Construction & Development

The report provides an analysis of the highest and best use of proposed development on a site located in South Australia. The developer aimed at investigating the economic viability as well as the profitability of construction of an office building, development of a community center or hotel development. The highest and best value analysis would be used in making a comparison of the mentioned options against each other.

CONSTRUCTION & DEVELOPMENT
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Executive summary
The global economy has been changed by the financial crisis experienced in 2007 leaving
nations, businesses as well as peoples with the task of deleveraging of great magnitude with
hopes of making right their financial direction in the uncertain and turbulent economy. The
report provides an analysis of the highest and best use of proposed development on a site
located in South Australia. The developer aimed at investigating the economic viability as
well as the profitability of construction of an office building, development of a community
center or hotel development. The highest and best value analysis would be used in making a
comparison of the mentioned options against each other. The report is divided into sections
including introduction, site analysis, planning analysis, economic context, market analysis,
design and cost, financial viability and then recommendations.
Introduction
This report is aimed at producing the highest and best use analysis for the purposes of
production of the highest value for a given property based on the maximum productivity
concept. The site on which the analysis is done is located at the junction of Poultney Street
and Angas Street in Adelaide city center, South Australia. Bowes Street passes on its Eastern
side parallel to Poultney Street. It is legally identified as Allotment 290 – 304.
Figure 1: Site Location Map

Site analysis
The site is located at the junction of Poultney Street and Angas Street in Adelaide city center.
One of the main competitive advantages of this site is the ease of its accessibility. The site is
accessible by three main streets making it a highly profitable site as far as development is
concerned. Still, the topography of the site is such that it is fairly flat and properly maintained
making it very easy to develop and hence saving the developer a lot of costs. The site covers
about 0.28 ha of land (Morano, Locurcio and Tajani, 2016). Poultney Street is perceived as a
quintessential illustration of the new urban village providing a robust transit-oriented
community as a result of the three main streets that enable unlimited and very easy access. Its
vibrant business friendly surrounding is epitomized by the science, trade associations as well
as technology that is found here. The classic demographics of its surroundings are just but
one of the numerous proofs demonstrating this point.
Owing to the location and nature of the site, various developments can be attained including:
 Office buildings
 Commercial structures that may be inclusive of parking spaces in the basements since
the site is used for parking at the moment (Herold, Liu, and Clarke, 2013)
 A community center that brings together the dwellers of the city and breaths fresh life
into the city
The site is at the moment enhanced by parking for 120 cars with the topography being
relatively level hence providing no projected complications with regard to the development of
the region.
Planning analysis
Poultney Street is zoned Capital City Zone which acts as the economic as well as cultural
attention of the State and is inclusive of an avalanche of community, employment,
entertainment, educational as well as tourism facilities (Maxwell, 2016). It is expected that an

increase in the human population within this Zone would be competitive of the experienced
as well as the range of opportunities offered in the city alongside enhancing the vibrancy.
Determination of the real types, as well as densities of uses, will be attained through the
process of site plan approval based on the features of the site, heights as well as maximum
densities. The need for community facilities, landscaped areas as well circulation and open
spaces would also be taken into consideration during the determination of the density and
heights.
A more enhanced review of the site inclusive of discussions indicates Poultney Street is
controlled by a certain exception, site plan 28 which was approved during the second
amendment. The intent of Site Plan 28 means the cumulative gross area should not go beyond
a floor area ratio of 3.25 that would basically allow the development of a property 0.28*3.25
square ha. Nevertheless, a more detailed analysis is needed to establish the maximum
permissible building which may be developed on the site.

In the City Zone where the site lies other than with regard to sites that are larger than 1500
square meters in coverage, the number of dwellings that would be ideal on a site should not
be more than the site area divided by the number of dwelling unit factor as provided in
relevant Zone and any fractions in number should be avoided in case so calculated.
Landscaping
Landscaped open space should be offered on the site f development to not less than the extent
specified in Principles of Development Control for the City Zone outdoor sitting, screen, and
amenity purposes. In cases the existing amount of landscaped open areas offered in less than
the specified amount in the zone, the development should not reduce further this amount.
Parking Requirements
All the developments are expected to provide car parking services for people having
disabilities as per the requirements of the BCA and the number of spaces should be as per the
table is shown below.

Process of Approval
The process of acquiring site plan approval in Adelaide (City) calls for a public hearing from
the City Board to establish the development suggested by the site plan is significantly
complaint with the character of master plans as well as regulations and relates functionally to
the other structure allowed in the neighborhood.
Economic Context
The site is located at the junction of Poultney Street and Angas Street in Adelaide city center,
South Australia. With regard to land, the sit tends to be having the smallest land coverage
compared to the neighboring structures. The neighborhood of the site is home to numerous
economic developments and economic hub rendering the location an instrumental aspect in
the growth of South Australia.

