Real Estate Development (D49RD)Course-work Brief 2010-11 semester 3

Colin ElliotPage 104/19/2019

Real Estate Development (D49RD)Course-work Brief 2010-11 semester 3

  1. Introduction

This project is designed to further the achievement of the objectives set out for the course and will form part of the course’s assessment.

  1. Specific Objectives

To develop an understanding of, and skills in:

  • the process of market and site analysis;
  • the process of selecting potential options and uses;
  • the problems associated with determining the variables to be used in the appraisal;
  • the method and accuracy of development appraisal;
  • the presentation of analysis and recommendations in report form.
  1. Submission and Assessment

Your report must be submitted by 1400 hours on Friday, 29th July. The submission should be typed and in report form (see report details below). Your report will be assessed against the criteria set out in section 8 below.

This coursework will count for 30% of the course mark (the exam counts for the other 70%).

  1. Context

Edinburgh is a modern European Capital City. Its city centre enjoys an urban character unrivalled by any other city in the UK and has been designated a World Heritage Site. It is the seat of the Scottish Parliament and has a dynamic and diverse economy and a cosmopolitan vitality and vibrancy. It is both an important retail centre and a popular tourist destination. Edinburgh is also a significant commercial centre, being the sixth largest fund management and second largest banking centre in Europe, overtaking the financial strongholds of Frankfurt, Milan, Zurich and Madrid. It is also the seat of the Legal profession in Scotland.

Edinburgh is also a major tourist destination and famed for its castle, Royal Mile and as a centre of history and culture. The city boasts various festivals and major events supposedly take up 11 of the 12 months in the year. The accommodation and hotel sector is therefore a very significant and vibrant industry.

It is within this context that a potential refurbishment of Haymarket House immediately opposite Haymarket station has become available. Location maps and site plan are provided within the property brochure which is copied to Vision>……….assessment. The property is an existing but obsolete 1960’s office building. You are requested to evaluate and provide recommendations on the potential of this refurbishment/development option.

  1. Particulars

The property is currently owned by a major UK property company and it is their intention to lease the property to a hotel operator. The landlord would be responsible for converting the property to a hotel.).

The full brochure is on Vision> assessment>...... You can also access images of the site through Google street view.

Being opposite Haymarket railway station which will also become a tram stop and right on a major transport hub, the location of the building is very prominent. The building itself is set between Georgian (traditional) terraced buildings of moderate (3 storey) height. To the rear of the property is a substantial twin deck car park accessed from Roseberry Crescent Lane to the west of the building.

The current owner, may also be prepared to refurbish the offices and requires your advice as to which refurbishment option they should pursue.Please see appendix 2 for a list of existing and list of proposed gross internal areas.

  1. Instructions

You have been instructed by the owner to advise them on the development potential of the above property. In particular, your report should include recommendations (supported by justifications) on the following issues.

  • The best use to generate within a refurbishment scheme: hotel or office
  • For each of the two uses: the net development value of the proposal,and the project’s development yield
  • The recommended option to pursue.
  1. Marking Schedule (see appendix 3 for feedback template)

%
Report structure including layout plan / 15
Site/Market Analysis and Justification of Proposal/Figures / 35
Appraisals (RSV, cash-flows) / 35
Conclusion/recommendations / 15
Total / 100

The allocation of marks gives an indication of the time-commitment to be devoted to each aspect. Report writing skills are important. If the report is difficult to follow or contains typos and spelling errors, you are unlikely to obtain further business from clients. There is nothing intrinsically difficult about report writing yet many students underperform on this issue. For this reason, 15% of the marks have been allocated to encourage you to improve your report writing skills. There is no reason why you cannot obtain almost full marks for this aspect.

It is expected that considerable time will be devoted to the appraisals, as this requires you to develop your spreadsheet skills and master the developer’s budget. For this reason 35% of the marks have been allocated to this task. As important is the market analysis and the justification of your proposal and figures to be used in the appraisals. This has been allocated 35% of the marks. It is expected that less time will be devoted to risk analysis. Notice, however, that 15% has been allocated to the conclusion/recommendation section. Clearly, more than a short paragraph is required. This may not take 15% of the total time to complete but it will entail critical thinking. You need to reflect on your findings, go beyond the figures and arrive at reasoned recommendations.

  1. Report Format

The technical requirements of the written submission are as detailed below.

  1. The length of the written submission should not exceed 30 pages. This total is inclusive of the report narrative and appendices. The latter can include plans, appraisals and data.
  2. For each page in excess of the limit referred to above, there will be a deduction at the flat rate of 5% per page.
  3. Use Times New Roman 12-point font and single spacing throughout (with adequate spacing between paragraphs) except for headings and title pages. Microsoft Excel spreadsheet calculations in the appendices shall be at least 10-point font.
  4. Use an appropriate front cover. A template will be made available for download on Vision.
  1. Further Guidance

A guide to addressing the coursework and presenting your findings is provided in Appendix One.

  1. Restrictions

You must not for any reason contact the selling agents directly or any other individual or organisation involved. The property profession have been very generous in the provision of data, information and talks and there immense support is acknowledged.All campus based students are expected to visit the site. However, you are not permitted to enter the site.

APPENDIX ONE: Coursework Guide

Introduction

It is important that any development proposals are viable and you should not simply assume that the above aspirations of the Client are correct. You still have to analyse the market and justify the recommended uses and all values used in your appraisal.

In this project, you have been instructed by your client, DK Developments, to advise them on the optimal land use(s) for the development site and the recommended option to pursue. To arrive at the recommended option you need to consider the possible options the developer faces. In this project, there are at two potential options.

Option 1.Secure a long lease to a hotel operator and convert to budget hotel (part retail on ground floor)

Option 2.Completely refurbish the building as offices (part retail on ground floor) on a speculative basis.

