logo

Report on Building Project Evaluation

   

Added on  2020-05-28

22 Pages6025 Words34 Views
BUILDING PROJECT EVALUATION16 Robert Street, Jesmond

TABLE OF CONTENTS LETTER OF TRANSMITTAL............................................................................................................3INTRODUCTION................................................................................................................................4EXECUTIVE SUMMARY..................................................................................................................4OVERVIEW OF THE AUSTRALIAN MARKET..............................................................................6Analysis of Real Estate Market.......................................................................................................6Jesmond...........................................................................................................................................7FINANCIAL CAPACITY....................................................................................................................8SITE ANALYSIS..................................................................................................................................9LOCATION CHARACTERISTICS.....................................................................................................9SURROUNDING FACILITIES...........................................................................................................9PHYSICAL CHARACTERISTICS...................................................................................................12LEGAL CHARACTERISTICS..........................................................................................................12DEVELOPMENT PROPOSAL.........................................................................................................12DESCRIPTION OF THE PROJECT.................................................................................................12Project : Mixed Commercial and Residential Development.........................................................12TARGETED’ LIKELY CUSTOMERS..............................................................................................13SCHEDULE FOR DEVELOPMENT................................................................................................13CONSTRUCTION COST..................................................................................................................14CAPITAL............................................................................................................................................14ENVIRONMENT-FRIENDLY FEATURES INCORPORATED INTO PROJECT..........................15Urban Design.................................................................................................................................15Labor..............................................................................................................................................15Noise..............................................................................................................................................15Materials and waste.......................................................................................................................15Energy............................................................................................................................................15INCOME ESTIMATE........................................................................................................................16INVESTMENT PROPOSAL.............................................................................................................16CASH FLOWS – BEFORE TAX.......................................................................................................16AFTER TAX CASH FLOWS............................................................................................................17IRR and NPV- BEFORE TAX............................................................................................................17IRR and NPV-AFTER TAX...............................................................................................................17RISK ANALYSIS OF INVESTMENT AND SUSTAINABILITY...................................................17RISK MATRIX...................................................................................................................................18COMPARABLE MARKETS.............................................................................................................19REFERENCES...................................................................................................................................20APPENDICES....................................................................................................................................22

LETTER OF TRANSMITTALThe ManagementReal Estate Pty LtdNewcastle City1234 Victor RoadJanuary 2017To the ClientSydney, 2314 Wisshes RoadSydneyDear Sir/ MadamReference: Property Valuation Report for 16 Robert Street Road, Jesmond, NSWThe above refers; this report is a valuation of the named property, using the API (Australian Property Institute) standards. The facility is valued based on the returns it can provide when purchased and developed as a real estate business, specifically, a student accommodation facility with 105 rooms and a small commercial section covering 1450 square meters. The valuation is donebased on present and projected financial and economic conditions, as well as social dynamics. Assumptions are made, such as that the real estate market will not collapse or the economy faces a recession that can drastically lower real estate prices. The report is made on January 2018. The report is done step by step, with external factors evaluated, internal dynamics also evaluated, and risks that the project may face also analyzed. As such, the report is accurate and factual to the limits of assumptions madeRegardsReal Estate Pty Ltd

