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Getting a Return from Mixed Use Development. A presentation by Gerry Brough, DTZ 24 th January 2006. Corporate Real Estate. Research & Investment. Development & Regeneration. Development & Economic Consulting. Strategic Economics. Housing. Economic Impact Assessments Economic Strategy - PowerPoint PPT Presentation
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DTZ Central & Eastern Europe
www.dtz.com
Getting a Return from Mixed Use Development
A presentation by Gerry Brough, DTZ
24th January 2006
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Getting a return from mixed use development – 7 Key Factors
1. Use advisers that:
Have experience of working with/for all potential stakeholders (property occupiers, buyers, property investors, public authorities and local communities)
Are knowledgeable about all aspects of the development cycle (Research >> Project Definition >> Development >> Delivery >> Impact Assessment)
Are committed to the development of their business in the Czech Republic, over the long-term
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Getting a return from mixed use development – 7 Key Factors
2. Meet the developers/investors needs:
A well located site (near suppliers, customers,
road links, labour supply)….
No ownership or planning issues….
To make as much profit as possible (low land
price, high investment incentives, low build costs,
no delays, high yields)….
A plentiful supply of adaptable, skilled labour….
No environmental liabilities….
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Getting a return from mixed use development – 7 Key Factors
3. Use an appropriate mix of advisers and cost/ benefit modelling to test various development options:
Stage 3Development
Options
• Property market appraisal• Value benefits of the site location
• Economic “health check”
• Ability of site to accept alternative land uses• Layout/massing/access etc
• Major Physical site constraints• Highlight key “cost” risks
• Current state of commercial property market
• Local economic conditions• Identify alternative high-value opportunities
• Road and public transport connections
• Mixed-use development potential
• Environmental issues
• Major costs associated with de-contamination,
• Ground conditions, utilities infrastructure, etc
Stage 1Baseline
Assessment for each site
Stage 2Initial
Conclusions
Stage 4TestingOptions
Establish and Compare Redevelopment Options for each site
Construct and Use Cost Benefit and Financial Models to Test Options
Urban Designers/Master planners
Engineers/Cost Consultants
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Getting a return from mixed use development – 7 Key Factors
4. Determine the best development mix to meet all stakeholder aspirations:
Balance Needs of all Stakeholders
Supporting Existing Businesses and Protecting local
jobs
Maximising community benefits;public open space
etc.
Maximising Future Local Economic
benefits (e.g. New Job Creation)
Maximising Profit
Economic Impact Appraisal
Development Appraisal
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Getting a return from mixed use development – 7 Key Factors
Risk associated with ‘doing nothing’ – environmental and socio-economic
Risks associated with regeneration projects Environmental obligations – need for possible future guarantees Planning approvals/permits - pressure groups, other ‘interests’ Environmental remediation - to what level? Financial risk – costs may exceed budget Market risks – are public sector anchor tenants or rental guarantees available?
Risks associated with securing/maintaining public sector support
Economic justification required (economic impact assessment)
5. Identify and “manage” risks:
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Getting a return from mixed use development – 7 Key Factors
Initial Market Assessment should;
Be based on knowledge of local and international property market is essential
Assess different options (different schemes based on pessimistic, average and optimistic scenarios)
Determine likely investment market interest at some future stage
Reputable international property advisers should be involved
from an early stage
Develop a realistic marketing strategy
6. Determine the marketability of the final scheme before starting:
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Getting a return from mixed use development – 7 Key Factors
Stakeholders = Site owners, main funding sources, planning authorities, local community groups etc.
Experts = Economic, Planning, Architectural, Environmental, Engineering, Cost, Building, Financial, Marketing
Dedicated management team (involving key stakeholders and key experts) should be established a.s.a.p.
