Finance Notes PDF

Sunday, 17 November 2024 FINANCE NOTES FINANCIAL ASPECTS OF SPATIAL DEVELOPMENT Finance = costs and revenues, balance and phasing, spatial development. Spatial development —> the process of (re)developing urban and rural areas. —> it entails planning,...

Sunday, 17 November 2024 FINANCE NOTES FINANCIAL ASPECTS OF SPATIAL DEVELOPMENT Finance = costs and revenues, balance and phasing, spatial development. Spatial development —> the process of (re)developing urban and rural areas. —> it entails planning, designs, legal preparation ………………………….. (environmental plans, permits), physical preparation of ………………………….. the land, building, preparation for use and maintenance. —> it’s whole process has become more and more ………………………….. complicated during the years and a lot of actors are ………………………….. involved. The development consists of different phases, ………………………….. one of which is usually a change of land use. The connection between land/spatial development and finance is that each action during the development either costs money or will render a benefit. If the balance is negative, somebody (usually the municipality) has to pay for the deficit. Usually there’s a basic split-up between the real estate finance and the finance of land development. Real estate finance —> it’s a subject for itself; it’s all about the calculation of the …………………………..value of a building the value of a real estate is determined by location, ………………………….. quality and quantity (f.i. London is expensive, Newcastle ………………………….. is cheap). Nonetheless, part of the real estate value is ………………………….. the price of the land (usually 1/3), whose value is ………………………….. calculated based on the value of the real estate. Features of land —> AVAILABILITY: “free land” is (at least in most parts of ……………………….Europe) not available = all land has a function = nature, ……………………….agriculture, housing, industry, infrastructure, leisure are all ……………………….functions. The nature of the use and its (expected) future ……………………….use determines the land value. —> VALUE: determined by the location, the use and the ………………………. (expected) future use. Its central issue is the scarcity (if there’s ………………………. a small supply and a lot of demand its value increases). Land development —> can be defined in two ways: the actual (integral) process, …………………………. and the underlying financial calculation. Usually, when …………………………..we talk about the land development we talk about the …………………………..financial part. 1   DEVELOPMENT PHASES Initiative phase —> get a first idea and exploration of possibilities / location ………………………comparing the land in analysis to other projects. You also need ………………………to calculate roughly the land development = working with key ………………………figures. Feasibility phase —> involves more detailed plans: urban designs, detailed mobility ………………………..plans, architectonic designs, calculation of land development ………………………..based upon real figures (calculations, tenders, contracts), ………………………..detailed phasing (whens start to be questioned). —> no margin is allowed and a risk analysis is included in this ……………………….. phase. —> the result of this phase will be (a change of) an environmental ……………………….. plan and a definitive calculation of the land development Execution phase —> means the acquisition (although it has usually already ………………………….been acquired before this phase) of land, and the ………………………….preparation for building and use. Maintenance phase —> it starts the moment the land development stops maintenance is therefore no part of the (calculation) of ……………………………. the land development, although this phase had influence ……………………………. on the land. STAGES IN LAND DEVELOPMENT 1. ACQUISITION —> buy the land 2. PREPARING FOR BUILDING —> before constructing 3. BUILDING 4. PREPARING FOR USE 5. MAINTENANCE However, it turns out to be: 1. ACQUISITION 2. PREPARING FOR BUILDING 3. SALE OF THE PREPARED LAND —> to the ones that will be building 4. (BUILDING) 5. PREPARING FOR USE 6. (MAINTENANCE) it’s the choice of instruments by a municipality with reference ………………….to land transaction and land management: legal instruments ………………….(environmental plans, permits, etc.), buying and selling of land. —> has three basic forms: 2   PRO- ACTIVE ACTIVE PASSIVE / FACILITATING The acquisition of land The municipality acquires Other developers buy the prior to planning; land as part of a planning land (not to get a pro t happens when there’s process and it’s applied in but to make sure they can competition or when speci c locations. Its build a real estate), and somebody has enough advantages are the full the municipality has the money to invest. Its control by the owner of responsibility for all legal advantage is that it is the planning process matters. Its advantage is cheap; its disadvantage and the possibility of a that there’s no risk for is that it’s a high risk pro t for the the municipality; the investment (you don’t municipality; the disadvantages are less know who/if somebody is disadvantages are the opportunities for control gonna do something with higher price and a and no opportunities for it). smaller risk (in pro t. comparison with pro- active land policy), but still a risk for the municipality. Basic assumption —> the municipality has an active land policy (although this …………………………..case is present in less than a quarter of all developments). Preparing for building —> it’s the preparation of the land in order to accomodate ………………………….. the building process; it is composed by a legal and a ………………………….. technical part. —> the legal part entails the changing of the ………………………….. Environmental Plan, environmental research and ………………………….. permits, etc. —> the technical part entails the removal of obstacles, ………………………….. demolition, site levelling, soil decontamination, ………………………….. construction of building roads, bridges, tunnels and the ………………………….. supply of electricity, gas, water, sewerage and street ………………………….. lights. Sale of the prepared land —> to the developers/builders; hopefully with a higher ………………………………….price than the acquisition’s. —> the municipality is not the developer. —> all the costs of real estate development is no …………………………………. part of land development and therefore no part of …………………………………. this course, but the price of the land underneath the …………………………………. real estate is the major revenue in a land …………………………………. development, but it is determined by the value of …………………………………. the real estate. Building —> because of what just mentioned, the building process is no part of ……………..the land development process. Preparing for use —> the land is prepared for a permanent use = permanent …………………………sidewalks/pavement/bicycle paths 3  fi fi fi fi  —> buildings have to be connected to sewerage / water / gas / …………………………. electricity parking, green- and playing facilities; street furniture …………………………. (benches, tables, …) Maintenance —> no part of the process of land development and neither of ……………………the calculations depends on choices made during the process of land ……………………. development: cheap during land development is expensive ……………………. during maintenance; expensive during land development is ……………………. cheap during maintenance. —> it starts the moment the land development stops (“liquidation”). CALCULATION IN LAND DEVELOPMENT Calculation consists of four items: - Costs —> the expenses incurred during ………………………………………………………land development (such as ………………………………………………………acquiring land, preparing it for ………………………………………………………construction, and making it ready ………………………………………………………for use). Other costs include ………………………………………………………planning expenses (legal and ………………………………………………………design work) and apportionment ………………………………………………………costs for infrastructure outside the ………………………………………………………immediate development area. - Revenues - Balance: that is the nancial outcome — ………………………………………………………whether the revenues exceed costs ………………………………………………………(pro t) or vice versa (loss). - Phasing: which involves planning the ………………………………………………………sequence and timing of activities to ………………………………………………………manage resources and nances ………………………………………………………e ectively. Land development has the following cost items: plan development costs, apportionment costs, acquisition, preparing for building, preparing for use. Plan development costs —> include environmental plans or permits, salaries …………………………………(architect, urban designer, project leader), …………………………………accommodation costs (temporary o ces) and …………………………………overhead. Apportionment costs —> are the costs outside the land development area; ……………………………..infrastructure, green areas, waterstorage. Acquisition —> the purchase of land using either private or public law methods. ……………………covers activities like clearing, leveling land, or installing basic ……………………utilities. Preparing for building and use —> covers activities like clearing, levelling land, or ………………………………………..installing basic utilities; preparing for building 4  ff fi fi ffi fi  ………………………………………..also includes demolition and environmental ………………………………………..adjustments. Revenues —> with a pro-active land policy the revenue is earned by selling ………………..prepared land to developers or buyers; with a facilitating land ………………..policy the income comes from contributions developers pay to ………………..o set the costs of municipal support. —> other revenues: grants ( nancial aids from authorities at various ……………….. levels (e.g., European, national, municipal) for activities like soil ……………….. clean-up or heritage preservation) and apportionment revenues ……………….. (that are earnings from shared public facilities: infrastructure, ……………….. green areas and water storage) LAND USE FRAMEWORK Land use —> necessary to determine which areas are used for which purpose, which ……………….areas will yield costs and which areas will yield bene t and to determine ……………….which costs have to be paid by whom. Land use hierarchy —> PLANNING AREA: it is the overall area de ned by zoning or ……………………………environmental plans, representing potential development land. - objects which remain unchanged = LAND DEVELOPMENT AREA - municipal structures (large parks, water reservoirs), main roads (which have a function for a larger area) and “hindrance zones” (big green areas) = NET PLANNING AREA - district- and neighborhood scale water storage systems, green and parking spaces and roads = SALEABLE AREA (Housing, shops, schools, o ces, factories, etc.) The bigger the part of the saleable area, the bigger the revenues; the bigger the part of public space, the bigger the costs. 5  ff ffi fi fi fi  *KEY ESCLUSIONS* —> Areas or objects that don’t generate costs or revenues, ………………………………such as unchanged properties, are removed from ………………………………calculations + maintenance of existing structures is ………………………………not considered part of development costs unless ………………………………significant alterations occur. PREPARING FOR BUILDING Includes: - Decontamination of the soil - Leveling - Raising - Removal of green - Demolition (roads and buildings) - Ground works (water, drainage) - Cabels, pipes, sewerage - Building roads. PREPARING FOR USE Includes: - De nitive road surfaces - House connections - Parking spaces - Green areas - Play facilities - Street furniture - Street lights Civil engineering —> application of technique in land development, road ………………………..construction, waterworks, ground works, tunnels, bridges, ………………………..viaducts. Key factors with civil engineering in a land development —> soil conditions, soil ………………………..………………………..