INTRODUCTIONThis report details the feasibility study and evaluation of a proposed real estate investment in NSW, in Newcastle City at Jesmond. Specifically, the report looks at the feasibility of constructing a 3 level mixed residential and commercial building at 16 Robert Street in Jesmond that will be used to provide accommodation to University students studying at Newcastle University. The project looks at putting up 105 accommodation rooms, motivated by the large student population at Newcastle University and the scarcity of adequate accommodation for these students. Further, the region (Newcastle) is touted a the next big growth area in real estate; this study therefore seeks to justify whether the proposed investment on 2500 square feet of land at 16 Jesmond street is feasible, by computing its cash flows, and net present value for an intended development and use of the facility for ten years, after which it will be sold off. EXECUTIVE SUMMARYThe ‘company’ is looking at making an investment into real estate; recently, here has been an upturnin the real estate sector in Newcastle in NSW; with analysts projecting that it is the next growth frontier for real estate. With a projected population growth of 33 % by the year 2016, the region willsee a huge demand for real estate. In looking at the region, it was decided that Jesmond, a dormitorytown for Newcastle City, and just 9.5 km from the Newcastle CBD, offered a good investment opportunity. This is because land rates are still lower than purchasing the same amount of land in within the Newcastle CBD. As such, a search returned a suitable piece f land, Number 16 Robert Street, Jesmond, measuring 2500 square meters. The land has straight edges and is rectangular with triangular shaped edges. Its shape makes it an ideal investment for real estate given that it will maximize utilization of space. The piece of land is 80% vacant, with an old building and a few structures touching the Robert Street road. The zoning for the areas means it can be used only as a residential area with rating of residential zone Type A. The piece of land can easily take 11 three bedroomed residential houses; however, the company wanted a different approach that would enable it serve the needs of the community better and attain higher returns. The University of Newcastle has a student population of 26615 in Newcastle City and at Jesmond, meaning this is a long term investment with guaranteed results. It is proposed that a student accommodation be built as well as a few commercial facilities where small restaurants, laundry businesses can be put up. The proposed development is a mixed use facility with three levels and an underground parking. Based on construction rates, the building will cost a total of $ 13.2 million to construct, including allother costs. The proposed building will be developed using solar technology and double envelope large windows for maximum natural lighting and to reduce air conditioning needs. Further, solar air

conditioners will be installed and solar panels used to minimize energy consumption. Some of the anticipated risks include business, vacancy, environment, structural, project, management, and legal risks. Computing the IRR and NPV using the cash flow method shows that the business is viable; the IRR before tax is 12.2% with an NPV $ 8,931,854, while after tax, the IRR is 10.2% with an NPV of $ 5,530,440 using a discounted cash flow rate of 6%. the findings show that it is a viable business; the tax rate used is 30% with annual depreciation of 2.5%. selling off the facility after 10 years means it remains a very viable investment. The project will take 36 weeks to complete

OVERVIEW OF THE AUSTRALIAN MARKETAustralia has a highly developed economy and is considered among the largest mixed economies globally, with a GDP (Gross Domestic Product) of $ 1.69 trillion (in Australian Dollars) (Holden, 2018). Considered in terms of wealth per adult, Australia is the second wealthiest country in the world, behind Switzerland, with a total wealth of $ 8.9 trillion as of 2017 (Pash, 2016). It is the 14thlargest economy (national) in terms of GDP and is the 25th largest exporter of goods among the world national economies (Tasker, 2017). The country’s economy has consistently performed well, ensuring a sustained GDP growth for 26 years, with its last recession reported 27 years ago; even the global economic recession of 2007/2008 did not affect her economy (Kopf, 2017). The service sector accounts for a major portion of the country’s GDP, at 61% of total GDP and this sector is alsothe biggest employer, employing 79% of the total labor force as of 2017 (Garnett, 2015). Australia has the 16th largest stock exchange (the ASX) in the context of domestic market capitalization; the country also has the largest interest rate derivatives in the Asian region (Martin, 2016). The country’s economy is a fully liberalized free market economy. Its GDP grew by an average of 3.4% between 1999 and 2008, and by an average of 2.7% between 2009 and 2014 (‘Focus Economics’, 2017). In 2018, the country’s GDP id projected to grow by 2.7%, same for 2019 (Holden, 2018). The GDP growth is shown in the chart below;Source: Trading Economics Analysis of Real Estate MarketInterest rates are dropping in Australia; coupled with steady economic growth and other indicators such as th weakening of the AUD, the real estate sector has benefited significantly. Sydney and Melbourne recorded the strongest property execution in 2015 - a pattern seen in 2016 and 2017, and

End of preview

Want to access all the pages? Upload your documents or become a member.

Related Documents
Real Estate Development Appraisal and Analysis Report
|19
|4014
|98

Property Portfolio Analysis
|20
|4031
|311

Analysis of CBRE: Mission, Value Proposition, Offerings, Competitors, and Digital Channels
|6
|939
|493