Sample Development Appraisal

1 © Hussein Hijazi 2016

160 BLACKFRIARS ROAD

Development Appraisal Sample Work

Hussein Hijazi


REPORT CONTENTS

EXECUTIVE SUMMARY .............................................................................................................................................................................................................................................................................................................................3

INTRODUCTION .........................................................................................................................................................................................................................................................................................................................................4

LOCALITY ...................................................................................................................................................................................................................................................................................................................................................5

THE SITE ....................................................................................................................................................................................................................................................................................................................................................6

Construction Considerations ....................................................................................................................................................................................................................................................................................................................6

Risks Associated with the Site .................................................................................................................................................................................................................................................................................................................6

Environmental, Sustainability and Contamination Considerations ............................................................................................................................................................................................................................................................6

PROPOSED DEVELOPMENT ....................................................................................................................................................................................................................................................................................................................8

SITE PLAN ............................................................................................................................................................................................................................................................................................................................................10

PROPOSED FRONTAL ELEVATION ....................................................................................................................................................................................................................................................................................................11

PLANNING POLICY CONSIDERATIONS .................................................................................................................................................................................................................................................................................................12

Compatibility with the Blackfriars Road SPD 2014 .................................................................................................................................................................................................................................................................................12

Compatibility with the New Southwark Plan 2017 to 2033 ......................................................................................................................................................................................................................................................................13

COMPARABLES .......................................................................................................................................................................................................................................................................................................................................14

Residential Comparables .......................................................................................................................................................................................................................................................................................................................14

Office Comparables ...............................................................................................................................................................................................................................................................................................................................18

Retail Comparables ...............................................................................................................................................................................................................................................................................................................................28

DEVELOPMENT APPRAISAL ...................................................................................................................................................................................................................................................................................................................32

RISK AND SENSITIVITY ANALYSIS .........................................................................................................................................................................................................................................................................................................34

DEVELOPMENT VIABILITY ......................................................................................................................................................................................................................................................................................................................35

SITE ACQUISITION STRATEGY ..............................................................................................................................................................................................................................................................................................................35

REFERENCES ..........................................................................................................................................................................................................................................................................................................................................36

APPENDICES ...........................................................................................................................................................................................................................................................................................................................................39

Appendix 1: Environment Agency Flood Risk ........................................................................................................................................................................................................................................................................................39

Appendix 2: Subterranean Construction Risk .........................................................................................................................................................................................................................................................................................39

Appendix 3: Archaeological Risk ............................................................................................................................................................................................................................................................................................................40

Appendix 4: Conservation Area Risk......................................................................................................................................................................................................................................................................................................40

Appendix 5: Environmental and Sustainability Impact and Assessment .................................................................................................................................................................................................................................................41

Appendix 6: Contamination Considerations ...........................................................................................................................................................................................................................................................................................42


EXECUTIVE SUMMARY

This report examines the development viability of the site located at 160 Blackfriars Road, London, SE1 8ES. The report examines the locality in which the site is located, provides a detailed proposed development

with a full development appraisal, comparable evidence and residual valuation for a mixed use residential, office and retail scheme. Planning considerations were also taken into account in relation to Southwark

Council’s planning policies, as well as a brief on the site acquisition strategy as well as a risk assessment based on a sensitivity analysis. Headline information include:

The local area is undergoing major development and regeneration, making it a prime location for the proposed scheme.

The site is located on the main road and allows for relatively easy access for construction and development.

The proposed development on the 1 acre site is for:

o A 504,300 square foot 10 storey building housing:

93,600 square feet of Residential user Class (C3) space, with 113 one, two and three bedroom units, 74 units of which offered at full market value and 39 units offered as affordable housing;

166,351 square feet of Office user Class (B1) space, with a typical floor space being open plan with a net internal area of approximately 16,000 square feet;

40,120 square feet of Retail user Class (A1) space, open plan and customisable for specific tenant needs.

o A 2,150 square foot community public open space.

o Over 167,000 square feet of underground parking for residents and commercial tenants.

Planning considerations demonstrate that the proposed development is compatible with Southwark Council’s planning policies and should not pose any risk of planning consent refusal.

Comparable evidence demonstrate that the scheme is viable with potential increases in market prices.

The development appraisal and residual valuation demonstrate:

o A Gross Development Value for the entire scheme to be over £330 million

o Total profit of over £52 million

o Total construction, fees and interest costs of just over £166 million

o A Net Residual Site value of say £83 million

o A lead time of approximately 54 months from start of construction to fully sold and let.

Risk analysis of the scheme demonstrate an increase in costs risk tolerance of over 20% versus a reduction in sales value risk tolerance of over 30%.


INTRODUCTION

160 Blackfriars Road (the Site) is a 1 acre site located in Southwark, an area of London located south of the River Thames, nestled in the middle of the three strategically significant areas of Waterloo, Elephant

and Castle and the Southbank. The Site benefits from a significant frontage of 76 meters onto Blackfriars Road, for which only 51% of the 1 acre site is currently developed which is occupied by Friar’s House, a

mixed use development that is arranged over lower ground, ground and eight upper floors (Knight Frank, 2016). The Site is located in a prime development location in London with significant potential for the

development of a high-end mixed use development that features retail, office and residential space.

Figure 1: Site Location. Source: Google Maps


LOCALITY

The Site is located on Blackfriars Road (the Road), formerly known as the Great Surrey Street (British-history.ac.uk, 2016), a mile long boulevard style road that acts as an entry point into the City of London as the

A201. The Site is within the London Borough of Southwark jurisdiction and is served by several public transportation means including local London buses; the London bike hire scheme; Southwark, Waterloo and

Waterloo East tube stations to the north of the Site; and Lambeth North and Elephant & Castle tube stations to the south of the Site.

Blackfriars Road was first developed as a residential street in the 1760s and the majority of the freehold was owned by the Barons. The style of the buildings at the time were of Georgian era architecture and some

of the original buildings still survive (British-history.ac.uk, 2016). By the mid-1830s, the area had been developed with a mixture of industrial and residential buildings. Following WWII, a major redevelopment of the

area occurred, with the conversion of many of the buildings into commercial and mixed use space. Today, the Road is character ised by the large scale and height of the buildings, which predominantly house a

variety of user classes including offices and light industrial (B1, B2 & B3), residential (C3), retail (A1) and hotels (C1). Most building heights are from two to eight stories, with buildings that are sixteen to fifty storeys

and over to the north side of the Road on the banks of the River Thames. The provision of open space and public realms in the area is limited due to the dense urban environment, with Nelson Square, Christchurch

Gardens and Paris Gardens being within close proximity to the Site (Southwark Council A, 2014).

Within direct proximity to the site, the age, style and use of buildings is mixed. One Valentine Place, for example, is a modern design new build development that offers 30,000 square feet of grade-A office space

across the road from the site (Stiffandtrevillion.com, 2016). Whereas The Residence, a development by Linden Homes to the north of the site, is another modern style new build residential development that “is a

boutique development of 1 and 2 bedroom contemporary apartments…” (London.lindenhomes.co.uk, 2016). To the south of the site, the style and age of buildings is mixed, with some original Georgian style

buildings that survived the war, and other more recent buildings, such as Tadworth House, that house a mixture of residential and commercial space that were built in the post war period.

The Road and the area surrounding the Site have been in a continuous state of development throughout the post war period. In 2013, the Blackfriars Road Public Realm Study was published after a public

consultation by Southwark Council and associated stakeholders took place. The report aimed to provide a holistic approach into how to improve the local and public amenities on the Road due to the changes

that are occurring on it. Furthermore, the Blackfriars Road Supplementary Planning Document 2014 (SPD14) was adopted by Southwark Council, in an effort to better coordinate the development of the area with

a vision to transform the Road “into a vibrant place where people want to work, live and visit” (Southwark Council, 2014). Additionally, the Site is located within the London Plan’s Bankside, Borough and London

Bridge Opportunity Area and is part of London’s Central Activities Zone (CAZ) [Appendix 7]. Therefore, the site is located in an area of significant strategic interest and development, and stands to improve

significantly over the coming years.

Figure 2: One Valentine Place. Source: stiffandtrevillion.com Figure 3: The Residence. Source: lindenhomes.co.uk Figure 4: Tadworth House. Source: Google Street View


THE SITE

The Site is flat with no sloping gradient and carries over 70m of frontage onto the Road (see Figure 5 below for Ordinance Survey). Only 51% of the site is currently developed and is currently occupied by Friars

House, a mixed used development that was refurbished in 1998, providing over 155,000 square feet of office and retail space over the basement, ground and eight upper floors. Friars House is currently actively

occupied by 7 tenants, achieving a net rent of over £3,700,000 per annum. The site is currently on the market, with offers in excess of £75,270,000 invited, producing a net initial yield of approximately 4.65%. The

sale terms are for a long leasehold of 109 years unexpired, with the City of London Corporation being the freeholder commanding a head rent of £360,000 per annum (Knight Frank, 2016).

Construction Considerations

This Site’s location allows for excellent accessibility, with no easements required over any private land when it comes to access for its development, other than the necessary council permits. Furthermore, due to

a large section of the Site being undeveloped, currently serving as a 50 space car park, access for construction, including associated machinery and equipment is relatively easy, with access from Pocock Street

to the north of the Site.

