First Property Group,Plc. is a property company based in the UK that deals with fund management and investment, with subsidiaries in Poland and Romania. The company is listed on the London Stock Exchange (FTSE 250 index). It mainly focuses on high yielding commercial properties that generate sustainable cash flows. Besides, the corporation is flexible and has an active approach to assets management. The company was established in 1994, and its core principle is to invest and develop in high yielding properties in UK, Poland, Romania, and entire Europe(First Property Group – AnnualReports.com, 2020). Most of the company’s properties are located in the UK. However, it has diverse subsidiaries such as CPD limited, First Property Online Ltd., Ross Sp. Z O.o., Corp Sp z o o, and Scaup Sp Z O O. The company’s philosophy is to buy the property when the value drops as its yield increases and sell when the property value increases as the yields reduce(First Property Group – AnnualReports.com, 2020). As such, its core values are expertise, strong earnings, growth, and geographical diversification.

Performance

The company’s annual consolidated incomestatement for the financial yearending 31^st March 2019 indicated a total revenue of £20,437,000and £25,460,000 for the fiscal year ended 31^st March 2018. According to its comprehensive statements, profits were £6,365,000 and £7,760,000 for the year 2019 and 2018, respectively. This was a drop in profits of £ 1,395,000 across the two financial years. The total assets of the group were £30,501,000 for 2019 and £36,155,000 for 2018. The group’s equity indicated a total amount of £46,286,000 for the year 2019 and £52,922,000 for 2018. Also, the cash and cash equivalents for the group from the consolidated cash flow statements were £9,738,000 for 2019 and £15,315,000 for 2018(First Property Group – AnnualReports.com, 2020). Besides, the group acquired 2.9 hectaressite contiguous with the park for £1.65 million. Thus, this included 800 meters squared of warehouse space and 300 meters squared of office space.

Objectives

The primary goal for the company is to invest in high yielding commercial properties that generate sustainable cash flows that meet the core standards. Therefore;

The property should offer multi-let purposes such as office and warehouse.
The properties should be located within the company’s investment regions in the UK, Poland, and Romania.
The building is for commercial use in prime areas.

Additionally, thecorporation will take into account investment opportunities and schemes, including those with;

High possibility of generating sustainable cash flows for a given period,
The projects with a high likelihood of timely completionwith the budgeted amount, and;
The investment should generate a substantial return on investment (ROI) per the company’s portfolio and market performance.

The Purpose of this Report

The report provides two potential investment options that have already been identified to meet the company’s criteria. The projects are Griffin House, Crawley, and Eximius Park, Krakow. Accordingly, the review will entail an initial assessment of the identified projects and an in-depth analysis of the investments in terms of its financial viability in the various fundamentaldevelopment process stages. The report also containsthe residual valuation of the investment projects, purchase offer recommendation, and sensitivity analysis.

Investment Project Finding Process

The proposed projects in this report were found on the company’s website on the annual reports for the financial year 2019(First Property Group – AnnualReports.com, 2020). The two projects are listed in the annual statements and are suitable for the analysis in this development project. Further research on the project’s aspects regarding planning viability was assessed and conducted online using the website of Local Authority Planning. The portal showed if the investment had been granted development permission by the local authority and had acquired all the necessary documents. A clear view of the viability of the investment was formed after reviewing the planning documents, the company’s memorandum, and identifying primary issues likely to emerge from the investment. Therefore, after choosing the most suitable development project, a detailed scheme plan is developed with provisions that can be accommodated.

Investment Project Shortlist

Below in Table 1 is the shortlist for the investment project shortlist;

Table 1: Investment project shortlist

Project name	Location	Purchase price	Sales price	Holding period	Development
Griffin House	Crawley	£6.6 million	£8.2 million	2 years, 10 Mo	Yes
Eximius Park	Krakow	£50m	N/A	N/A	Yes

Investments Projects

Some of the company investment projects are as follows;

Griffin House

Figure 2: Griffin House images as taken from Google

Project’s Aspects

Location. The house is located in Crawley adjacent to Hays Crawley and Hallermann Tyton. The property is located in a prime place on the northern end of 135 Crawley HighStreet. The project is approximately 0.25 miles from A23, located 0.25 miles from the A23 and West Sussex. It is accessible through Ifield Avenue or Kilnmead at High Street, Crawley RH10 1DQ (GriffinhouseCrawley, 2020). The surrounding building in the area primarily consists of office buildings with few restaurants, residential apartments, retail stores, and Leisure Park.

Current Use.This project is currently used for office purposes were 1706 square feet is remaining for leasehold in the 4th floor North West. The house is located strategically at Crawley’s mainline railway station and adjacent to Crawley Leisure Park, making the building easily accessible. The project is suitable for office space renting and goes for £230 per square feet(GriffinhouseCrawley, 2020). The project has also undergone full renovation and refurbishment, making it more desirable for office rentals.

Key Planning Considerations.The house was approved for construction of over ground and four upper floors to provide approximately 32,399 square feet of flexible office space. The house also provides parking space at a parking ratio of 1:272 square feet(GriffinhouseCrawley, 2020). The significantissues are achieving 100% leasehold of the house through the house has already let five tenants on six different leases.

Eximius Park, Krakow

Figure 3: Eximus Park, Krakow images as taken from Google

Project’s Aspects

Location.The park is located thirteen kilometers Krakow center and easily accessible train, public transport, and even motorbike. It is 18 minutes ride from KrakowCentre. The park is on a close proximate to Zabierzów Eximius Park and Zabierzów Działki (Nż) (Eximius Park, 2020). One can access the building using bus lines stop 238, 248, and train lines stop SKA1. The surrounding areas consist of business parks and business buildings.

