Financial Viability Assessments in Planning

Chartered Surveyors and RICS Registered Valuers: London and the Home Counties

What we doOur financial viability assessments are crucial for informed decision-making in the planning process

Changes to national planning policy mean the financial viability of property developments is taking on an increasingly important role in the planning and plan-making process.

We work with Developers, Registered Social Landlords (RSLs) and Local Authorities to ensure the value generated by a development (Gross Development Value, GDV) exceeds the total cost of delivering it.

Chartered surveyors play a central role in conducting financial viability assessments.

Our highly experienced team of chartered surveyors have access to the latest evidence to accurately model the viability of a development. We can assess both greenfield and brownfield sites and can effectively negotiate for both private sector and public sector clients. We can also provide insight and guidance into the viability process and procedures.

We provide the following financial viability in planning services:

  • Preparation of financial viability assessments, including benchmark land values on behalf of applicants.
  • Reviewing FVAs on behalf of local planning authorities.
  • Undertaking negotiations;
  • Liaising with the Local Authority.
  • Providing expert advice for planning appeals.
  • Liaising with solicitors in relation to review mechanisms.
  • Preparing evidence for local plan reviews and examinations.
Key Components of  Viability Assessments include:

Market Analysis:

  • Demand Analysis: Evaluates the current and projected demand for the type of property in the chosen location (e.g., residential, commercial, industrial).
  • Supply Analysis: Assesses the existing and planned supply of similar properties in the market.
  • Competitive Analysis: Studies the competitive landscape, including pricing, amenities, and occupancy rates of comparable properties.

Financial Analysis:

  • Capital Costs: Estimation of all costs related to acquiring, developing, or renovating the property, including land acquisition, construction, and soft costs (e.g., architectural, engineering, permits).
  • Revenue Projections: Forecasts potential income from the property, such as rental income, sales revenue, or lease agreements.
  • Operating Expenses: Calculation of ongoing costs to operate and maintain the property, including property management fees, maintenance, utilities, taxes, and insurance.
  • Financing Costs: Assessment of interest rates, loan terms, and the impact of financing on overall project costs.

Cash Flow Analysis:

  • Net Operating Income (NOI): Income generated from the property after deducting operating expenses.
  • Cash Flow Projections: Detailed projections of cash inflows and outflows over the investment period.
  • Debt Service Coverage Ratio (DSCR): Measure of the property’s ability to cover its debt obligations from its NOI.

Return on Investment (ROI) Metrics:

  • Capitalization Rate (Cap Rate): NOI divided by the property’s purchase price, indicating the expected rate of return.
  • Cash on Cash Return: Annual pre-tax cash flow divided by the total cash invested.
  • Internal Rate of Return (IRR): The discount rate at which the net present value (NPV) of all cash flows (positive and negative) from the investment equals zero.
  • Net Present Value (NPV): The difference between the present value of cash inflows and outflows over the investment period.

Risk Analysis:

  • Market Risk: Potential impact of changes in market conditions on property value and income.
  • Operational Risk: Risks associated with property management, tenant turnover, and maintenance issues.
  • Financial Risk: Risks related to changes in interest rates, financing terms, and availability of capital.
  • Legal and Regulatory Risk: Risks associated with zoning laws, building codes, environmental regulations, and other legal considerations.

Feasibility Studies:

  • Technical Feasibility: Evaluation of the technical aspects of the project, including site suitability, design, and construction feasibility.
  • Economic Feasibility: Analysis of the economic benefits of the project relative to its costs and the overall economic environment.
  • Environmental Feasibility: Assessment of environmental impact and compliance with environmental regulations.

Exit Strategy:

  • Sale: Plans for selling the property, including timing and potential buyers.
  • Refinancing: Potential for refinancing the property to take advantage of better loan terms or to extract equity.
  • Alternative Uses: Consideration of alternative uses for the property to maximize value if initial plans do not succeed.

Get in touchGet a quote for our services or request a call back.

We are more than happy to discuss your requirements and send you a quote for our services, as well as sample reports and turnaround time.

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020 8516 7795

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Residential & Commercial Surveys and Valuations (RCSV). RCSV and RSAVL are trading names of Residential Surveys and Valuations Limited, Chartered Surveyors and Registered Valuers. Registered in England & Wales, Company Number 14386530. All rights reserved.