…………………. hydrology. Soil conditions —> important because the type of soil matters in supporting ……………………. power and drainage (solid rock, sand and gravel are the best; ……………………. clay and peat the worst). Solid rock —> does not create problem with foundations, although there may ………………. be problems with drainage, as the water doesn’t in ltrate in the ………………. ground. Sand and gravel —> does not create problem with foundations, and the ………………. drainage is near perfect since the water in ltrates the ………………. ground easily. Furthermore, they are often used to enhance ………………. the quality of the building ground. Clay soil —> with foundations, piles are often necessary and the drainage can ………………be very di cult. Nonetheless, water in ltrates very slowly. Peat grounds —> the use of piles as foundation is almost always necessary, ………………. and the drainage is a a very delicate process. Also, there’s a ………………. risk of settling (lowering process). 6  fi ffi fi fi fi  SOIL HYDROLOGY Groundwater level —> it is the water situated in the space between the grains ………………………….of sand, gravel or clay or as a part of peat. It follows the ………………………….relief (capillary action). —> its control is very important for the foundations of buildings …………………………. and roads, as there are also agricultural …………………………. (dehydration/overhydration) and natural interests. District Water Boards —> checks the quantity and quality of water in the ……………………………..Netherlands (no other country has something ……………………………..comparable). Geological conditions in the land development —> a ect construction of roads, ……………………………..…………………………….levelling / elevation, drainage, ……………………………..…………………………….cables and pipes. CONSTRUCTION OF ROADS Foundation of roads —> Necessary on weeks soils (clay and peat) and for the …………………………….equal spreading of the weights of vehicles in order to …………………………….avoid subsidence of roads. —> a diversity of materials apply (rocks, rubble, sand). Surfacing of roads —> necessary for an equal spreading of tra c load, sound ………………………… levels, for appearance, to improve tra c safety and for ………………………… important cost item. Construction works —> refer to structures or facilities built using durable materials ……………………………like stone, concrete, steel, or wood, all of which are ……………………………assembled in a xed location, such as bridges, viaducts ……………………………or tunnels. —> when building on clay or peat soils, subsidence (the ……………………………. sinking or settling of the ground) can occur over time. ……………………………. These soils are soft and compressible, which causes the ……………………………. structures to shift or deform, particularly at points where ……………………………. di erent surface materials meet (transition zones). SETTLING Clay- and peat grounds contain water (70%) If the ground is “loaded” (for instance with sand), it is “squeezed out” If the ground is dehydrated, it loses volume The ground will subside: settling Can be as much as centimetres per year/metres per century. Settling will always occur once clay- and peatgrounds are built up. What to do then? Accept the settling = every 20 years you need to re-build the roads foundations = it is cheap during the development, but expensive during the management. So the best thing to do is to think about possible solutions to solve this problem. 7  ff fi ff ffi ffi  Possible solutions —> Pre-loading: before building, you pre-load the ground with ………………………….sand, so water will be squeezed out and settling will be ………………………….forced. —> sand-pillars: before building, water will be pumped out of …………………………. the ground and settling will also be forced. DRAINAGE Natural drainage —> depends on relief (natural run o ) and type of soil (if it’s ………………………. waterproof or not). Arti cial drainage —> like a system of canals or ditches, which lowers the ………………………. groundwater level, or happens through the building of ………………………. reservoirs, drainage pipes or sewerage systems. Sewerage system —> it’s the drainage of dirty water and rainwater through a ………………………. system of drains, tubes, pipes, and pumps. Pipes can have di erent purposes: sewerage, electricity, gas, water, telecommunication, city heating and industrial transport pipes REVENUES Types of revenues —> - selling of ground: the price of the ground is often derived ……………………………from the value of the real estate (and it’s worth a ……………………………percentage) and it has a xed price per m2 ( ≠ municipal contribution ( at the moment of realisation cash has to be available can be calculated from the moment of the realisation until the end of …………….. the land development EX: value, incl. cost increase: $1.082.432 | Execution in 2028 | Interest: …………….. 4% | Liquidation in 2034 | Value, including cost increase and interest: …………….. $1.082.432 x 1,04 alla 6 = $1.369.622 FORMULA: end value : interest rate —> EX: End value: $1.369.622 | Interest: 4% | Cash value: $1.269.622 : …………….. 1.04 alla 10 = $925.268 ……………..—> easier way to remember it: if I need a million euro’s in ten years …………….. time, how much money do I have to put on the bank right now (and …………….. collect interest each year)? INFRASTRUCTURE MANAGEMENT What are infrastructure assets in a city? —> Streets, bridges, water and stormwater systems, buildings, electricity networks, landscaping, waste systems, public lighting systems. Developments are also increasingly delivering a mix of uses, tenures and house types, especially apartments. They need careful management if they are to work well and may therefore require more care than local authorities are able to provide. Management options should be considered at the outset to ensure that the design is viable in the long term e.g.: energy e cient bulbs for street lights. Design decisions should be made in full knowledge of how and by whom they will be maintained. In urban management and maintenance, we are concerned with the maintenance and management of public goods1 Every time we design something we add asset infrastructures into a city. This requires careful consideration about the maintenance and management. As we need to consider the additional capacity (people or infrastructure itself, which is part of the Project Consideration/Initiation and Design phases) we need to be able to maintain this infrastructure. 1Public good: a commodity or service that is provided without pro t to all members of a society. 9  ffi fi