Valuation of developable land in Canary WharfTo value developable land in Canary Wharf, there are several factors to take into account. Indeed, it is crucial to decide on an appropriate rate at which to discount the projected cash flows for the property. Canary Wharf developable properties carry considerable risks. For example, the slowdown in the London office market, together with significant market impacts for large financial services tenants in Canary Wharf, presents serious risks to leasing and lease negotiation. How long will it take to attract quality tenants to buildings, especially as financial services tenants are currently under pressure? Additionally, the requirement for additional planning permission for buildings means construction on three of the sites cannot begin for several years. How can you accurately predict the market in the future? Will the London office market improve significantly or continue to decline? What will interest rates look like? Songbird must consider the risk of developing such sites several years from now. Additionally, Songbird must take into account the significant risk associated with transportation. If the Crossrail project does not come to fruition in a timely manner with the necessary approvals, the development will not proceed as planned, leading to cost overruns and significant construction delays. Assuming Canary Wharf is able to obtain the necessary transport approvals, Canary Wharf's projected cash flows should be discounted at 12.5% ​​to mitigate the risks it faces. Taking into account this discount rate, together with all taxes, debts, rent and rent-free periods, as well as all construction costs, a suitable offer on developable sites in Canary Wharf is ₤809,000 (the net present value of cash flows, discounted at 12.5%). Please see Appendix 1 for a detailed pro forma of all projected cash flows. It is important to clarify some key assumptions that were made when valuing properties at this NPV. First, the project generates a high IRR of 73%, largely due to the sale of each building upon rental. For cash flow projections, it was assumed that all buildings would be sold 18 months after construction completion. Thus, with the exception of the last building sold, Heron Quay, the buildings are sold towards the end of their free rental periods and no rent is collected..