Risks Associated with the Site

There are relatively low risks associated with the site. Although it is located on a floodplain due to its close proximity to the banks of the River Thames, and is classified to be in a Flood Zone 3 by the Environment

Agency, the area benefits from significant flood defences, posing a low risk of 0.01% probability of flooding each year [Appendix 1]. Additionally, there are no subterranean issues that can restrict digging on the

site, as there are no major transportation tunnels passing directly underneath the site [Appendix 2], and the site lies outside the Southwark Council’s Archaeological priority zone [Appendix 3] and is not within a

conservation area [Appendix 4].

Environmental, Sustainability and Contamination Considerations

Under the SPD14, Southwark Council undertook a full assessment and examination of any environmental and sustainability issues that could affect development in the locality of the Site. Under Appendix F

(Southwark Council B, 2014) and Appendix H (Southwark Council C, 2014) of the SPD14, the development of “Business Space” and “Mixed use town centre”, amongst other development considerations, were

found to have an overall positive effect on the locality’s contribution to climate change, improvement of air quality, reduction of waste, sustainable use of water resources and maintaining and enhancing the quality

of land and soil [Appendix 5]. This thus demonstrates the council’s encouragement for development within the area.

In terms of contamination considerations, under the Department for Environment Food & Rural Affairs (DEFRA) Contaminated Land Statutory Guidance document (DEFRA, 2012) and under Part 2A of the

Environmental Protection Act 1990, contaminated land refers to sites that were used in the past as former factories, mines, steelworks, refineries and landfil ls. Investigation into the historic use of the Site yielded

no results that match any of the aforementioned uses. Furthermore, the Site is not listed as a “Special Site” by the Environment Agency and there are no records of the site suffering any historical industrial pollutions

nor used as a former landfill [Appendix 6]. Therefore, there is no evidence to suggest that development on the Site could be affected due to it being contaminated. Nonetheless, as mentioned above, the undeveloped

part of the site is being used as a 50 space car park, therefore, as it is standard before any major development project, an investigation by Southwark Council into the status of the site will be required following

guidance from its publication, Contaminated Land Strategy 2012-2017 (Southwark Council, 2012).


Figure 5: Ordinance Survey. Source: DigiMaps


PROPOSED DEVELOPMENT

The proposed development is for a 504,300 square foot 10 storey mixed used development that will house 93,600 square feet of Residential user Class (C3) space; 166,351 square feet of Office user Class (B1)

space; 40,120 square feet of Retail user Class (A1) space; a 167,380 square foot underground parking/service area; and a 2,150 square foot public open space at the centre-front of the development facing

Blackfriars Road.

The proposal is for the property to be developed as a single building with two wings. The North Wing will house the residential space and the South Wing will house the office space. The retail space is to be located

at ground floor level of each wing, in order to provide maximum exposure and attraction to potential customers on Blackfriars Road. Both the North and South Wings will have individual access at ground floor level,

each with their own lobby area.

The design of the building will be that of glass and steel and will be of modern architecture. This allows the development to keep in line with designs similar to the directly adjacent One Valentine Place and The

Residence and other developments along the Blackfriars Road such as The Wedge on 40 Blackfriars Road, the One Blackfriars and 240 Blackfriars developments. The design will aim to make use and implement

the latest building standards, with emphasis on sustainability, equality and energy efficiency. The frontage of the property on Blackfriars Road will be similar in design for both the North and South Wings, with minor

architectural adjustment to accommodate the different needs of residential and office occupiers. The retail space at ground floor level will be a complementary design to the upper 10 storeys, with appropriate

accommodations made for retail occupiers such as wide floor to ceiling transparent glass walls.

The residential North Wing will be made up of 113 units of 1, 2 and 3 bedroom units over 10 floors. 65% or 74 units of all residential provision will be of dwellings that are to be offered at full market value, whereas

the remaining 35% or 39 units of residential provision will be of dwellings that are to be offered as affordable housing at 80% off full market value. Please refer to Table 1 below for further information.

The office South Wing will house 10 floors of tenant customisable open plan office space, with each floor having a net internal area of 16,635 square feet. The retail area at ground floor level will be of a total net

internal area of 40,120 square feet, which will again be open plan and tenant customisable to ensure maximum and efficient utility of the space. The implementation of a modern building design and the use of the

latest technological resources is what will allow this development to be as customisable as proposed, thus allowing for an increase in its attractiveness to a wider range of potential tenants.

An underground parking/services space is proposed one lower level below ground level made available to residents and occupiers of the residential, office and retail spaces. Access to and from the underground

area from outside the development will be through Pocock Street north of the site, which is the current access to the car park of Friars House, thus reducing the need for permission to alter the public highway for

access.

Additionally, in order to ensure that the development will be as attractive to occupiers as to visitors, potential customers and the surrounding locality, a 2,150 square foot central public open space is proposed that

will accommodate a variety of low maintenance landscaping and vegetative features. The space is aimed to add both value and goodwill to the proposed development with an emphasis on community, togetherness

and openness, promoting the relationship of the development to the surrounding locality and residents.


TABLE 1: PROPOSED DEVELOPMENT

SQM (GIA) SQFT (GIA) SQM (NIA) SQFT (NIA) % Share per user class

Residential Scheme (C3) 10,000 107,640 *8,700 93,600 31.19%

Market Housing 65.00%

One bedroom x 20 units on floors 1 to 2 56 600 13.00%

Two bedroom x 39 units on floors 3 to 7 80 800 32.50%

Three bedroom x 15 units on floors 8 to 10 111 1,200 19.50%

Affordable Housing 35.00%

One bedroom x 11 units on floors 1 to 2 56 600 7.00%

Two bedroom x 20 units on floors 3 to 7 80 800 17.50%

Three bedroom x 8 units on floors 8 to 10 111 1,200 10.50%

Total Office (B1) 17,000 183,000 **15,455 166,351 55.44%

Total Retail (A1) 4,100 44,130 **3,727 40,120 13.37%

Total Net Development Excluding Parking 31,100 334,757 27,882 300,071 100.00%

Under Ground Parking 15,550 167,380

Public Open Space 200 2,150

Total Dev Including Parking and Public Open Space 46,850 504,300

Legend:

* NIA for Residential is 15% less than GIA

** NIA for Office and Retail is 10% less than GIA

NIA= Net Internal Area

GIA= Gross Internal Area

Conversion rate 1sqm=10.7639sqft


SITE PLAN

For Illustration Purposes Only. NOT TO SCALE


PROPOSED FRONTAL ELEVATION

For Illustration Purposes Only. NOT TO SCALE


PLANNING POLICY CONSIDERATIONS

Southwark Council’s planning policies are based on the London Plan 2015 and the New Southwark Plan, which is the latest local plan by the council that will replace the Southwark Core Strategy (2011) and

Southwark Plan (2010) policies. These policies will be used to make planning decisions and to set out a regeneration strategy for the area from 2017 to 2033 Southwark Council, (2015). The Blackfriars Road SPD

2014 (SPD14) complements the council’s planning policies and sets out specific policies that are relevant to Blackfriars Road and will act as the basis for planning considerations in relation to the proposed

development alongside the New Southwark Plan (Southwark Council, 2015).

Compatibility with the Blackfriars Road SPD 2014

Page 8 of the SPD14 set’s out the council’s vision for Blackfriars Road, where it “will be transformed into a vibrant place where people want to work, live and visit” (Southwark Council, 2014). From within the SPD14,

several strategies and guidance policies are presented that relate to the proposed development. These were identified and analysed to deduce whether the proposed development is compatible to these policies

and they are summarised and presented in Table 2 below.

TABLE 2

SPD14 policies Relevant Extracts from policies How the proposed development is compatible

SPD 1 Business space

Supporting the provision of new business floorspace (B1 use class). Space should be deigned with flexibility in mind to accommodate a

range of unit sizes.

The proposed development is providing over 160,000 square feet of new office B1 space, which is designed in

an open plan setting to allow customizability by the type and size of tenant.

SPD 2 Mixed use town centre

Encouraging the provision of a mix of new town centres (especially shops, restaurants, cafes and bars).

Space should be designed flexibly to accommodate a range of unit sizes.

Developed alongside residential development and businesses in order to increase activity and strengthen appeal of the area to visitors.

The proposed development is a 10 storey mixed use development offering a mix of residential, office and retail

space, for which the latter is deigned to be open plan and customisable to meet tenant needs.

SPD 3 Public realm and open space

Create environments that are inclusive and follow Secured by Design principles such as ensuring spaces are well lit, overlooked and feel safe.

Use trees and landscaping to green streets and spaces, and reinforce where trees are integral to the historic townscape.

Reinforce and enhance the character of Blackfriars Road, so that it is attractive and comfortable.

Introduce active lower floor frontages

The development will be offering a 2,150 square foot open public space on the centre front of the development

on Blackfriars Road that will include a variety of landscaping and street furniture, which will be compatible with

the locality and the surrounding area. Furthermore, the space is on street level and open onto the main road,

thus making the space inviting with a feeling of security due to its confinement within the North and South Wings

of the development.

