© 2011 Deloitte Corporate Finance Limited - Private and confidential Developing for the future, for more sustainable returns and higher value Question:

© 2011 Deloitte Corporate Finance Limited - Private and confidential

Developing for the future, for more sustainable returns and higher value

Question: What will produce higher sustainable returns?


Modern office development – Eastern Province

Assumption: A long term investor

Note: All property markets are imperfect Note: Reasonable assumptions must be made

Case Study:


Case Study:


End user requirements: Build for the occupier not the profit

• Corporate identity

• Car parking

• Specification


Case Study


Corporate identity

• Impressive entrance hall

• Good quality atria

• Professional reception desk & tenant’s directory


Case Study


Car parking

• Limited public transport – preference to drive

• 1 car park space per 25 sq. m net minimum

• 1 space requires 33 sq. m


Case Study


Specification

• Flexible floor plates

• High speed lifts

• State of the art security


Case Study


Typical building

• 1,250 sq. m plot

• 20 levels

• 1,000 sq. m gross per floor (85% efficiency)


Case Study

High specification building 14,450 sq. m net

• 578 car park spaces (1:25)

• Triple height atria (lose 3 x levels rental)

• Build cost offices @ $1,460/sq. m

• Build cost car park @ $ 475/sq. m

• Rent @ $ 318/sq. m pa

Medium specification building 16,575 sq. m net

• 166 car park spaces (1:100)

• Basic atria (loose 50% ground level)

• Build cost offices @ $1,200/sq. m

• Build cost car park @ $ 475/sq. m

• Rent @ $ 255/sq. m pa


Case Study


• Construction cost offices $29.2 million

• Car park $ 9.1 million

• Land $ 7.1 million

• Total $ 45.4 million

• Rent $4.6 million pa


• Construction cost offices $ 23.9 million

• Car park $ 2.6 million

• Land $ 7.1 million

• Total $ 33.6 million

• Rent @ $ 4.2 million pa


Case Study


• Construction cost 22% higher

• Land - same

• Rent 9% higher

• 10% return on cost


• -

• -

• -

• 12.5% return on cost


Case Study


Impact on yield

• Quality tenants – covenant strength +

• Longer leases – typically 5 years plus

• Better efficiency (85%)

• Lower yield – higher capital value


• Lower quality tenant – covenant strength -

• Shorter leases – typically 2 years

• Less efficient (80%)

• Higher yield – lower capital value


Case Study


Impact on value

• Rent @ $4.6 million pa

• Yield say 8.0 %

• Capital value $57.5 million


• Rent @ $4.2 million pa

• Yield say 10.0 %

• Capital value $42.0 million

The higher specification building is $ 15.5 million more valuable (37%)


Developing for the future and for higher and more sustainable value

Question: What will produce higher sustainable returns?

Answer: Buildings designed and constructed for end-users


Developing for the future and for higher and more sustainable value

How do you achieve results?

By working with experienced relevant professionals

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© 2011 Deloitte Corporate Finance Limited - Private and confidential Developing for the future, for more sustainable returns and higher value Question: