T10: Financial Appraisal & Project Viability

A number of interrelated factors inform both the physical content of development projects and the approach taken to project delivery. These factors also determine the overall financial viability of any project and whether or not it can and will be implemented.

The economic downturn is having a serious impact on property and land values. Whilst the developer/applicant will have a good understanding and appreciation of the economic factors that drive commercial decisions and underlying investor concerns, not all stakeholders involved in the planning process may have a full understanding of such matters, the appraisal process and the impact that decision making can have on overall project viability.

Where the ability to meet project-specific or wider policy objectives is considered to be questionable due to financial reasons, this must be understood and addressed as early in the process as possible. If it is not, then there will be a risk of financial concerns being raised at a later date, resulting in potential disagreements between key parties in terms of meeting objectives. This can in turn cause delay and uncertainty.

The aim of the paper is therefore to:

• Ensure that there is mutual understanding of the financial considerations affecting key stakeholders; 
• Explore the role of financial appraisal and project viability in the planning process; 
• Provide a general introduction to the financial appraisal process, the key components of project costs and values and potential sources of comparable evidence; 
• Introduce the alternative methods to undertake financial appraisal, also introducing the potential for an independent assessment approach to resolve potential disputes arising from project viability concerns.