SPD 4 Built form and heritage

SPD 5 Building Heights

Ensure that materials and features consider the identity of the surroundings, taking the local historic environment into account.

Reinforce the civic scale along the main route of Blackfriars Road, enhancing the setting of public realm and public spaces, providing clear entrances that address the street with generous windows

Incorporate flexibility in the design of non-residential buildings Buildings of up to 30m along Blackfriars Road between Southwark

tube station and St George’s Circus. All buildings above 25/30 meters should provide public space at

ground level. All buildings above 25/30 metres should provide a mix of uses.

The development is located between Southwark tube and St George’s Circus and will be of glass and steel

design, similar to adjacent buildings such as The Residence and One Valentine Place and will be no more than

30 meters high with 10 storeys. The open public space in the centre of the development will enhance the public

realm and space availability within the locality. This includes the customisable open plan design of the office

and retail space provided.


Compatibility with the New Southwark Plan 2017 to 2033

The New Southwark Plan (NSP) is the latest planning policy document that will be used by Southwark Council in order to determine the granting of planning permission. Therefore, compatibility of the proposed

development with these policies is crucial if planning consent is to be granted. Table 3 below summarises the relevant policies and how the proposed development is compatible with them.

TABLE 3

NSP Policy Relevant Extracts from policy How the proposed development is compatible

DM1 Affordable homes DM2 New family homes DM8 Optimising delivery of

new homes

A minimum of 35% affordable housing is to be provided where developments provide 10 or more homes.

Minimum of 60% of residential provision with two or more bedrooms. A maximum of 5% of units to be studios. Minimums of 3, 4 or 5 bedroom affordable units as set out under Table

2 in the NSP page 24. Planning permission will be granted for developments within the

density ranges outlined under Table of page 32 of the NSP Development will not be permitted where it will result in net loss of

residential space

The proposed development meets Southwark Council’s policies in the provision of affordable

housing. These are outlined in Table 1 above.

There are no studio accommodations provided within the residential scheme, with over 70%

percent of the residential units provided will be of two or more bedrooms. Furthermore, 20% of

the affordable housing provided is of 3 bedroom units.

As the percentage of residential space provided is less than the percentage of non-residential

space provided, a negotiation with the council into the determination of the habitable rooms per

hectare, as set out under page 35 of the NSP, is required.

DM9 Design of places DM10 Design quality DM11 Residential Design DM12 Tall buildings

Ensures height, scale, massing and arrangement of development contributes positively to the locality

Provides accessible and inclusive design for all ages and people with disabilities and compliance with Equalities Act 2010.

Provides opportunities for formal and informal play. Ensures high standards of innovative and sustainable design that fit

the location, context and scale of the development. Ensures accessibility and inclusive design for all and provides positive

pedestrian experience. Provides basements that do not have structural or environmental

impacts. All homes meet or exceed the minimum, national space standard,

providing adequate internal space. Flatted development to provide green communal amenity space for all

residents and communal play areas for children.

The design of the building will be that of glass and steel and will be of modern architecture. This

allows the development to keep in line with designs similar to the directly adjacent One Valentine

Place and The Residence and other developments along the Blackfriars Road such as The

Wedge on 40 Blackfriars Road, the One Blackfriars and 240 Blackfriars developments. The

design will aim to make use and implement the latest building standards, with emphasis on

sustainability, equality and energy efficiency. The frontage of the property on Blackfriars Road

will be similar in design for both the North and South Wings, with minor architectural adjustment

to accommodate the different needs of residential and office occupiers. The retail space at

ground floor level will be a complementary design to the upper 10 storeys, with appropriate

accommodations made for retail occupiers such as wide floor to ceiling transparent glass walls.

DM24 Office and business development

Planning consent to be granted for office B1 floorspace. See Table 2 above.

DM27 Town and local centres

Retail and other town uses are to be located in areas under Table 7 of page 58 of the NSP

The development is located in the “District Town Centres” of Bankside and The Borough. See

SPD 2 under Table 2 above.

DM48 Car Parking Planning permission will be granted for developments that provide all car parking spaces within the development and not on the public highway.

The underground level car parking/services are will be fully contained within the development

and should not cause any negative impacts to the local public highways and associated council

owned parking spaces on them.

DM52 Open space and open water space

New public accessible open space must be provided in major development and should provide multiple benefits.

Please see SPD 3 in Table 2 above.


The compatibility of the development to the above relevant policy considerations, should result in planning permission to be granted by the council for the development of the site. It is recommended, however, that

a pre-planning application meeting takes place with the council in order to review the current proposal and address any preliminary planning conditions set out by the council. The main argument to be presented

to the council in order to justify the development is as follows:

1. The addition of over 166,000 net square feet of office class (B1) space, which is a significant policy under the relevant planning documents.

2. The development can meet the affordable housing quota set out by the council at 35% with ease.

3. The number of residential units with 2 or more bedrooms is over the minimum 60%.

4. Over 40,100 net square feet of retail class (A1) space is being added to Blackfriars Road, which is lacking in retail provision.

5. The development has taken into account the need for public space within the area, which is stated to be limited under the SPD14 and can contribute towards Section 106 agreements.

6. The development will be of modern building standards and design, which will complement the current built environment of the locality and will be sustainable, energy efficient and provide equal opportunities

for all users of the site.

COMPARABLES

Residential Comparables

Determining the right type of comparables to be used in analysing the valuation of the residential units within the proposed development proved to be very difficult. Blackfriars Road has not had many new build or

mixed used developments that have come onto the market which resulted in a sale. Therefore, the availability of “sold data” for such comparable properties proved to be almost non-existent. The only directly

comparable scheme that has finally come onto the market, which result in completion between vendor and buyer, was The Residence for which completion took place in late 2015, early 2016, and the completion

of the sales procedure resulted in sold data information, which formed the foundation of the applied value on residential prices of the proposed development.

In order to mitigate for the lack of data, a new approach was taken, which is a similar approach used by John Lang LeSalle (JLL) during the development appraisal for the One Blackfriars Road development on the

South Bank. Under the freedom of information act, the relevant development appraisal documentation were obtained and are available under (WhatDoTheyKnow, 2014). I turn the assessor’s attention to the

document under (Whatdotheyknow.com, 2016), where it is clearly obvious that the document reflects JLL’s residential comparables analysis, for which the said company analyses a variety of comparable buildings,

similar to those of the relevant development, and analyse not only sold price information, but asking price information as well. This allowed JLL to formulate an opinion of the current prices of the residential units,

based on number of beds, size and price per sq. ft. within comparable buildings only.

Therefore, based on the above justification, a comparable methodology for the residential units is outlined below, followed by the relevant comparable data in the below mentioned tables:

Residential Comparables Methodology 1. Find residential developments that are similar to the proposed development. Similarities include:

a. New build or in construction b. Mixed-use (if possible) c. Similar large building tower type with at least 10 floors where possible d. Within a 1 mile radius e. Similar communal provisions (if any)

i. These are to include 1. Public space 2. Car park 3. Retail provisions 4. Concierge service

2. Within comparable developments, assess unit provisions and similarities that include:

a. The number of bedrooms of the units b. Size of the units c. Finishing of the units

3. Comparable values a. Assess previous sold prices of comparable units first b. If previous sold prices do not indicate similarities under 2 above, then examine similar units

on the market and corresponding asking price 4. Assess the other effects on comparable prices such as

a. Change in value due to location on floor b. The availability of a balcony or terrace

5. Based on the above information, a comparable price for the units will then be assessed as a matter of judgement based on the evidence provided


THE RESIDENCE

Address The Residence, 169-173 Blackfriars Road, London SE1 8ER

Proximity to proposed development

(source: Google Maps)

282 ft

Provisions, size, scale, age Boutique development comprising of approx. 59 studio, 1, 2 and 3 bedroom units over 10 floors including a basement. New build with completion late 2015, early 2016. Modern

architectural design with direct access onto Blackfriars Road.

Communal Provisions

Public Space No. Roof top shared garden

Car Park Not known

Retail Yes. Ground floor. Size unknown

Concierge Yes

Unit Provisions and Comparable Prices

Unit Type Floor Balcony/terrace Size (sq.ft.) Finishing Price Sold or Asking? Source Effective Date

1 bed 5th Yes 710 High spec. £750,000 Asking (Linden Homes Prices, 2016)

(Fieldandsons.co.uk, 2016)

01/05/2016

2 bed 4th Yes 732 High spec. £860,000 Sold (ibid) Unknown





2 bed 9th

Yes 732 High spec. £975,000 Sold (ibid) (Fieldandsons.co.uk, 2016) Unknown

2 bed 9th

Yes 732 High spec. £975,000 Asking (Rightmove Comparison, 2016) 01/05/2016

3 bed 9th Yes 1195 High spec. £1,400,000 Sold (ibid) Unknown


BLACKFRIARS CIRCUS SE1

Address Blackfriars Road, Southwark, London SE1 8EQ



0.2 miles

Provisions, size, scale, age

Blackfriars Circus is made up of 336 studios, one, two and three-bedroom apartments and penthouses, all built around two new public squares. The development will feature on-

site amenities such as a concierge and roof-top garden giving residents stunning views across London. (Barratthomes.co.uk, 2015). This development is currently under

construction and completion is estimated in Spring 2017 (www.a3ia.com, 2016)

Communal Provisions

Public Space Yes

Car Park Yes

Retail/Office Yes. Retail 16,500 sq. ft. and Office 35,000 sq. ft.