Market analysis
The region where the site lays costs of a high human population composed of vibrant
workforces that have since evolved into the forefront of commerce as well as technology
industries. The city boasts of the highest number of youths in the regions and most likely the
most highly learned community in South Australia. Inspired by Smart Growth, the site and
the surrounding have become a vibrant mix of entertainment and public parking uses where
the site is a parking ground during the working days and a social place at night and during
weekends playing host to various forms of entertainment party providing a truly live, play
and work environment.
It can be concluded in this section located at the junction of Poultney Street and Angas Street
in Adelaide city center, South Australia is positioned in one of the regions that experience the
fastest growth in South Australia offering it a highly competitive advantage.
Design and costing
The proposed development would be a single level structure with a room height of 2700 mm
The design and costing are as analyzed in the attached excel sheet in the appendix

Financial feasibility
Poultney Street is encumbered by a maturing note of $100,000,000 for the development of
the site. Such a predicament calls upon the developer to make a decision on the most
appropriate course of action for the real estate asset. To entirely have an understanding of all
the options, the developer would conduct back of the envelope highest and best use analysis
in the determination if a community center, office building or mixed-use development is the
most economically viable option as far as using the site is concerned (Rahmawati and Utomo,
2017). The approach entails a three-tier approach with the initial one being the determination
of the maximum density for every use as per the zoning analysis. This is followed by
reaching out to consultants to aid with cost estimates for each of the proposed projects
development. The services of another consulted would be sought to aid in ascertaining the
income from the market, debt assumptions as well as expenses which have been highlighted
in the analysis to come up with a proforma for every use.
Overview of capital markets
The direction of the real estate industry has been dictated by the capital markets for a long
time. The success of Poultney Street would have a direct correlation with the capital markets.
Four options are available with regard to bridge financing and construction:
 Banks
 Construction Permanent lenders
 Commercial Mortgage-Backed Securities
 Depart of Housing & Urban Development
There is a limited number of construction permanent lenders and the ones that are available
have not been very competitive in comparison with the other sources of lending on proceeds
as well as the interest rate (Boardman et al., 2017). Department of Housing and Urban
Development provides financing for family development only even though they as well have

an extended lead time. Hence construction permanent lenders and housing and urban
development are not recommended as sources of financing for Poultney Street site
development.
The underwriting assumptions used by the developer in the highest and best value analyses
for each development is as shown:
Office construction
Community center
Development of Hotel
Return on Cost
Office construction 7.02%
Community Center 8.01%
Hotel Development 2.89%
The return on the cost table above offers an idea on a high-level overview of the possible
development options (Chapple, 2014). The first conclusion is that hotel development does not
provide enough returns to further pursue this option. Development of a community center
looks like the most attractive options even though it is of importance to note the development
is not inclusive of additional hard costs of development of the site neighborhood and services

as the development costs are fairly less than costs linked with the development of entire
neighborhood and various services. Still, in case an appropriate budget may be made,
reducing the cost over-runs with aggressive leasing team being in place, development of
community center is one viable option to the prevailing predicament (Herradiyanti, Utomo
and Putri, 2016).
Recommendation
Following the discussion above, it is noted and recommended that:
Hotel development does not present an attractive return of offers
Still, office development even though intriguing from a long term point of view does not
provide the returns that would be anticipated by the developer
Community center development is the last option and should be as a speculative commercial
and social structure presents a viable option for the investment and promises returns on the
capital injected.

References
Morano, P., Locurcio, M. and Tajani, F., 2016. Cultural heritage valorization: an application
of AHP for the choice of the highest and best use. Procedia-Social and Behavioral
Sciences, 223, pp.952-959 Della Spina, L., 2016. Evaluation decision support models:
Highest and Best Use choice. Procedia-Social and Behavioral Sciences, 223, pp.936-943
Herradiyanti, M., Utomo, C. and Putri, Y.E., 2016. Analisa Penggunaan Tertinggi dan
Terbaik (Highest and Best Use Analysis) pada Lahan Pasar Turi Lama Surabaya. Journal
Teknik ITS, 5(2), pp.D172-D175
Maxwell, D.G., 2016. Highest and best use?: Access to urban land for semi-subsistence food
production. Land Use Policy, 13(3), pp.181-195
Chapple, K., 2014. The highest and best use? Urban industrial land and job
creation. Economic Development Quarterly, 28(4), pp.300-313
Herold, M., Liu, X. and Clarke, K.C., 2013. Spatial metrics and image texture for mapping
urban land use. Photogrammetric Engineering & Remote Sensing, 69(9), pp.991-1001
Boardman, A.E., Greenberg, D.H., Vining, A.R. and Weimer, D.L., 2017. Cost-benefit
analysis: concepts and practice. Cambridge University Press

Rahmawati, Y. and Utomo, C., 2017, September. The value-based decision for highest and
best use. In 2017 International Conference on Engineering Technology and
Technopreneurship (ICE2T) (pp. 1-5). IEEE
Appendices
Appendix A
Appendix B: Office Development Analysis

Appendix C: Community Center Development Analysis

Appendix D: Hotel Development Analysis