Regular meetings with key stakeholders at each stage in the process
Regular public meetings to seek comments and secure public backing
An effective communications strategy (part of marketing strategy)
7. Ensure effective coordination of stakeholder and expert inputs:
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Summary
Expertise in all aspects of economic and property development Regeneration, Innovation, FDI, Performance Appraisal, Economic Impact
Assessment, Master Planning, Development Appraisals, Market Appraisals
Expertise in each stage of the project management process Research, Definition, Development, Delivery and Impact Assessment
Extensive Property Market Expertise
Expertise in advising Developers Property owners and occupiers Investors
An international brand associated with providing high quality expertise to demanding clients
= QUALITY
Culture
People Products
Clients
What DTZ can offer;
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Summary
Overall assessment of brownfield sites within the region
Work with Regional Councils to review zoning plans and identify the best potential development areas within the overall site, or wider region
Produce pre-feasibility studies for key sites
Development proposals for key sites Acquisition strategies Commercial development plans and funding proposals Brownfield regeneration strategies, where appropriate
Developer/Investor search Identify potential developers and investors Prepare development briefs for key sites
What DTZ can do for Czech Regional Authorities;
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Summary
Czech National Brownfield Strategy Project Project managed by Gerry Brough, Director, DTZ Consulting &
Research - on behalf of CzechInvest, the Ministry of Trade & Industry and the EU
Involved the preparation of 5 regeneration projects, as examples of best practice
• Ex-Thrall Wagonka factory, Studenka, • Ex construction materials site, Poruba District, Ostrava• Frantisek ex-deep coal mine, Horni Sucha, nr. Ostrava• Ex- military site, Podborany, near Most• Ex-gas works, Usti-nad-Labem
Previous Czech Experience;
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Summary
Demolition/Refurbishment Plan
Ex-Thrall Wagonka Factory - Studenka;
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Summary
Development Plan Phasing
Ex-Thrall Wagonka Factory - Studenka;
Phase 1
Phase 1
Phase 2
Phase 3
Phase 0 – site preparation
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Summary
Development Plan Phase 1
Ex-Thrall Wagonka Factory - Studenka;
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Summary
Estimated Development Costs
Site Acquisition and site servicing
Demolition
Refurbishment costs for Phase 1
Internal service connections for phase 1
Car parking and landscaping for phase 1
Preparation of serviced plot for new SME units in Phase 1
Preparation of serviced development plots in phases 2 and 3
Ex-Thrall Wagonka Factory - Studenka;
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Summary
Development Appraisal
Gross and net cash outflows/inflows estimated over a 15 year period (shown in graph and cash flow format) for each element of the development plan
Sources of cash outflows/inflows identified
Then, on a discounted cash basis, estimates are made for;• Net Total Development Costs [cumulative cash outflows
(costs) + cumulative inflows (income)] (A)
• Final Development Values (B)
• Indicative Residual Value = (B-A)
Ex-Thrall Wagonka Factory - Studenka;
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Summary
Ex-Thrall Wagonka Factory - Studenka; Economic Impact Appraisal
Contextual Analysis
Analysis of ‘Do-Nothing’ Option
Analysis of Preferred Option(s)
Risk Appraisal
Conclusions.
€
Gross Jobs created 2,397
Net Jobs created 1,614
Whole Project Costs 83,683,063
Whole Project Revenues 21,193,988
Net Project Value/(Costs) -62,489,074
Net Present Value/(Costs) -46,795,713
Gross Public Sector Costs 40,506,406
Net Public Sector Costs 1,365,911
Public Sector receipts -39,140,495
Net Present Public Sector Costs -26,565,643
Gross Project Cost per additional job created 51,842
Gross Public Sector Costs per additional job created 25,094
Gross Value Added per annum 19,818,300
Claw back per annum 2,099,589
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Summary
Ex-Thrall Wagonka Factory - Studenka; Site Marketing
Marketing Strategy
Marketing Tools (Site Brochures, 3-D models etc)
International exposure through DTZ’s Global network
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Summary
Undertake environmental risk assessment and determine main development constraints (in partnership with a suitable environmental engineering company)
Determine the optimum development scheme, based on a comprehensive property market assessment
Oversee the preparation of the concept plan (in partnership with a suitable architectural company)
Undertake a financial appraisal of the development scheme options Assess the economic impact (value) of any development Help secure potential sources of finance and/or equity/development partners Identify potential future occupiers Advise on all aspects of design and specification that will affect value Prepare and manage leasing strategy and marketing campaign for pre-letting
opportunities. Co-ordinate preparation of an effective marketing campaign including the creation
of a scheme ‘brand’. Prepare a management strategy for the completed development.
What DTZ can do for the Zbrojovka site;