Concierge Yes


Unit Type Floor Balcony/terrace Size (sq.ft.) Finishing Price Sold or Asking? Source Effective Date

1 bed 4th Yes 577 High spec. £600,000 Asking (Barratthomes.co.uk, 2015) 01/05/2016

1 bed 7th Yes 580 £716,000 Asking (Barratthomes.co.uk, 2015)


2 bed 6th No 778 £814,000 Asking (Barratthomes.co.uk, 2015)

2 bed 7th No 778 £824,000 Asking (Barratthomes.co.uk, 2015)

3 bed 2nd Yes 976 £955,000 Asking (Barratthomes.co.uk, 2015)

3 bed 2nd Yes 1004 £960,000 Asking (Barratthomes.co.uk, 2015)

3 bed 3rd Yes 976 £965,000 Asking (Barratthomes.co.uk, 2015)



THE MUSIC BOX

Address The Music Box SE1, Union Street, Southwark, SE1 0LR



0.2 miles

Provisions, size, scale, age The Music Box is a residential development of 41 1, 2 and 3 bedroom apartments in Southwark. The development will be the new home for the London Centre for Contemporary

Music and will house luxury residential units from floors 6 to 11. Development is set to be completed in late 2016 (London, 2016) (www.a3ia.com, 2016).

Communal Provisions

Public Space No

Car Park Unknown

Retail/Office No

Concierge Yes


Unit Type Floor Balcony/terrace Size (sq. ft.) Finishing Price Sold or Asking? Source Effective Date

1 bed 6th No 661 High spec. £737,500 Asking (London, 2016) 01/05/2016

1 bed 9th No 521 £737,500 Asking (London, 2016)



2 bed 10th No

795 £1,090,000 Asking (London, 2016)

2 bed 11th No

1015 £1,620,000 Asking (London, 2016)

3 bed 6th No

945 £1,205,000 Asking (London, 2016)

3 bed 11th No

1525 £2,435,000 Asking (London, 2016)


The above comparables were further analysed and the averages of the data was taken. These are presented below:

Units Floor Average Average Size sq. ft. Average Asking Price Average per sq.

ft.

1 bed 7 602 £711,333 £1,192.98

2 bed 7 770 £972,538 £1,255.79

3 bed 5 1085 £1,270,714 £1,137.97

Examination of the comparables, particularly Blackfriars Circus, can suggest an explanation to the large discrepancy shown above. As shown under (Barratthomes City AM, 2015), Blackfriars Circus has been

branded as one the “more affordable options”. 160 Blackfriars is not aiming to be an affordable option, it is a luxury mixed used development commanding premium prices. Additionally, Blackfriars Circus comprises

of 336 apartments in 5 buildings of office, residential and retail, with the main residential tower being 28 storeys high. Therefore, it could be argued due to the size and scale of the project, economies of scale apply,

thus allowing Blackfriars Circus developers to charge lower prices while still meeting return requirements. Removing Blackfriars Circus from the data in averaging the value of the three bed units, provides for the

table below.

Units Floor Average Average Size sq. ft. Average Asking Price Average per sq.

ft.

1 bed 7 602 £711,333 £1,192.98

2 bed 7 770 £972,538 £1,255.79

3 bed 9 1222 £1,680,000 £1.347.80

One might ask, therefore, why Blackfriars Circus was used as a comparable in this case. The lack of relevant comparable data made it very difficult in assessing an appropriate value for the residential units and

Blackfriars Circus met most of the criteria specified under the methodology. Therefore, its use as a comparable is appropriate, and appropriate adjustments have been made.

Office Comparables

In analysing comparable evidence in order to determine the valuation per sq. ft. of the office space, a similar methodology to that of the residential comparables is used with data obtained from CoStar Suite, a

commercial property analysis database. 160 Blackfriars Road will be offering Grade A open plan space on 10 floors, with a typical floor size being around 15,400 sq. ft. net. As a result, the below methodology is

thus adopted in analysing comparable office buildings and leases within a 0.5 mile radius of the proposed development.

Office Comparables Methodology

1. Office space rating will have to equal a three, four or five star rating as determined by CoStar Suite. 2. The building will have to be

a. under construction, b. a new or recent build, c. or underwent a complete recent renovation.

3. The typical floor space leased or available to be leased should be between 12,000 sq. ft. to 18,000 sq. ft. where possible. 4. Amenities within the building to include (if any)

a. Lift b. Air conditioning c. Car park

5. The building is to have at least 10 floors if possible. 6. Lease terms to be on Full Repairing and Insuring basis (if any).


One Valentine Place - 1 Valentine Pl

London, SE1 8QH - Southbank West

LEASING

Available Spaces: 2 ,434 SF Available in 1 Space

Availability: % Available; 0% Vacant 11.2

AVAILABLE SPACES

Floor Use Type SF Avail Bldg Contig Rent Rates Ser Charge Term

E 6th Office Assignment 2,434 2,434 £45.00/SF £17.56/SF £7.75/SF Thru May 2023

TRANSPORTATION

Transit/Subway: 6 minute walk to Southwark Underground Station (Jubilee )

Commuter Rail: 3 minute drive to London Waterloo East Commuter Rail

Airport: 27 minute drive to London City Airport

KEY TENANTS

Fieldglass Europe Ltd 6 ,753 SF Corporate Traveller 3 ,510 SF

Gaming Realms plc 3 ,440 SF Elementa Consulting Ltd 2 ,434 SF

Seaco Global Limited 2 ,334 SF Tim Flynn Architects Ltd 2 ,334 SF

BUILDING

Type: Office

Tenancy: Multiple

Year Built: 2012

NIA: 21 ,650 SF

Floors: 8

Typical Floor: 2 ,584 SF


Palestra House - 197 Blackfriars Rd

London, SE1 8NJ - Southbank East Submarket

BUILDING

Type: Office Tenancy: Multiple

Year Built: 2006 NIA: 294,361 SF

Floors: 12 Typical Floor: 28 ,987 SF

Construction: Steel

BUILDING AMENITIES

Air Conditioning, Raised Floor

LEASING

Available Spaces: No Spaces Currently Available

SALE

Last Sale: Sold on 5 Jan 2013 for £223,000,000 (£757.57/SF) at 5.09% Yield

TRANSPORTATION

Transit/Subway: ) minute walk to Southwark Underground Station (Jubilee 3



KEY TENANTS

Transport For London 229,272 SF London Development Agency 60 ,436 SF


240 Blackfriars Rd

London, SE1 8NW - Southbank East Submarket

BUILDING AMENITIES Air Conditioning, Bus Line, LG7 Lighting, On Site Management,

Raised Floor, Reception, Restaurant, Security System 7.

BUILDING



Floors: 20 Typical Floor: 12,099 SF

Construction: Steel

Available Spaces: ,428 SF Available in 1 Space 1

Availability: 0.6 % Available; 0% Vacant

AVAILABLE SPACES

Floor Use Type SF Avail Bldg Contig Rent Rates Ser Charge Term

P GRND Retail Relet 1,428 1,428 Withheld Negotiable

TRANSPORTATION

Parking: 1 Covered Space is available; Ratio of 0.00/1,000 SF




KEY TENANTS

UBM Holdings Ltd 105,648 SF Ramboll UK Ltd 31 ,204 SF

Alternative Networks plc 24 ,127 SF Boodle Hatfield 23 ,648 SF

Instant Managed Offices Ltd 16 ,860 SF Lonely Planet 12 ,021 SF


Harlequin Building - 65 Southwark St

London, SE1 0HR - Southbank East Submarket

BUILDING AMENITIES

Air Conditioning, Bus Line, On Site Management, Raised Floor, Reception, Restaurant, Security System, Signage

BUILDING



Floors: 7 Typical Floor: 7,211 SF

Construction: Steel


The Crane Building - 22 Lavington St

London, SE1 0NZ - Southbank East Submarket

BUILDING AMENITIES

Air Conditioning, Courtyard, Raised Floor, Reception, Roof Terrace, Security System, Storage Space

9.

BUILDING Type: Office Tenancy: Multiple Year Built: 1995 ; Renov 2013 NIA: 46,467 SF Floors: 8 Typical Floor: 5,808 SF Construction: Steel

Page 1

02/05/2016


SALE

Last Sale: Sold on 3 Oct 2011 for £6,250,000 (£134.50/SF)

TRANSPORTATION

Transit/Subway: ) 8 minute walk to Southwark Underground Station (Jubilee



KEY TENANTS

Cheil Europe Ltd 28 ,443 SF M7 Real Estate Ltd 7 ,204 SF

GroupM Entertainment Ltd 5 ,423 SF Rethink Recruitment 5 ,397 SF

PROPERTY CONTACTS

Freeholder: Dorrington plc Prior Freeholder: St Ives plc

Property Manager: Jackson Coles Architect: Allies and Morrison Architects

Copyrighted report licensed to CoStar Group, Inc. - 725465.