Current Use.The project is used for office space and offers 12,600 square feet of office space for lease. The building also provides 294 parking slots, which is a parking ratio of 1:41 square meters. The park is located strategically near SKA1 train lines, which make the building easily accessible(Eximius Park, 2020). The building is suitable for office space renting and houses unique modern architectures, modern technology, 4-channel air conditioning, 2-independent power supply lines, and fire and smoke detectors.

Key Planning Considerations.The house was approved for construction with 19,000 square meters, and the building was completed in the year 2019. The total rentable office space is 12,000 square meters (Eximius Park, 2020). The significant issues in the park are achieving a 100% leasehold though the building has already let to different tenants.

Reasons for Selection

Griffin House and Eximius Park, Krakow,presents an excellent opportunity for office space letting, and the projects are suitably located ina prime location in London and Poland, respectively. The buildings are in line with the company’s mission and vision of investing in commercial spaces with a stable return on investments. The investment projects offer relatively low risk due to their size, planning, and previous experience. Both building are strategically located for office space, and First Property Group is quite experienced in real estate development, which will ease the planning experience.

Scheme Details

The development projects will provide commercial spaces by offering high-end office space. The office space for the scheme for Griffin House is 32,399 square feet, and that of Eximius Park, Krakow, is 19,000 square meters. Both buildings also provide for a parking lot with Eximius Park, Krakow, offering 294 spaces, and Griffin Houseparking ratio is 1:272 square feet.

Planning & Sustainability Considerations

The scheme will offer office spaces for rent, and the plan was laid out to consider the rights to light, accessibility, and flood risk assessment. The impact of daylight was assessed to determine the effects of sunlight on the surrounding buildings. Both building are easily accessible by public transport and railway system. Natural calamity assessment such as flood was also accessed and concluded there was little chance of occurrence. The planning was given for the project to provide office space construction.

Comparable Market Analysis

Table 2 below is a summary of the market analysis of different projects;

Table 2: Comparable market analysis

Office name	Proximity to the project	Size (meter sq.)
Buckingham Palace	2.18 km	21560
St. James’s Park	2.48 km	3248
Westminster Abbey	3.05 km	6240
Big Ben	3.19 km	29734

Valuation

The residual value is determined based on the following inputs and assumptions;

The expected return value of the project is calculated using the comparable rent for the two projects per square feet or meters. Griffin House has a rental space of 32,399 square feet, and that of Eximius Park, Krakow, is 12,000 square meters.
The total rent amount is given by the Expected return value multiplied by the floor area.
The project’s yield is given by the comparable ofﬁce data from the company’s website.
The aggregate GIA from both projects is 32,399 square feet for Griffin House and 12,000 square meters for Eximius Park, Krakow.
The estimated sales values represent the sale price per square feet or meter and are calculated in the comparable data.
Building Value (GDV) – This is the total value of the building from the office space.
Stamp Duty is estimated using the online stamp duty tax calculator.
Lettings Fees is assumed to be 15% of the total rent
Marketing expenses are calculated as 3% of the project’s building value.
The developer’s proﬁt margin is 20%, as provided on the company’s website.
Financing of the project is taken as an interest rate of 7% that is simple.

Griffin House Proposal

Table 3: Griffin House proposal

GDV	Area (sqm)	Rent
Office	32,399	230	7451770
Total GDV			7451770
Costs
Letting fees (15%)		1117765.5
Marketing expenses (3%)		223553.1
Profit margin (20%)		1490354
Financing (7%)		521623.9
Total costs			3353296.5
Site purchase cost			4098473.5
Less stamp duty (15%)			614771.025
Total available for site			3483702.475

Recommendation

Thecalculated residual values will have a direct impact on the inputs of the project development and its cost. Thus, the maximum offer price for Griffin House is £348370.20 after considering a 20% return on investment.

Sensitivity Analysis

The residual valuation of the project development considers many factors in its inputs. However, the credibility of these factors is determined by the accuracy of the inputs. Some inputs in the residual valuation are inaccurate due to lack or inadequate transaction data,and some information is highly sensitive in response to external factors such as natural disasters, political environment, and a rise in interest rates (Smith, 2016). As such, the project may not be completed on time with the budgeted amount. Therefore, the inputs that are considered as highly sensitive in the residual valuation include;

Estimated Sales Value

It is sensitive due to the limited availability of transaction data and the quoted office rent prices

Development Costs

The development costs are due to uncertainty over Brexit policies that could change labor costs, material costs, and the overall building prices.

References

Eximius Park, 2020. Home – Eximius Park Powierzchnie Biurowe Pod Krakowem | Biuro Do Wynajęcia Kraków. [online] Eximius Park powierzchnie biurowe pod Krakowem | biuro do wynajęcia Kraków. Available at: <http://eximiuspark.pl/> [Accessed 22 July 2020].

First Property Group – AnnualReports.com, 2020. First Property Group – Annualreports.Com. [online] Annualreports.com. Available at: <http://annualreports.com/Company/first- property-group> [Accessed 22 July 2020].

GriffinhouseCrawley, 2020. Template | SHW. [online] SHW. Available at: <http://property.shw.co.uk/propertyInfo/6660/4th-Floor-Griffin-House-135-High-Street- Crawley–RH10-1DQ> [Accessed 22 July 2020].

Smith, J., Jaggar, D. M., & Love, P. (2016). Building cost planning for the design team. Routledge.

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