Have the wheels fallen off the Carriageworks proposals?

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For over a year people living and working around Stokes Croft have expected an iminent start on the redevelopment of the Carriagaworks and Westmoreland House.  While the Carriageworks Action Group hope that something will still happen, we are finding it increasingly hard to avoid the conclusion that the current development scheme is unlikely
to be built.carriageworks-clown

In October 2015 the City Council agreed to give Fifth Capital London planning permission to build 112 residential units and 1000sqm of non-residential units on the long derelict site. The permission was finalised in July 2016 and lasts for two years from that date. Fifth Capital are required to undertake a wide range of surveys before starting any work. They are also required to “consult and work with local stakeholders, including the Carriageworks Action Group“ on a number of issues including local employment and how the site will be managed.

Proposed ground floor

CAG has been frustrated by the lack of progress with the scheme. To the best of its knowledge no surveys or site investigations have yet been undertaken. Neither have there been any recent updates from Fifth Capital; the last face-to-face meeting was in May 2016, the last phone conversation was in October and since then phone calls and messages have gone unanswered.

There are some understandable challenges facing Fifth Capital, not least the need to agree contract terms with a builder and many unquantified risks attached to the buildings which will only be resolved when surveys are undertaken. Furthermore, the site itself is still owned by Comer Homes. Fifth Capital have an option to buy the site subject to securing planning permission. It is not known when this option expires, but given that planning permission was obtained last July Fifth Capital seem to be struggling to complete the purchase.

Whether the lack of progress with buying the site and finding either a builder or a development partner means it is the end of the road for Fifth Capital is far from clear. But CAG is concerned that Fifth Capital might ultimately seek to exit the project.

schistostega

Luminous moss (or Goblin’s Gold) growing on a tunnel wall (not in the Carriageworks)

Having said that, there might be a glimmer of light. Fifth Capital have instructed the Bristol
office of property consultants CBRE to help find a development partner.  CBRE say that the process is going well and that there should be news in the second quarter of this year.  We hope that this is true, but then we’ve also been here many times before. Is it really light at the end of the tunnel, or is it just the moss glowing on the wall?

From an early stage in CAG’s work to get the site redeveloped it has been agreed that there should be a dual-track approach. On the one hand working with any willing developer and on the other pursuing compulsory purchase (CPO) by the City Council. The CPO process was started in 2012 and Knightstone identified as the preferred developer in November 2013. But almost immediately Fifth Capital emerged with its option to buy the site and this made the Council understandably reluctant to further the CPO process.  While CAG worked closely with Fifth Capital on its proposals, we all hoped the CPO wouldn’t be necessary. But now CAG believes that it is time to restart the CPO process so that swift action can be taken if, as and when the Fifth Capital scheme fails.

Bristol is in desperate need of more housing. This site will provide 112 units which, if properly managed by a housing association or ethical corporate landlord, will help meet some of the City’s needs. Ideally CAG would like to see a good mix of social, affordable and market units but this was not the case with the Fifth Capital scheme which only provided 10 affordable units.

Lori Streich, Chair of CAG, said: “We worked really hard with Marc Pennick of Fifth Capital to get a scheme which was acceptable to the community and viabile for the developer. If he can still pull something out of the bag that will be great. Equally CAG remains committed to working with any developer that will develop the site in line with the Community Vision.  But if the private sector cannot step up to the mark then it must be for the City Council to take a leadership role and bring forward a compulsory purchase to enable the desperately needed end to this site’s long term dereliction”.

Alternative developer? Key points from the Community Meeting

There is growing concern about the lack of visible action towards development on the Carriageworks site.  This has rekindled some of the dialogue within the community about the current plans for development.  If these seem too difficult to deliver, what about thinking about alternative approaches and about the actions we can take to move the development forward.

The community want to see the site developed in line with the CAG Community Vision, through whatever means/whichever developer.  There is concern that even though the Section 106 agreement was signed in June, the site is still owned by the Comers through their company Opecprime.

ACTION:  CAG, through the Liaison Group, was delegated to seek a meeting with the Comers to discuss unsticking the process.

There was a discussion about the price of the site.  If the site has to be Compulsorily Purchased (CPO), then the price would be market value.  If, however, a different arrangement not involving the Council was reached with the current owners, then there could be more latitude in the agreement of the price.