Bankside 2 & 3 - 90-100 Southwark St

London, SE1 0SW - Southbank East Submarket

BUILDING AMENITIES Air Conditioning, Banking, Bus Line, Concierge, Convenience Store,

Dry Cleaner, Food Court, Hotel, Restaurant, Signage

BUILDING



Floors: 11 Typical Floor: 45 ,265 SF

Construction: Steel


SALE

Last Sale: Portfolio of 2 Properties/Units in London Sold on 12 Dec 2013 for £315,000,000 (£726.30/SF)

TRANSPORTATION

Parking: Covered Spaces are available 14

Transit/Subway: minute walk to Southwark Underground Station (Jubilee ) 10



KEY TENANTS

Omnicom Europe Ltd 373,787 SF Ketchum Group Ltd 32 ,100 SF

Marks & Spencer plc 3 ,620 SF Vapiano 3 ,620 SF

Better Bankside 3 ,000 SF Oliver Bonas 1 ,760 SF


Bankside 1 - The Blue Fin Building, Bankside Mix –

110 Southwark St London, SE1 0SU - Southbank East Submarket

BUILDING AMENITIES

24 Hour Availability, Air Conditioning, Bus Line, Concierge,

Conferencing Facility, Controlled Access, Food Court, LG7 Lighting,

Mezzanine, On Site Management, Raised Floor, Reception, Restaurant,

Roof Terrace, Security System, Signage


SALE

Last Sale: Sold on 24 Nov 2015 for £415,000,000 (£801.93/SF) at 4.50% Yield

TRANSPORTATION




KEY TENANTS

Time Inc. UK 153,894 SF BAE Systems plc 40 ,000 SF

Mediaocean Systems Ltd ,049 SF 35 Tableau Software UK Ltd 31 ,381 SF

Totaljobs Group Ltd 29 ,095 SF The Bankside Health Club 16 ,303 SF BUILDING Type: Office Unit Tenancy: Multiple Year Built: 2007

NIA: 517,499 SF Floors: 14

Typical Floor: 39 ,227 SF Construction: Steel


The above office comparables come very close to the methodology implemented and are most similar to the proposed development at 160 Blackfriars. Lease comparables from December 2014 to the most recent

leases signed were analysed and the results are shown in the table below:

Sign Date Start Date Address Floor Total SF Leased Rent/SF/Yr Rent Type Service Rent PA Service Charge Service Charge PA Term Rent Free

01/12/2015 01/12/2015 240 Blackfriars Rd 7th 11,920 £63.00 Effective FRI £750,960.00 10.00 119,200.00 10 yrs

01/12/2015 01/12/2015 240 Blackfriars Rd 8th 11,964 £63.00 Achieved £753,732.00 10.00 119,640.00

03/08/2015 01/11/2015 110 Southwark St 9th 11,187 9.00 100,683.00 7 mos

14/05/2015 14/05/2015 240 Blackfriars Rd 14th 11,804 £51.57 Effective FRI £608,715.84 10.00 118,040.00 14 yrs 15

02/05/2015 02/05/2015 240 Blackfriars Rd 11th 5,598 £59.84 Effective FRI £334,976.49 10.00 55,980.00 10 yrs 6

08/12/2014 31/12/2014 240 Blackfriars Rd 6th 12,021 £56.00 Achieved £673,176.00 10.00 120,210.00 10 yrs

Average 10,749 £58.68 £624,312.07

The average annual rent per sq. ft. from the above data equal £58.68, with an average floor space of 10,749 sq. ft. However, the list above cannot be taken as an accurate reflection of the market as it only includes

two of the comparable properties. Taking into account the remaining lease comparables from the remaining buildings from 2014 provides the data presented in the table below:

Sign Date Start Date Address Floor Total SF

Leased

Rent/SF/Yr Rent Type Service Rent PA Service

Charge

Service Charge PA Term Rent Free

01/12/2015 01/12/2015 240 Blackfriars Rd 7th 11,920 63.00 Effective FRI 750,960.00 10.00 119,200.00 10 yrs

01/12/2015 01/12/2015 240 Blackfriars Rd 8th 11,964 63.00 Achieved 753,732.00 10.00 119,640.00

03/08/2015 01/11/2015 110 Southwark St 9th 11,187 9.00 100,683.00 7 mos

14/05/2015 14/05/2015 240 Blackfriars Rd 14th 11,804 51.57 Effective FRI 608,715.84 10.00 118,040.00 14 yrs 15

02/05/2015 02/05/2015 240 Blackfriars Rd 11th 5,598 59.84 Effective FRI 334,976.49 10.00 55,980.00 10 yrs 6

08/12/2014 31/12/2014 240 Blackfriars Rd 6th 12,021 56.00 Achieved 673,176.00 10.00 120,210.00 10 yrs

02/10/2014 02/10/2014 240 Blackfriars Rd 11th 5,405 57.50 Effective FRI 310,786.71 10.00 54,050.00 5 yrs

01/10/2014 01/10/2014 90 Southwark St BSMT,GRND,1-9 373,787 45.00 Asking 16,820,415.00 9.79 3,659,374.73 12 yrs 11 mos

01/09/2014 01/09/2014 65 Southwark St 1st 4,248 51.89 Effective FRI 220,427.20 6.83 29,013.84 10 yrs 10

06/08/2014 06/08/2014 240 Blackfriars Rd 4-5 24,127 41.37 Effective 998,200.00 10.00 241,270.00 15 yrs 24

01/07/2014 31/07/2014 65 Southwark St 1st 2,902 44.69 Effective 129,681.05 6.83 19,820.66 10 yrs 14

01/07/2014 01/08/2014 110 Southwark St 11th 7,953 55.00 Effective 437,414.80 8.34 66,328.02 10 yrs

13/06/2014 13/06/2014 240 Blackfriars Rd 12-13 16,860 48.60 Effective FRI 819,374.15 5 yrs 6 mos 6

01/06/2014 01/06/2014 110 Southwark St 9th 29,095 55.00 Effective 1,600,223.97 8.34 242,652.30 7 yrs 9 mos

20/05/2014 19/07/2014 22 Lavington St 4th 7,204 49.50 Asking FRI 356,598.00 7.50 54,030.00

15/05/2014 12/10/2014 240 Blackfriars Rd 1-3 31,204 35.06 Effective 1,093,962.84 10.00 312,040.00 15 yrs 33

29/04/2014 01/05/2014 110 Southwark St 2nd 15,898 48.50 Effective FRI 771,052.15 5 yrs 1 mo

14/04/2014 15/04/2014 1 Valentine Pl LL,GRND 3,313 28.40 Effective FRI 94,089.20 7.50 24,847.50 10 yrs 5

01/04/2014 01/04/2014 110 Southwark St 10th 10,973 55.00 Effective 603,514.62 8.34 91,514.82 7 yrs 11 mos

08/01/2014 08/01/2014 22 Lavington St GRND,1-3 28,443 45.76 Achieved FRI 1,301,551.68 7.50 213,322.50 10 yrs

Average 31,295 £50.25 £1,509,413.25


Again, based on a longer time frame, the average annual rent per sq. ft. is £50.25, with an average floor space of 31,295. However, there is discrepancy within the data, where lease comparables show the combined

square footage leased over multiple floors by certain tenants, or a significantly larger floor space than that of the proposed development at 160 Blackfriars (highlighted in green above). These are highlighted above.

Eliminating the above highlighted outliers data provides for the average sq. ft. leased of 9,160 sq. ft. at £50.50 per sq. ft.

Finally, the analysis of current asking rents by the above comparables are taken into account and are presented under the table below:

Building Current Asking Rent PSF Submarket Rent 3-5 Star Submarket Rent 4-5 Star

One Valentine Place £45.00 £38.92

Palestra House £49.54

240 Blackfriars £59.50 £51.90

Harlequin Building £41.00 £51.90

The Crane £49.54

Bankside 2 and 3 £47.00 £49.54

Bankside 1 £51.90

Averages £48.13 £46.89 £51.90

The data above shows that for comparables that currently have vacant space to let on the market, the average rent per sq. ft. commanded is £48.13. Taking into account the average of the sub-market, as analysed

by CoStar Suite, for both asking rents for buildings rated 3-5 stars and 4-5 stars provides for an average asking rent per sq. ft. of £49.54 and £51.90 respectively. Taking into account all the averages from all of the

data presented above, the resulting average is shown in the table below:

£ psf

Average Rent for Most Recent Transactions £58.68

Average Rent from Longer Term Transactions

(excluding outliers)

£50.50

Average Asking Rent from Comparables £48.13

Average Rent for 3-5 Star £46.89

Average Rent for 4-5 Star £51.90

Average £51.22

It is therefore appropriate to apply the expected rent per square foot of the office space to be equal to £50.00 psf. A conservative figure that is just below the comparable rent, taking into account personal judgement

and the distance of the proposed development from the banks of the Thames.


Retail Comparables

Retail comparable evidence has proven to be the most difficult to attain in order to determine an accurate retail rent per annum for the proposed development. Blackfriars Road is undergoing significant regeneration

and several developments along the soon to be six lane boulevard are under way. Footfall is significantly expected to increase, particularly the number of residents living within the area and the number of commuters

accessing the city from nearby Southwark Station. However, this is all to come and current retail provision on the Road is very minimal.

