% 95% 100% 105% 110% 90% (1,688,609) (1,475,629) (1,262,650) (1,049,670) (836,690) 95% (1,987,280) (1,774,300) (1,561,320) (1,348,341) (1,135,361) Construction costs 100% (2,285,951) (2,072,971) (1,859,991) (1,647,011) (1,434,032) 105% (2,584,621) (2,371,642) (2,158,662) (1,945,682) (1,732,702) 110% (2,883,292) (2,670,312) (2,457,333) (2,244,353) (2,031,373) 115% (3,181,963) (2,968,983) (2,756,003) (2,543,024) (2,330,044)
Green = viable Red = not viable
NOTES
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