Exam paper

FINAL EXAM – AUTUMN SESSION 2023

School of Business

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QUESTION 1 – COMPULSORY (40 MARKS)

1. Your client, Ebony, a property developer, has provided information on a proposed commercial development as listed below. She hopes to sell off the completed development to Ivory for $90 million, with an expected net rental value of $8 million per year. Ebony has carried out a quick search on the current capitalization rate of similar properties and found out the rate to be 6%. Work out the total development cost of the proposed development only, excluding the land costs. You can make other assumptions if needed:

Gross Area: 8000 sq. meters

Rental Value: $1100.00 per sq. meter

Vacancy Factor: 10%

Non – Recoverable Outgoings Factor: 5.5%

Disposal Costs: 4%

Marketing and advertising costs: $450,000.00

Site Clearance: $350,000.00

Site Remediation: $3000,000.00

Building Costs: $4300.00 per sq. meter

Professional fees on site costs: 6%

Professional fees on building costs: 12%

Contingency 3% of building cost

Letting fees: 10% of net rental value

Finance costs: 15.5% pa (nominal)

Pre-construction period including getting a development approval: 10 months

Construction period: 30 months

Letting period: 6 months

Incentive period: 3 months

Acquisition costs: 9.5% (10 marks)

1. Based on the data provided and your answer in (a) and without carrying out another calculation, answer the following:

   • The Reserve Bank of Australia has already announced twelve increases in interest rates since late last year. If you are the developer of the development above, identify two main variables used in the calculation that will have a big impact on the financial feasibility of the development. Briefly, discuss how do you address these concerns?

(15 marks)

1. Let’s assume Ebony and Ivory would like to complete the development above, on a joint-venture term. They would like to engage a local builder to carry out the construction works and at the same time supporting local products by using locally sourced building materials. Considering current market conditions in New South Wales/Australia now, what advice would you give to both?

(15 marks)

CHOOSE 3 (THREE) QUESTIONS ONLY FROM THE FOLLOWING:

Question 2 (20 marks)

Jumping Jack is currently in the process of carrying out a renovation and refurbishment exercise on his three-bedroom, single dwelling property built in the late 50’s and located in a small suburb near Parramatta. He wants to add an attached bathroom to the guest bedroom at the front of the house and tearing down an old store which is part of the main kitchen. He is a good neighbour and would like to inform his plans to Meghan Sparkle who is suffering from chronic asthma.

Advice Jumping Jack with regards to addressing the renovation he has in mind from

1. the local council perspective and

2. from Meghan Sparkle’s perspective. (20 marks)

Question 3 (20 marks)

129 and 131 Pennant Street, Parramatta are two blocks of adjacent land roughly 1200 square meters in size. https://goo.gl/maps/76jcG9FbVQeWGrRT8

Next door at 168 Pennant Street is a recently completed four-level block of units offering two- and three-bedroom accommodations known as the Collette Conquest. About 200 meters away north of these blocks of land, another recently approved block of units is still under construction. Western Sydney University North Campus is just 5 minutes’ walk away.

If you are the owner of lots 129 and 131 and you are considering applying for a development approval, what are the main challenges facing your development assuming that your development will be approved by the end of the year. (20 marks)

Question 4 (20 marks)

1. Environmental risk was ranked at number one by prominent property developers in Australia while it was ranked at number ten in another country, Malaysia. Briefly discuss 3 main reasons why environmental risk is highly ranked by Australian developers. (10 marks)

1. The Sydney Opera House (SOH) has been dubbed as a development that has failed over and over since its inception until completion. However, it is a fact that today, SOH is a Green Star rated building and businesses within the building still operate successfully. Briefly comment how a development like SOH can be a failure but successful and sustainable at the same time?

(10 marks)

Question 5 (20 marks)

It has been reported in the media that there are unique design features implemented at 105, Philip Street, which has been awarded with a 6-star Green Star rated commercial building in Parramatta. https://goo.gl/maps/8wDnnyFjxTBufMJD8

The building has been equipped with rain-water cooling towers, low-flow water fi­xtures in the toilets throughout the building, rooftop soccer and sports pitch and a combination of natural light and a state-of-the-art lighting design. Relate these features towards the long-term benefits enjoyed by:

• The owner of the building

• The occupier of the building (20 marks)

Question 6 (20 marks)

Landcom, a property company developing for the NSW government, is developing a site known as Macarthur Garden North (MGN) in Campbeltown. It is located on Gilchrist Drive next door to Western Sydney University and TAFE NSW.

https://landcom.com.au/places/macarthur-gardens-north/

They have been approved to develop a mixed development of high-rise residential units, office space and retail outlets.

1. Considering the current demographic of the suburb, discuss who would be considering buying/renting of the following types of accommodation:

• A three-bedroom unit

• A studio apartment

• Affordable rental housing

• Retail outlet (10 marks)

1. Briefly discuss at least two funding options available to Landcom, to finance this development from start to completion? (10marks)

Submit the whole document into the Turnitin link provided on vUWS.

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