In determining a methodology for selecting appropriate retail comparables, a similar concept to the residential and office methodology would have the best to be adopted. However, due to the lack of comparable

evidence within the locality, the methodology was relaxed to include lease comparables from buildings that are not similar to the proposed development at all, however, present a reasonable indication into the

asking rent per sq. ft. within the locality. Furthermore, due to the large retail provision that 160 Blackfriars is set to deliver, it is expected that tenants will occupy a set number of square footage rather than the entire

available space. This is to be encouraged when leasing the retail space in order to encourage variety of provision, thus attracting a variety of customers.

The methodology for selecting comparables is, therefore:

1. A CoStar rating of at least 3 stars 2. Space leased within the last year up to January 2015 3. Provisions to be

a. Either new build, proposed, or recently renovated b. Frontage on “High Street” c. User Class A1 (Shops)

4. For the retail space to be in a similar building to that of 160 Blackfriars, as demonstrated by the residential and office comparables above, where possible 5. With a 0.5 mile radius of the proposed development



Based on the above comparables, the resulting data is presented in the table below:

Sq. ft. Rent PA Rent psf

5670 £145,000.00 £25.57

9018 £300,000.00 £33.27

1127 £26,000.00 £23.07

927 £23,175.00 £25.00

Average 4185.5 £123,543.75 £26.73

It was felt that the data above is not a sufficient indication of comparable retail evidence within a 0.5 mile radius of the proposed development. Therefore, further investigation was made into spaces that are available

to let on the market now and the asking rents were also analysed in order to determine a reasonable comparable figure. The data is presented in the table below:


Address Floor Use SF Avail Rent/SF/yr £Rent PA Star Rating Status Submarket Postcode Use Class

28 Great Suffolk St E GRND Retail 1,044 £57.47 £60,000.00 3 out of 5 Stars Existing Southbank East SE1 0UE A1 (Shops)

Lower Marsh (proposed) P GRND Retail 573 £61.08 £35,000.00 3 out of 5 Stars Proposed Southbank Ret SE1 7AE A1 (Shops)

Union St P GRND Retail 488 £31.76 £15,500.00 3 out of 5 Stars Existing Southbank Ret SE1 0LH A1 (Shops)

109-119 Waterloo Rd P GRND Retail 1,650 £151.52 £250,000.00 3 out of 5 Stars Existing Southbank West SE1 8UL A1 (Shops)

111 Westminster Bridge Rd P GRND Retail 3,433 £24.76 £85,000.00 3 out of 5 Stars Under Renovation Southbank West SE1 7HR A1 (Shops)

11-63 York Rd P GRND Retail 730 £47.95 £35,000.00 3 out of 5 Stars Existing Southbank West SE1 7NX A1 (Shops)

Average £62.42 £80,083.33

The data above also follow the methodology presented, for which asking rents currently on the market are demonstrated. Finding an average rent per sq. ft. from the above comparables shows that average rent

per sq. ft. is £48.14. Taking into account a personal judgement into making the space attractive for potential tenants, a rent equal to £45.00 per sq. ft. for the retail provision is applied in this case.


DEVELOPMENT APPRAISAL Upon carrying out the development appraisal for the proposed development, the Gross Development Value of the scheme totalled £330,236,325, with a Net Development Value of £312,013,894.61. The developer’s

profit, in this case, is over £27 million, with a final value for the site equalling say £83,000,000 and a total profit for the scheme over £52 million. These are demonstrated in the Residual Valuation calculations below,

produced using Microsoft Excel.

Residual Valuation Calculations

Residential Scheme

Market Housing

Floors

Occupied NIA per flat (sqft) NIA per flat (sqm)

Total Available Per

Floor

Total Available for

All Floors

Total Number of

Units

Unit Price from

Comparables Value psf

Gross Development

Value

1 bed 1 to 2 600 56 6,084 12,168 20 £750,000 £1,250 £15,210,000

2 bed 3 to 7 800 74 6,084 30,420 38 £1,000,000 £1,250 £38,025,000

3 bed 8 to 10 1,200 111 6,084 18,252 15 £1,700,000 £1,417 £25,857,000

Affordable Housing 73

1 bed 1 to 2 600 56 3,276 6,552 11 £600,000.0 £1,000 £6,552,000

2 bed 3 to 7 800 74 3,276 16,380 20 £800,000.0 £1,000 £16,380,000

3 bed 8 to 10 1,200 111 3,276 9,828 8 £1,360,000.0 £1,133 £11,138,400

40

Total 93,600 113 £113,162,400

Office Scheme

NIA Office Space sqft

Comparable

Rent psf Estimated Rent Yield

Multiplier in

Perpetuity

Gross Development

Value

166,351 £50.00 £8,317,559.09 4.50% 22.22222222 £184,834,646.46

Retail Scheme

NIA Retail Space sqft

Comparable

Rent psf Estimated Rent Yield

Multiplier in

Perpetuity

Gross Development

Value

40,120 £45.00 £1,805,399.59 5.60% 17.85714286 £32,239,278.41

Net Value of Residential

Scheme Less Sales Cost @2% 2.00% £110,943,529.41 Development Gross Development Value £330,236,325

Purchaser's Cost of Office

Scheme @5.8% 5.80% £174,701,934.28 Event Time (Months) Accuracy Check

Less Sales Cost of Office

Scheme @2% 2.00% £3,494,038.69 Start Construction 6 Months Total Profit £52,002,315.77

Net Value of Office Scheme £171,207,895.59 End Construction 30 months Total Cost £260,011,578.84

Purchaser's Cost of Retail

Scheme @5.8% 5.80% £30,471,907.76 Last Residential Sale 36 months Total Profit/Total Cost 20%

Less Sales Cost of Retail

Scheme @2% 2.00% £609,438.16 Let Offices 48 months

Net Value of Retail Scheme £29,862,469.60 Let Retail 54 months

Net Development Value £312,013,894.61


Costs

Construction

Gross Residential Area (sqft) Cost per sqft

Total Construction

Cost

107,640 £197.33 £21,240,601.20

Gross Office Area (sqft)

183,000 £255.20 £46,701,600.00

Gross Retial Area (sqft)

44,130 £130.81 £5,772,645.30

Gross Car Park Area (sqft)

167,380 £87.24 £14,602,231.20

Total Development Construction Cost £89,614,777.70

Demolition Costs of Friars House total approx. 200,000

sqft/18,580 sqm GEA 18,580 £1,297,700.00

Site Investigation £90,000.00

Demolition @£50psm £929,000.00

Site Clearance @£15 psm £278,700.00

Professional Fees 12.00% £10,753,773.32

Contingency Costs 4.00% £4,014,742.04

Letting Fee on office off rental value 10.00% £831,755.91

Letting Fee on retail off rental value 10.00% £180,539.96

Marketing Fees for residential scheme @1% off Net Value 1.00% £1,109,435.29

Marketing Fees for office at 1% off Net Value 1.00% £1,712,078.96

Marketing Fee for retail at 1% off Net Value 1.00% £298,624.70

Rental Void for office scheme @ 12 months (inc 6 months

rent free) 1 £8,317,559.09

Rental Void for retail scheme @ 24 months (inc 6 months

rent free) 2 £3,610,799.18

Empty Rates on office scheme for 3 months @ 49.7p

multiplier £0.497 £1,033,456.72

Empty Rates on retail scheme 15 months @ 49.7p

multiplier £0.497 £1,570,246.29

Void Costs post construction (estimated) £850,000

Residential Scheme £400,000

Office Scheme £300,000

Retail Scheme £150,000

Community Infrastructure Levy Zone 2 Southwark £3,601,000.00

Office @£35 psm GIA (including £35 MCIL) £595,000.00

Residential @£235 psm GIA (including £35 MCIL) £2,350,000.00

Retail @ £160 psm GIA (including £35 MCIL) £656,000.00

Total Cost Excluding Construction Costs £39,181,711.46

Total Cost Including Construction Costs £128,796,489.16

Interest on Construction @ 7.5% 7.50% £8,332,832.40

Total Including Interest on Construction £137,129,321.56

Residential Sales Period £81,657,556.86 £1,531,079.19

Interest on Residential Sale Period @ 7.5% £1,531,079.19

Total Cost including interest on Residential Sale Period £138,660,400.76

Developer's Profit at 20% 20% £27,732,080.15

Total Cost including Developer's Profit £166,392,480.91

Total Cost Less Net Sales £145,621,413.70

Reduced by Developer's Profit £24,270,235.62

£121,351,178.08 £121,351,178.08

Reduce by interest on site £33,710,463.95

£87,640,714.13

Buying Cost of Site @5.80% 5.80% £4,804,500.40

Net Residual Value of Site £82,836,213.74

Say £83,000,000.00


RISK AND SENSITIVITY ANALYSIS In determining the amount of risk that this scheme can handle, a sensitivity analysis was carried out as presented in the table below. The figures were tested against a potential increase in costs versus a potential

decrease in the value of sales. From the data below, it is evident that the scheme does carry a fair amount of risk tolerance, with the scheme still delivering a gross profit, even if sales values decrease by a total of

20%. Conversely, the risk tolerance in terms of increase in costs equals 30.06%, which is the breakeven point of the entire scheme. It is evident, however, that a deeper analysis into the strength of the scheme to

tolerate various other risks will provide for a more robust picture into its ability to withstand any unaccounted for events. Examples include a change in the market yield as well changes in government legislation in

regards to the various user classes employed in the scheme.

