200360 Feasibility Report Preliminary Feasibility Reporting Definition of

200360 Feasibility Report

Preliminary Feasibility Reporting

Definition of Feasibility Study ‘the process of undertaking an assessment to identify the opportunities and risks of a PD project and to estimate the projected costs and revenues and profit potential of the project’ GN 5 – Feasibility Studies

Feasibility Study component • The feasibility study can be broken down into two key components: • The pre-emptive conceptual stage of the overall Feasibility Process - i. e. ‘conceptual’ feasibility studies - where the objective is to produce an effective ‘concept’ for the development scheme, which should end in a definitive DESIGN for the end-product continue…

Feasibility Study component • The financial viability stage of the overall Feasibility Process - i. e. ‘financial’ feasibility studies - where the objective is to TEST OUT the feasibility of the product concept and its design in terms of Value, Cost, and most of all, PROFIT.

Report Content • • • Basis of appointment Executive summary Introduction • • • Purpose of report Land details Location Site details Planning and other statutory requirements Existing improvement Main report • • • Evaluation of site/development potential Proposed development Market commentary/review Comparable development for pricing/performance Development cost breakdown Preliminary financial analysis (HDM/DCF) Conclusion and Recommendations • Appendices – Full calculations

Basis of appointment • Letter of instructions (If available) • • • Property/site identification • • Terms of reference Address/location Basic information given by client – eg. funding, special requirements, JV options etc Conditions of appointment

Executive summary • • 1 – 2 page (maximum) summary of the report This is important since the client will be able to know at a glance what the report is all about and the outcome they expected, and they will be very interested to know what your recommendations are. It is a summary of the report and all important details need to be included including the findings and your recommendations. It should be at the front of the main report, on its on page

Site/Land details • Site identification and description • Legal matters/ownership • General description of surrounding area • Services/utilities • Easements and Encumbrances • Special use clauses?

Site Location • General location – regional/local context • Accessibility to the area • Surrounding development and land use • Location in relation to existing infra/facilities/services

Site details Details include: • • • Site area and dimensions • Note: A picture of the site taken during inspection is an acceptable record of current use of property. Physical attributes Special physical attributes Existing use/surrounding use Site accessibility/traffic flows etc

Planning and Statutory Requirements • Zoning information • Zoning • Locality • Height limit • Set-backs • Site coverage • Permitted uses

Existing improvements • As is where is basis • • • Any buildings? Plant and machinery on site? Fencing? Contamination/environment al issues? Other matters

Evaluation of site/development potential • • • Possibility of objections/oppositions? New access required? Any set-backs? Height restrictions? Parking requirements? Permitted and proposed use? Potential objections and oppositions? Any HS issues? Greener development?

(Acquisition considerations) • Current owner – are they realistic seller and is there any reason for concern with regards to performance as vendors • Price and market value – analysis of offer price/any recent sales • Acquisition structure – reasonable settlement period?

Market commentary • International factors • National factors • Share market volatility • Interest rate/cash rate • Local market commentary (Note: brief comments on current SS and DD of similar properties, selling prices and rental values, yields, overview of the local area, absorption rates and expected user/buyer)

Proposed development • Development description/size – taking into considerations of zoning/planning approval • Nature of development – estimate number and type of units, any height restrictions • specific unit details not needed • Estimate on selling prices

(Environmental audit) • The existing use of the property. Any OHS issues with regard to carrying out proposed development. • Own investigation of sites – any special considerations to conform to specific environmental requirements eg. Removal of plants and trees, removal of toxic materials, heritage listed, etc

Comparable development • Recently completed projects and other competitors – know your competitors • Performance of similar developments (take-up rate) • How are your products different?

Value/Price vs Development cost • Development costs and assumptions • • • Acquisition cost Site preparation cost Consultants fees Construction costs Marketing costs Agents fees Finance costs Achievable sales price/market rents Sale timeline

Preliminary analysis - Conclusion • Profit and costs/ affordable land bid (HDM) • NPV and IRR (DCF) Feasible vs Not Feasible

Recommendations • Whether client’s proposed development is feasible? • Whether client’s proposed development is in line with current market demand • Whether to proceed taking into considerations of all constraints and limited resources • Whethere is an alternative development that can be recommended to client based on similar constraints and limitations

Assessment of Client’s Objectives • Reflect back on client’s objectives and requirements of the proposed development • Financial and non-financial objectives met? • Client’s legal, physical, commercial & organisational requirements met?