Derek Maynard Financial Viability Calculations

We have been copied in on an email from Derek Maynard to Alistair Stewart and David Monk.

We think the contents of this email are so important that it should be in the public domain and so with Mr Maynard’s permission we are including links to his letter and appendices further down this page.

Mr Maynard is a Fellow of the Royal Institution of Chartered Surveyors with many years’ experience in real estate valuations, property asset acquisitions and instigating major development projects.

He has been looking at the Princes Parade project and has calculated that the project would incur development costs of £99.6m and generate income of £70m (assuming no affordable housing) ie a loss of nearly £30m.

Mr Maynard points out that there are a number of challenges to developing Princes Parade including:

1) the strata of contaminated landfill upon which their personal asset would stand and

2) the technical solutions to absorb collected volumes of floodwater from over-topping waves in the sea and rain storms.

He thinks that it is very unlikely that the council will be able to pass these risks on to a development partner as successful developers are absolutely risk averse and always leave inherent, unquantified risks with the landowning partner.

Mr Maynard also points out that there will be a considerable negative cash flow associated with the project because the rate at which sales receipts can be banked will lag considerably behind the rate at which the contractor earns stage payments. He calculates that £80m of the costs will have to be paid within the first 2 years of the project whereas only £50m of the sales income will be generated in that time frame. That means if the council opts to develop the site itself it will have to borrow a considerable amount of money.

However, we at Save Princes Parade think that Mr Maynard has considerably underestimated the cash flow problem and so we have asked Martin Arnold to take a look at this . We will publish the results as soon as we have them.

Even if the council chooses to sell the land to a developer, it will still need to bear the costs of much of upfront work to enable the leisure centre to be built and to make the site sufficiently attractive to the developer. This work will amount to many millions of pounds.

Mr Maynard’s calculations do not take account of the s106 money from Nickoll’s Quarry nor the receipt from the sale of the existing swimming pool site but clearly these will not be sufficient to cover the £30m deficit nor will they be available early enough to relive the negative cash flow position.

You can read the full email and appendices  here:

Summary Letter Princes Parade

A – Gross Dev Value Calc

B – Residual Valuations

C – Cost Profile Analysis

As Mr Maynard says , it would be reckless for Shepway DC to continue with their proposed development on Princes Parade and we urge the council to reconsider and withdraw the planning application and remove Princes Parade from the Places & Policies Local Plan.