Sensitivity Analysis

Original Decrease in Sales by 10% Decrease Sales by 15% Decrease Sales by 20%

Total Sales Price £330,236,324.87 £297,212,692.39 £280,700,876.14 £264,189,059.90

Site Purchase Price (Including Buying

Costs) £82,836,213.74 £82,836,213.74 £82,836,213.74 £82,836,213.74

Construction Cost Total £89,614,777.70 £89,614,777.70 £89,614,777.70 £89,614,777.70

Professional fees £10,753,773.32 £10,753,773.32 £10,753,773.32 £10,753,773.32

Contingency £4,014,742.04 £4,014,742.04 £4,014,742.04 £4,014,742.04

Letting £1,012,295.87 £1,012,295.87 £1,012,295.87 £1,012,295.87

Marketing £3,120,138.95 £3,120,138.95 £3,120,138.95 £3,120,138.95

CIL £3,601,000.00 £3,601,000.00 £3,601,000.00 £3,601,000.00

Post Construction Costs £850,000.00 £850,000.00 £850,000.00 £850,000.00

Void Rental £11,928,358.27 £11,928,358.27 £11,928,358.27 £11,928,358.27 Break Even Point

Break Even Point %

reduction in sales 23.11%

Empty Rates £2,603,703.01 £2,603,703.01 £2,603,703.01 £2,603,703.01 £253,909,378.44

Break Even Point %

increase in costs 30.06%

Interest Costs £43,574,375.54 £43,574,375.54 £43,574,375.54 £43,574,375.54 £82,836,213.74

Decrease in Sales/Increase

in Costs £76,326,946.43

Total Cost £253,909,378.44 £253,909,378.44 £253,909,378.44 £253,909,378.44 £89,614,777.70

Project Profit £76,326,946.43 £43,303,313.94 £26,791,497.70 £10,279,681.46 £10,753,773.32

Profit on Cost 30.06% 17.05% 10.55% 4.05% £4,014,742.04

All Cost Overrun by 10%

(Excluding Void Rents & Rates) Cost Overrun by 15% Cost Overrun 20% £1,012,295.87

Total Sales Price £330,236,324.87 £330,236,324.87 £330,236,324.87 £330,236,325.87 £3,120,138.95

Site Purchase Price (Including Buying

Costs) £82,836,213.74 £82,836,213.74 £82,836,213.74 £82,836,213.74 £3,601,000.00

Construction Cost Total £89,614,777.70 £98,576,255.47 £103,056,994.36 £107,537,733.24 £850,000.00

Professional fees £10,753,773.32 £11,829,150.66 £12,366,839.32 £12,904,527.99 £11,928,358.27

Contingency £4,014,742.04 £4,416,216.25 £4,616,953.35 £4,817,690.45 £2,603,703.01

Letting £1,012,295.87 £1,113,525.46 £1,164,140.25 £1,214,755.04 £43,574,375.54

Marketing £3,120,138.95 £3,432,152.84 £3,588,159.79 £3,744,166.74 £253,909,378.44

CIL £3,601,000.00 £3,961,100.00 £4,141,150.00 £4,321,200.00 £0.00

Post Construction Costs £850,000.00 £935,000.00 £977,500.00 £1,020,000.00 0.00%

Void Rental £11,928,358.27 £11,928,358.27 £11,928,358.27 £11,928,358.27


Empty Rates £2,603,703.01 £2,603,703.01 £2,603,703.01 £2,603,703.01

Interest Costs £43,574,375.54 £47,931,813.10 £50,110,531.88 £52,289,250.65

Total Cost £253,909,378.44 £269,563,488.78 £277,390,543.96 £285,217,599.13

Project Profit £76,326,946.43 £60,672,836.09 £52,845,780.92 £45,018,726.75

Profit on Cost 30.06% 22.51% 19.05% 15.78%

DEVELOPMENT VIABILITY

Analysing the site’s residual valuation above showcases the viability of the proposed development and the potential return to be made as a result of developing 160 Blackfriars Road. The figures used throughout

the residual valuation have been conservative figures. In terms of construction, it is estimated that the development will take two years to build, with 6 months lead time in order to gain planning consent. It is

assumed that due to the high demand of residential units within the area, all residential units will be sold by the date of construction completion, as it is evident from the sale of units from nearby The Residence

development. The void and rent free periods for the retail and office spaces have been estimated to be as provided by market analysis. It is preferable, however, that a large anchor tenant is found to occupy a

significant amount of space for both the retail and the office provision. This will entice other potential tenants to take up space within the proposed development. Additionally, the proposed development can withstand

a favourable amount of risk as demonstrated by the sensitivity analysis carried above. Due to the scale and value of the proposed development, the estimated interest rate that will be charged is assumed to be at

the higher end of the scale at 7.5%. Nonetheless, the Net Development Value of the scheme is estimated to be over £300 million, with a 20% Developer’s Profit on cost resulting in a total profit of over £52 million.

The Net Residual Value of the site based on the proposed development is estimated to be around £83 million. Therefore, as mentioned above, the site is currently on the market with offers in excess of £75,270,000

invited, thus making the proposed site extremely viable.

SITE ACQUISITION STRATEGY

Based on the above proposal, it is recommended that the best strategy in acquiring the site is through a Conditional Contract offered to the seller, with the condition being strictly on the council providing planning

consent to the buyer for the above proposed development. The contract is to take into the account the length of time in obtaining planning consent, which is stated on the Southwark Council website to be within

13 weeks, which could be longer for large scale developments such as the proposed (Southwark Council Planning Applications, 2016).

The risks associated with the developer when it comes to Conditional Contracts varies. Within the context of the proposed development, the main contract risk is the gaining for approval for planning consent due

to the large scale of the project. However, as demonstrated in the previous section examining planning policy considerations, this risk is as assumed to be low. Furthermore, the risk of obtaining financing for the

project could be jeopardised if the conditions associated with the contract are not met and the council imposes further conditions before consenting for planning, thus resulting in loss of financing available for

commencing with development of the site. The transferred risk from the vendor to the purchaser, in this case, is if planning consent is granted, the site value increase dramatically, thus the vendor could try to get

out of the selling obligation at the conditional price. Therefore, it is extremely important that a solid clause within the contract is included to ensure that the seller cannot withdraw from the purchase price agreement

as long as all of the conditions within the contract are stated.

On the other hand, the main benefit that a conditional contract strategy will provide to the developer is the reduction of risk in acquiring a site that he cannot develop. Furthermore, having a conditional contract in

place allows for sufficient lead time to ensure that all necessary items regarding the development are properly assessed and validated, ensuring that the development is viable and will not result in a net loss.


REFERENCES

240blackfriars.com. (2016). 240 Blackfriars Road: Downloads240 Blackfriars. [online] Available at: http://240blackfriars.com/downloads/?menu=8 [Accessed 1 May 2016].

Barratthomes City AM. (2015). Barratt London's Blackfriars Circus featured in City AM | Barratt London. [online] Available at: http://www.barratthomes.co.uk/new-homes/london/news/latest-

news/Barratt-londons-blackfriars-circus-featured-in-city-am/ [Accessed 1 May 2016].

Barratthomes.co.uk. (2015). Blackfriars Circus: New Homes in Southwark, LONDON | Barratt London. [online] Available at: http://www.barratthomes.co.uk/new-homes/greater-

london/H625601-Blackfriars-circus/ [Accessed 1 May 2016].

BCIS. (2016). Login. [online] Available at: http://service.bcis.co.uk/BCISOnline/AveragePrices/Results [Accessed 28 Mar. 2016].

British-history.ac.uk. (2016). Blackfriars Bridge and Blackfriars Road | British History Online. [online] Available at: http://www.british-history.ac.uk/survey-london/vol22/pp115-121 [Accessed

23 Mar. 2016].

Canstockphoto.com. (2016). Water fountain Clipart Vector Graphics. 686 Water fountain EPS clip art vector and stock illustrations available to search from thousands of royalty free

illustrators. [online] Available at: http://www.canstockphoto.com/vector-clipart/water-fountain.html [Accessed 25 Mar. 2016].

Carter Jonas, (2015). Central London Office Market Update Q4 2015. [online] London: Carter Jonas. Available at:

http://www.carterjonas.co.uk/~/media/Publications/London%20Office%20Market%20Update%20-%20Q4%20-%200915.ashx [Accessed 28 Mar. 2016].

DEFRA, (2012). Contaminated Land Statutory Guidance. [online] London: DEFRA. Available at:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/223705/pb13735cont-land-guidance.pdf [Accessed 25 Mar. 2016].

Environmental Protection Act. (1990). .

