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Assignment Developer's/Residual Method of Appraisal

Assignment Developer's/Residual Method of Appraisal In this assignment, you are required to determine the offer price for your property under study using the residual or developer's method of appraisal.


1. Assume the equity invested is equal to the land value (you can ignore the cost of financing the land)

2. If your property is to be leased, you can capitalize the income stream by using market capitalization rates. Market capitalization rates can be derived from the published reports from commercial real estate firms.

3. Building costs can be derived from costing manuals from companies such as Marshall and Swift. Appraisal firms in your area or sometimes local libraries will have copies of these costing manuals. another source of costing data can be obtained by contacting local builders in your area for estimates of construction costs per square foot

  All "plugged" Numbers Calculated Value
Mid-Rise Economics, Proforma Analysis Mid Rise High Rise Mid Rise High Rise
Residential Unit & Area Statistics        
Number of Floors 8 25    
Number of Units 75 300    
Average Net Unit Size (SF) 850 725    
Gross to Net Efficiency (GNE, %) 85% 88%    
Average Gross Unit Size (SF) 1,000 824    
Total Residential Saleable Area (SF) 63,750 217,500    
Efficiency 85% 88%    
Gross Residential Area (GRA, SF) 75000 247,159    
Estimated Floor Plate 9,375 9,886    
GRA (square meters) 6,968 22,962    
Retail Area (SF) 4,688 4,943    
Gross Livable Area = GRA + retail (GLA, SF) 79,688 252,102    
Required Parking Stalls (per residential unit) 0.81 0.81    
Resident Parking Stalls Constructed 60.75 243    
Number of Visitor Parking Stalls 4.5 18    
Required Retail Parking 5 5    
Number of Parking Stalls Sold 56.25 225    
Estimated Area per Stall (SF) 400 400    
REQUIRED Total Parking Area - Below Grade (SF) 26,175 99,177    
Residential Index Price (PSF) $300 $300    
End Price (per residential unit) $255,000 $217,500    
Parking Revenue (per stall) $20,000 $20,000    
Retail Index Price ($20 PSF @ 8% Cap rate) $250 $250    
Hard (Construction) Costs
Above Grade GRA Construction Cost (PSF)
$140.00 $130.00    
Above Grade Retail Area Construction Cost (PSF) $150.00 $150.00    
Below Grade Parking Cost (PSF) $45.00 $60.00    
Blended Construction Cost (PSF) of GLA $155 $154    
Soft (Development) Costs
Rule of Thumb Approach, % of total development costs
30% 29%    
Developer/Builder Profit
Profit Margin (% of total revenues)
10.00% 10.00%    
Revenues from Sale of Units ############# $65,250,000    
Revenues from Sale of Parking $1,125,000 $4,500,000    
Revenues from Sale of Retail Area $1,171,875 $1,235,795    
Total Revenues ############# $70,985,795    
Land Cost - RLV to be determined Above & Below Grade Hard Construction ############# $38,822,795    
Soft (Development) Costs $5,306,143 $15,857,198    
Total Costs ############# $54,679,994    
Total Costs PSF GLA $222 $217    
Total Residual Land Value and Profit $3,734,732 $16,305,802    
Total Profit $2,142,188 $7,098,580    
Total Residual Land Value (future$) $1,592,545 $9,207,222    
RLV Per Residential Unit $21,234 $30,691    
RLV PSF of GLA $20 $37    
Total Residual Land Value (present$) $1,316,153 $5,995,999    
RLV Per Residential Unit $17,549 $19,987    
RLV PSF of GLA $17 $24    

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