Development Appraisal Report

The content of your report should be structured in such a way that it addresses all parts of the clients brief and does so in a logical manner. The following provides a guide to the format and content of the report.

  1. Summary of recommendations

Provide a brief statement of findings and recommendations in terms of the brief. This could include the recommended design concept, key budget(s) indicators (e.g. NDV, development yield ) and the option to pursue.

  1. Introduction

Outline (or list) the reports objectives, which is essentially a re-statement of the brief. Also, provide the site address. If your client has a large portfolio of on-going projects then this statement helps to orient the client.

  1. Description of development site/location

This covers the general and specific factors that were outlined in Unit 2 (section 2.3.1). This will include surrounding land uses, transport, accessibility, nature of development site, services, etc.

  1. Analysis of market

This includes an analysis of the different market sectors within Edinburgh, which are growing, which are in decline, where gaps exist in the market, etc. It will also include an analysis of rents and yields. There are numerous agents’ reports and other data bases that can be utilised in this task (see below).

  1. Proposal for development site

You need to fully explore and analyse the (hotel/retail or office/retail, the selected rent and yield, and the values of all the other development variables (e.g. interest rate, inflation rate, development period, etc.).

Selecting the optimum use(s) for the site is not an exact science and you must assess the viability of both potential uses. You are neither architects nor urban designers. Consequently, you do not have to provide scaled working drawings, and you should adopt the layout plans provided for the hotel proposals.

  1. Development appraisals

This section will provide all the appropriate appraisals. You are addressing 2 options and therefore two sets of appraisals are required. This part of the report draws upon Units 3 and 6. The first budget to present will be the traditional RSV budget (see Unit 3). This is achieved by using the appropriate yield and rent for each use (refer to Unit 3). Following the RSV budget will be the cash-flow appraisal sheets to determine the respective development yields. Here you can draw upon Unit 6, section 6.2.5 (use the Edinburgh Example as a guide). You are advised that the net site value is £4.5million. There is therefore no need to provide all the spreadsheets illustrated in unit 6 of the course notes.You do need to create an S-curve and you certainly need to include the Period-by-Period including site value and subsequent spreadsheets. All appraisals can be placed in an appendix, but you must refer to them in the report and discuss the findings.

Important: You should create a workbook in excel and place all the important data in the first sheet (e.g. rent, yield, construction cost per m2, interest rate, design period, etc.). This can be called the ‘data sheet’. The second sheet could be the RSV budget, the third the S-curve and so on. Each sheet should be linked to the data sheet (and, in some cases, to each other). No values should be entered other than through the data sheet. This is important. If you need to change a figure, then you only need to do this once on the data sheet and it will automatically up-date all the other sheets linked to it.

  1. Conclusions/recommendations

Here you need to return to and address the brief in terms of your findings, discuss the options open to your client and then formulate your recommendations. Here, you need to go beyond the figures obtained in the appraisals. There is also the issue of risk to be considered in making these recommendations (i.e. drawing upon the findings of section 7, above). Note this final part of the report is worth 15% of the total mark. Clearly a short paragraph will not do.

  1. Appendices

This could include a location map, site layout plan, comparables and any supplementary calculations and/or appraisals.

Undertaking the Appraisal

Much of your time will be spent analysing the market, deciding on the best use for the site, and justifying your budget variables. There are number of useful information sites that you can access from the web.

Using Google and searching on The City of Edinburgh Council, or Edinburgh provides a number of sources, including the following.

Property market reports:

This is an indicative list. You can find additional information under Vision > assessment. We also expect you to find your own sources of research /further information.

GVA Grimley ( or

Ryden’s (

Drivers Jonas (

Savills (

CBRE ( look at their Edinburgh market report.

King Sturge (

Within each home web page and under ‘research’, you can find different market reports. Some of their reports are provided separately.

Useful is EGi, which provides details of recent market transactions and links to the relevant agents’ web pages. This can be accessed thus:

  • go to
  • type in universal codes: User – ‘builtenv’; and password – ‘hwattegi01’, click login button
  • you will be brought to a security page – fill in your personal details
  • if you have been issued with a University email address we would prefer you use this for your username
  • click the submit button
  • you will now have an individual EGi account
  • you will only have to complete this process once
  • you can now log in using your chosen email address as your username and your chosen password.

Focus is another source of data. Access details are:

  • Web Address:
  • Username:
  • Password:PGSQ3751

For current base rates and rates of inflation you can access any major bank’s web page.

All construction costs can be derived from Spons Price Book. You need to look-up the rates per square metre for different types and qualities of buildings. A copy of the appropriate section has been placed on Vision at REAL ESTATE DEVELOPMENT (D49RD_2010-2011)ASSESSMENTSUPPORTING MATERIAL FOR ASSIGNMENT > ADDITIONAL SUPPORTING MATERIAL

.

Other information will be made available on Vision.

APPENDIX 2: Schedule of Floor Areas

Floor level / Area (sq. metres)
Total Existing Internal Floor Area / 5020
Basement / 625
Ground to Sixth / 565
Seventh / 405
Eighth / 35
Total Proposed Internal Floor Area / 6030
Basement / 865
Ground / 775
First to Sixth / 675
Seventh / 340
Total Proposed Additional Area / 1010

APPENDIX 3: Feedback Template

Heriot –WattUniversity

/ Session 2010/11
School of the Built Environment / Course: Real Estate Development D49RD
Coursework: Appraisal Report / Course Leader: Colin Elliot
Student Name:
Criteria / Actual/ available
Report structure / /15
Site/market analysis and justification of assumptions and variables / /35
Appraisals (RSV, cash-flows) / /35
Conclusions/recommendations / /15
OVERALL MARK / %
General comments:

Colin ElliotPage 104/19/2019