Farebrother, (2013). The London Southbank Office and Retail Market Q2 2013. [online] London: Farebrother. Available at:

http://www.unionstreetpartners.co.uk/images/uploads/archived_research/Q2_13_Southbank__Report.pdf [Accessed 1 May 2016].

Fieldandsons.co.uk. (2016). Property in Blackfriars Road, Blackfriars Boulevard. [online] Available at: http://www.fieldandsons.co.uk/Property/Residential/for-sale/Londn/Blackfriars-

Boulevard/Blackfriars-Road/FSN26018385.aspx [Accessed 1 May 2016].

Fieldandsons.co.uk. (2016). Property in Blackfriars Road, Blackfriars Road. [online] Available at: http://www.fieldandsons.co.uk/Property/Residential/for-sale/Londn/Blackfriars-

Road/Blackfriars-Road/FSN26018107.aspx [Accessed 1 May 2016].

Foxtons.co.uk. (2016). House prices in SE1 - View SE1 property prices and values. [online] Available at: http://www.foxtons.co.uk/living-in/se1/house-prices/ [Accessed 28 Mar. 2016].

Greater London Authority A, (2016). Central Activities Zone SPG. [online] London: Greater London Authority. Available at: https://www.london.gov.uk/sites/default/files/caz_spg_final.pdf

[Accessed 27 Mar. 2016].

Greater London Authority B, (2016). Crossrail Funding. London Plan 2016. [online] London: Greater London Authority. Available at:

https://www.london.gov.uk/sites/default/files/crossrail_funding_spg_updated_march_2016_final.pdf [Accessed 28 Mar. 2016].

Hijazi, H. (2016). Development Funding and Finance Coursework 1. University of Westminster, London.

Homes & Communities Agency, (2015). Guidance on dereliction, demolition and remediation costs. London.

Knight Frank, (2016). 160 Blackfriars Road SE1. [online] London: Knight Frank. Available at: http://search.knightfrank.co.uk/cpd207620 [Accessed 23 Mar. 2016].


Linden Homes Prices. (2016). Property Specification | The Residence | Linden Homes. [online] Available at: http://london.lindenhomes.co.uk/developments/london/the-residence-

southwark/availability-prices [Accessed 1 May 2016].

London SE1. (2016). Blackfriars Road, London SE1. [online] Available at: http://www.london-se1.co.uk/street/blackfriars-road [Accessed 23 Mar. 2016].

London, T. (2016). The Music Box - New apartments available in Southwark. [online] Taylorwimpeycentrallondon.com. Available at:

http://www.taylorwimpeycentrallondon.com/development/en/the-music-box [Accessed 1 May 2016].

London.lindenhomes.co.uk A. (2016). The Residence | New Homes For Sale in Blackfriars | Linden Homes. [online] Available at: http://london.lindenhomes.co.uk/developments/london/the-

residence-southwark [Accessed 23 Mar. 2016].

London.lindenhomes.co.uk B. (2016). Property Specification | The Residence | Linden Homes. [online] Available at: http://london.lindenhomes.co.uk/developments/london/the-residence-

southwark/availability-prices?filter=availability [Accessed 28 Mar. 2016].

London.lindenhomes.co.uk. (2016). The Residence | New Homes For Sale in Blackfriars | Linden Homes. [online] Available at: http://london.lindenhomes.co.uk/developments/london/the-

residence-southwark [Accessed 1 May 2016].

Maps.environment-agency.gov.uk. (2016). Environment Agency - What's in your backyard?. [online] Available at: http://maps.environment-

agency.gov.uk/wiyby/wiybyController?x=357683.0&y=355134.0&scale=1&layerGroups=default&ep=map&textonly=off&lang=_e&topic=floodmap#x=531645&y=180074&lg=1,2,10,&scale=8

[Accessed 24 Mar. 2016].

Maps.southwark.gov.uk. (2016). Stratus Connect. [online] Available at:

http://maps.southwark.gov.uk/connect/southwark.jsp?mapcfg=defaultmap&mylayer1=S_APZ&x=531760&y=179922&z=7 [Accessed 24 Mar. 2016].

Rightmove Comparison. (2016). Price Comparison Report for SE1 8ER. [online] Available at: http://www.rightmove.co.uk/house-

value.html?searchLocation=SE1+8ER&sellersPriceGuide=Start+Search&radius=0.0&displayPropertyType=&bedrooms= [Accessed 1 May 2016].

Rightmove Residence. (2016). House Prices in SE1 8ER. [online] Available at: http://www.rightmove.co.uk/house-

prices/detail.html?country=england&locationIdentifier=POSTCODE%5E1219160&searchLocation=SE1+8ER&referrer=landingPage [Accessed 1 May 2016].

Southwark Council A, (2014). Appendix I: Urban Design Study. Blackfriars Road SPD. [online] London: Southwark Council. Available at:

https://www.southwark.gov.uk/downloads/download/3487/blackfriars_road_spd [Accessed 25 Mar. 2016].

Southwark Council B, (2014). Appendix F: Sustainability Appraisal. Blackfriars Road SPD. [online] London: Southwark Council. Available at:


Southwark Council C, (2014). Appendix H: Appropriate Assessment. Blackfriars Road SPD. [online] London: Southwark Council. Available at:


Southwark Council Planning Applications. (2016). Planning Applications Process. [online] Available at: http://www.southwark.gov.uk/info/485/planning_applications [Accessed 28 Mar.

2016].

Southwark Council, (2012). Contaminated Land Strategy 2012-2017. [online] London: Southwark Council. Available at:

http://www.southwark.gov.uk/downloads/file/12025/contaminated_land_inspection_strategy_review_2012-2017 [Accessed 25 Mar. 2016].

Southwark Council, (2014). Blackfriars Road Supplementary Planning Document. [online] London: Southwark Council. Available at:



Southwark Council, (2015). New Southwark Plan Preferred Option. [online] London: Southwark Council. Available at:

http://www.southwark.gov.uk/downloads/download/4346/new_southwark_plan_preferred_option [Accessed 27 Mar. 2016].

Southwark.gov.uk. (2016). Southwark Community Infrastructure Levy April 2015. [online] Available at:

http://www.southwark.gov.uk/downloads/download/4124/southwark_community_infrastructure_levy_april_2015 [Accessed 28 Mar. 2016].

Stiffandtrevillion.com. (2016). 1 Valentine Place - Stiff + Trevillion. [online] Available at: http://www.stiffandtrevillion.com/architecture/1-valentine-place [Accessed 23 Mar. 2016].

WhatDoTheyKnow. (2014). 2nd Economic Viability Study for 1 Blackfriars - a Freedom of Information request to Southwark Borough Council. [online] Available at:

https://www.whatdotheyknow.com/request/2nd_economic_viability_study_for [Accessed 1 May 2016].

Whatdotheyknow.com. (2016). attachment.pdf. [online] Available at: https://www.whatdotheyknow.com/request/226757/response/574714/attach/html/3/attachment.pdf.html [Accessed 1

May 2016].

www.a3ia.com, a. (2016). New Developments - Blackfriars Circus, 128-150 Blackfriars Road, London SE1 8EQ. [online] Buildington.co.uk. Available at:

http://www.buildington.co.uk/new_developments/london_se1/128-150_blackfriars_road/blackfriars_circus/id/4578 [Accessed 1 May 2016].

www.a3ia.com, a. (2016). New Developments - The Music Box, 235-241 Union Street, London SE1 0LR. [online] Buildington.co.uk. Available at:

http://www.buildington.co.uk/new_developments/london_se1/235-241_union_street/the_music_box/id/4341 [Accessed 1 May 2016].

www.a3ia.com, a. (2016). New Developments - Two Fifty One, 251 Southwark Bridge Road, London SE1 6NP. [online] Buildington.co.uk. Available at:

http://www.buildington.co.uk/new_developments/london_se1/251_southwark_bridge_road/two_fifty_one/id/4339 [Accessed 1 May 2016].

York, M. (2015). The rise of Blackfriars’ towers on the South Bank. [online] Cityam.com. Available at: http://www.cityam.com/207238/focus-blackfriars-rise-and-rise-blackfriars-towers-south-

bank [Accessed 1 May 2016].

Zoopla.co.uk. (2016). House prices in Blackfriars Road, London SE1. Property values - Zoopla. [online] Available at: http://www.zoopla.co.uk/house-prices/london/blackfriars-

road/?so=last_sale_date&sd=desc [Accessed 28 Mar. 2016].


APPENDICES

Appendix 1: Environment Agency Flood Risk

Appendix 2: Subterranean Construction Risk

The Site

Source: Google Maps

The Site


Appendix 3: Archaeological Risk

Appendix 4: Conservation Area Risk

Source: (Maps.southwark.gov.uk, 2016)

The Site The Site

Source: (Maps.southwark.gov.uk, 2016)


Appendix 5: Environmental and Sustainability Impact and Assessment

Source: Appendix F: Sustainability Appraisal. Blackfriars Road SPD


Appendix 6: Contamination Considerations

Historical Pollution. Source: Environment Agency

The Site

Historic Landfill Sites. Source: Environment Agency

The Site

Date post:	13-Apr-2017
Category:	Documents
Upload:	hussein-hijazi
View:	114 times
Download:	2 times

Sample Development Appraisal

Documents