SRQ764 : Building Project Evaluation Mock Examination Solution - Engineering Assignment Help

Assignment Task:

Task:

Question 1

1.1 Discuss the importance of undertaking development feasibility appraisal in property development.

[10 marks]

1.2 The office property market is important to the development of economy. Identify and discuss three major factors that can influence the development of the office property market.

[10 marks]

Question 2

2.1 Calculate the residual value of a block of land by using the following information:

Land area 4,500 m2

Plot ratio 4:1

Net rental area 80% of gross floor area

Rental income $(50+A) per m2 per month

Outgoings 20% gross annual income

Projected yield 7%

Selling costs 7.5% of property value

Profit required 15% of property value

Site preparation costs $540,000

Building construction costs $(2,500+A) per m2 gross floor area

Professional fees 12% of the sum of site preparation costs and building construction costs

Finance cost $5 million

Note: “A” is the last number of your Deakin Student ID.

For example, if a student’s Deakin Student ID is 123456789, A is 9.

Then, “Rental income” is: 50+A = 50+9 = 59 per m2 per month

“Building construction costs” is: 2,500+A = 2,500+9 = 2,509 per m2 gross floor area

2.2 A multistorey freehold office building in the Sydney city was sold recently for $14,000,000. The building is served by lifts to all floors. The net rental floor space is 5,000m2. The building comprises rooms let to individual tenants. Similar office space is currently letting at between $300 and $350 per m2 per annum (inclusive). Outgoings (per annum) are normally about (20+B)% of gross annual rental income for this type of building. Calculate the expected yield for this property.

Note: “B” is the last number of your Deakin Student ID. For example, if a student’s Deakin Student ID is 123456789, B is 9. Then, “Outgoings (per annum)” is: (20+B)% = (20+9)% = 29%

Question 3

3.1 The highest and best use of a site is one of the most important considerations in property development. Identify and discuss three major factors that can influence the decisions about the highest and best use of a site in property development

3.2 Discuss the influences of environmental and psychological factors on the feasibility of property development.

Question 4

4.1 A company bought an office property for investment in 2020. The company will rent the property to a tenant for 20 years, and the company will sell the property at the end of the investment. Identify the different types of tax incurred in this scenario, and discuss how these different types of tax will influence the investment.

[12 marks]

4.2 A company purchased an old office property in a prime location for $270,000 in 2008, and the purchase expense is (1+X)% of the purchase price. The property was upgraded (e.g., floor carpets, double glazing) at a cost of $16,000 in 2009. A year later, the central heating was installed at a cost of $9,500. In 2015, the property was modernised (e.g., new floor tiles), and the cost of this upgrade was $15,500. The property was sold in 2020 for $760,000, and the sales expense is (1+X)% of the sale price. The company income tax rate is 30%. Calculate the capital gains tax.

Note: “X” is the last number of your Deakin Student ID. For example, if a student’s Deakin Student ID is 123456789, X is 9. Then, (1+X)% = (1+9)% =10%.

Question 5

5.1 Identify and discuss three main risks associated with property development and investment of high-rise residential buildings.

5.2 It is generally accepted that the cost of operating a building over its useful life is many times greater than its original construction cost. As a development manager of an office building, identify and explain three ways you could reduce future operation costs of the office building.

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