SRQ764: Building Project Evaluation - Management Assignment Help

Assignment Task

PURPOSE OF ASSIGNMENT 1

The purpose of this assignment is to enable you to:

• Examine implications of various social and economic factors for property development and investment • Apply processes and techniques to evaluate the economic components of complex building projects

• Evaluate and recommend processes and techniques used to prepare property valuation reports

 

ASSIGNMENT TASK

Appraisal is about estimating the worth of something. Estimating the land value of a site is an important part of building development appraisal. You will need to select a site that can be used for a commercial property development. Then, you are required to submit a Property Valuation Report that estimates the land value of the site. The report must document processes and techniques used in property valuation.

 

PURPOSE OF ASSIGNMENT 2

The purpose of this assignment is to enable you to:

• Examine implications of various social and economic factors for property development and investment • Apply processes and techniques to evaluate the economic components of complex building projects

• Prepare and justify a detailed development and investment feasibility study for a complex building project

 

ASSIGNMENT TASK

You will work in a group of five students for this assignment. It is your responsibility to establish your own group. Group sign-up boxes have been created online in Cloud Deakin where you must sign-up to join groups.

You will work with your group members to prepare a group research report on a commercial property development that is to retain/increase its value as a property investment for 10 years. Your group research report should include the project development part (Step 1, Step 2, Step 3) and the project investment part (Step 4, Step 5).

 

The project development part (Step 1, Step 2, Step 3)

The Development Pty Ltd will develop a major commercial project.

 

Step 1 – Economic conditions for commercial property development and finance

Your group will need to research and analyse the current economic conditions for commercial property development. In addition, for the Development Pty Ltd, your group will also assume the amount of equity available for the property development and the loan amount that can be obtained.

 

Step 2 – Site selection and development proposal

Your group will select a site that is suitable for the development of a major commercial project in any location and market sector. The selected site may be a vacant land, or it may contain a building or buildings. If the selected site contains a building or buildings, your group will assume that demolition will be one part of the development process (In this situation, the demolition related costs should be considered in the site valuation of Step 3). Your group needs describe the features of the selected site from different perspectives, such as:

• Locality plan showing main roads, railways, retail centres and other major infrastructure

• Site plan showing dimensions

• Zoning information of the site

• Allowable uses extracted from the relevant planning scheme

• Photographs of the site

• Other relevant features

 

On the basis of understanding the economic conditions and the selected site, your group will determine and describe the proposed development and explain why your group is undertaking it. The proposed development should be a major commercial project, such as a large office building, a shopping centre, or other major commercial projects. The proposed development must be substantial enough to enable your group to undertake a significant development and investment (In this assignment, this means that the gross floor area of the proposed development should be more than 2,000 m2). Examples of projects considered too small are a small office building and a single retail shop. In addition, your group will also need to provide simple floor plans of the proposed development, which will enable your group to determine project-related variables and their values (e.g., gross floor area, net rentable area). These variables and their values will be used in the Step 3.

 

Step 3 – Site valuation

Your group will undertake the appraisal of the proposed development to determine the land value of the site. For this exercise, your group will use the residual valuation method. To use this method, your group will need to identify different variables and estimate their values, such as variables related to income, property value, building cost, marketing cost, finance, and profit. The specific processes of estimating the values of these different variables should be provided in this step.

To complete this step, your group will need to undertake a considerable amount of market research to collect all the needed information. For instance, this may involve reading the property press over the past months.

 

The project investment part (Step 4, Step 5)

The major commercial project (developed by the Development Pty Ltd in the project development part) will be sold to the Investment Pty Ltd, and the Investment Pty Ltd will retain the project for 10- year investment and then sell it.

 

Step 4 – Economic conditions for commercial property investment, cash flow (before tax), and risk analysis

To commence this step, your group will need to carry forward the value created in the development as the purchase price for the investment. For the Investment Pty Ltd, your group will also assume how much equity is available and how many needs to be borrowed for the property investment. The borrowed loan will be a cash inflow in the year zero. The loan will also incur interest and it must be repaid either during the investment period or at the end of the investment period.

Your group will need to research and analyse the current economic conditions for commercial property investment. On the basis, your group should identify and determine the variables and their values that will be used in the property investment analysis, such as rental income, rent review, reversionary yield, property purchase and sales expenses, and building effective life. At last, your group will need to develop a net cash flow (before tax) for the 10-year investment period.

In this step, your group should also identify risks for the investment and discuss how these risks can be effectively managed.

 

Step 5 - Taxation and cash flow (after tax)

Your group will need to access the Australian Taxation Office (www.ato.gov.au) to ascertain the capital allowances, company income tax, and capital gains tax applicable to the property investment. Your group must determine them and put them into the cash flow table so that your group can finish with a net cash flow (after tax). At the end, your group will need to determine the Internal Rate of Return for the property investment

 

PURPOSE OF ASSIGNMENT 3

The purpose of this assignment is to enable you to:

• Examine implications of various social and economic factors for property development and investment • Demonstrate an understanding of property markets and analyse property operation and maintenance from a life-cycle perspective

• Apply processes and techniques to evaluate the economic components of complex building projects

 

ASSIGNMENT TASK

Part 1: The residential property market is an important part of the Australian economy. You are required to critically analyse the residential property market in Australia. The Part 1 report should include:

1.1 Research and outline the current state of the residential property market in Australia.

1.2 Identify and explain two significant challenges in the current Australian residential property market. 1.3 Identify and discuss the possible strategies that can be used to solve the identified two challenges.

 

Part 2: You are a manager in a property developer in Australia. Currently, your company bought a site for a large office property development. On the basis of site investigation and market research, you have identfied some key variables and their values for the proposed development (Table 1). You are required to conduct a residual analysis and explore risky factors that can influence the residual analysis result based on sensitivity analysis. The Part 2 report should include:

 

2.1 Calculate the residual value of the site.

Note: Only providing the final calculation result (e.g., a number) will not be accepted. The calculation process should be provided in the report.

 

2.2 In the above residual analysis, the “Rental income (per m2 per month)” and the “Finance cost” are two risky factors as they are heavily influenced by some external factors (e.g., economic conditions) and their values may change easily and significantly. You are required to conduct sensitivity analysis for the two variables of “Rental income (per m2 per month)” and “Finance cost” in order to explore their influences on the residual value of the site.

Part 3: It is crucial for project managers to consider the life cycle cost of a building project when they make decisions about property development and investment. The Part 3 report should include:

3.1 It is generally accepted that the cost of operating a building over its useful life is many times greater than its original construction cost. If you are a development manager of an office building, you are required to identify and explain three ways you could use to reduce future operation costs of the building.

3.2 Given the following details about two proposed projects (Table 2), you are required to carry out a life cycle cost assessment. This will include:

3.2.1 The Net Present Value (NPV) calculations of Project A and Project B, and recommendation regarding which project is most feasible (based on NPV only).

 

Note: Only providing the final calculation results (e.g., two numbers) will not be accepted. The cash flow tables should be provided in the report.

3.2.2 On the basis of the life cycle cost analysis, you are required to discuss the proposition “Decisions of property development should be based on the life cycle cost of the property, instead of only based on the initial development cost”.

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