Land Value

Following the response to this FoI request,

we have been doing some more work on the Financial Viability calculations.

This is still not easy as most of the numbers have been redacted but the FoI material has given us some more clues.

There will be 4 phases to the development:

Phase 1 : Remediation of the site

Phase 2 : Construction of the leisure centre; realignment of the road and construction of the western car park; relocation of the rising main; new promenade; creation of the linear park

Phase 3: East residential development and central open space

Phase 4: West residential and commercial development and western open space.

We believe that the council are intending to develop the leisure centre themselves and then sell the housing land to a developer. They clearly believe that the sale of this land will generate sufficient money to cover the costs of  phase 1 and phase 2. (which from p766 of the FoI material is £26.8m). In other words they are assuming that the housing land has a significant value. (They acknowledge they will have to borrow money to achieve phases 1 and 2 until the housing  land is sold.)

However work done by Martin Arnold suggests that the project will make a significant loss after taking account of the cost of building the leisure centre and all the necessary infrastructure and preparation work. Download the Martin Arnold Financial Appraisal (pdf) here.

On page 801 of the FoI material there is a partly redacted summary calculation which shows on the income side £4.7m from the Nickoll’s Quarry s106 money; income from the sale of the existing pool site – redacted but which we know from other sources is about £5m; CIL from the PP site £1.184m (though we think it is incorrect to include this) and £1.4m being the Affordable Housing contribution from the Imperial Green devlopment (which shouldn’t be included – see below). Page 801 gives the total income as £26.6m,  the balancing figure being the land value for the residential plots. This works out at £14.3m which is confirmed on page 819 of the material.

As is stated on page 801, this income equates to the estimated costs for phases one and two although page 801 states that FHDC will need to contribute £1.7m plus funding costs.

With so much of the financial information being redacted, it is impossible to check exactly how the land value has been calculated and in particular which of the costs of phase 1 and 2 have been taken into account. But clearly it is crucial that the consultants have got this figure right. Have any significant costs been omitted? If so, this would mean that  either the land value is being overstated which would have serious implications for the viability calculation or that the council will have to bear the extra costs themselves.

The FoI material states on page 539  that an earlier Savills valuation was £8.7m taking into account the diversion of the road. Another  was £4.73m not taking into account the cost of diverting the road £2.9m. So how have they now come up with a figure of £14.3m?

One of the other worrying things about the financial viability calculation is that it includes £1.4m s106 money.  It’s now clear that this is  the off site affordable housing contribution from the Imperial Green development. But surely the council aren’t intending to build the AH from both the Imperial and the Princes Parade developments on PP? There are two possible implications from this. One is that no affordable housing is being provided for IG which is contrary to the Council’s planning policy. Or, that instead the IG affordable housing is being built on PP , and that actually the PP development itself is not generating the required number of affordable housing, which is also contrary to policy.

The council’s consultants are arguing that the housing is needed to fund the leisure centre. However, as Historic England have pointed out, the NPPF only allows for enabling developments in the context of improving heritage assets.

The other area of major concern to us is that most of the planning application (including the housing) is outline only. This means that when the council sells the housing land to a developer they will effectively be giving them a blank cheque and will have limited control over what eventually gets built there.

In terms of the development and understanding the associated costs, the Council is engaged in an evolving process . Cabinet did not have access to any financial viability information when they made the decision to submit the planning application and have not yet discussed the financial implications – at least not in a  public meeting. The costs and income of the project are still very uncertain and we are concerned that the council are rushing ahead with this proposal without having fully investigated the implications.