Given the seeming stalemate, the meeting would like to see the CPO process started up again.  This has to be led by Bristol City Council.  It is complicated by the fact that Fifth Capital have Planning Permission but ownership is still with Opecprime.

The meeting talked about setting up a development consortium to deliver community led plans for the site.  If this is the case and a consortium developed viable plans for the site, then it could become the “preferred developer”.  We have been advised that this would avoid the need for a full procurement process.  It would be up to the consortium to approach the Council to seek assistance to progress this idea.

ACTION:  BCC was asked to look into restarting the CPO process.

For a CPO to be successful, there needs to be a viable scheme.  Community members expressed considerable enthusiasm for the idea of a consortium to work up a scheme that would meet the Community Vision for the site, and be viable in terms of a CPO.   It was suggested a masterplan could form the basis for development being brought forward in phases and developed or sold to different developers.  Some people at the meeting wanted to be involved.  There was a discussion about what this means.  If we want this to move forward, consortium members have to be able to contribute real resources towards the design, finance and delivery of each part of the site.  Prue collected the names of people who are interested in setting up a development consortium.

The meeting agreed that we don’t need a “development brief” because this is captured by the Community Vision and the subsequent consultations about scheme design – carried out by Knightstone and Fifth Capital.  There has been a lot of discussion about what people want on the site.  What people want now is action!

ACTION:  CAG will convene a meeting in January for people who can contribute to a development consortium.

ACTION:  Can/will BCC Planning waive the fees for a planning application from a community led consortium?  This will be explored.

Carriageworks building:   There is a lot of concern about the continuing deterioration of the Carriageworks building.  Can notices be served on the owners for urgent works? The problem with this is that if the owner does not carry ouit the repair notice works Bristol City Council would have to do the works and pay the upfront costs, and then try to reclaim them.  While there is a pot of money for the Carriageworks, this is being held in case of the need for a site acquisition.

ACTION: CAG Liaison Group to explore with BCC how this money might be used (in the most creative ways!) so that we get the outcome we want – development of the site in line with the Community Vision – and protect the fabric of the Carriageworks building through this process.

ACTION:  If a development consortium is set up, this should explore grant funding for the historic building

ACTION:  BCC to establish the “curtilage” of the Listed Building.  This is the area around the listed building (Carriageworks) that is covered by the Listing.  It’s a technical issue but an important one that could help to bring in more resource for the development of the site.

Risks of the site:  Developing the site is complicated and there are many risks, including unknown ones.  For example…  Is the land contaminated? Are there issues about the water table? How unstable, or downright dangerous, are the buildings? And what does all this mean for the costs of redevelopment? There’s not an action arising from this point, but it’s worth bearing in mind.  Not knowing the risks makes it very difficult to establish the costs of redevelopment.  This is something that has to be addressed in drawing up alternative plans.

Ideas and moving forward:  At the end of the meeting, Lori (Chair) asked everyone to send their thoughts, ideas, intentions etc. to CAG via the comments section below (or click the speech bubble top right) or email  ideas@carriageworks.org.uk or Facebook

We look forward to hearing from you.

Lori Streich, Chair, Carriageworks Action Group

 

Revised Viability Appraisal released

Fifth Capital have released their revised viability appraisal. You can download the full appraisal from this site or find it on the Council’s planning website.

A comparison with the April version is below. The revisions reflect a reduction in the number of residential units, an increase in the number of smaller residential units, an increase in the amount of commercial / community spaces.  The other design changes have not resulted in any significant change in the construction costs.

The essence of the appraisal is:

  • calculate the value of the completed development
  • subtract all the costs of development (including the cost of the land)
  • = the developer’s profit.

The alternative ‘residual land value’ approach is to calculate the value of the completed development, take away the costs (including the developer’s profit at a % of the development value) with the result being the value of the land.

April 2015 September 2015
Residential – units for sale 110 102
Average unit sale value £248,136 £247,438
1.Total residential sales £27,295,000 £25,238,659
Residential shared ownership 8 10
Average unit value £128,227 £105,213
2.Total value of shared ownership £1,025,820 £1,052,130
Annual income from residential ground rents £30,300 £28,200
Yield 6% 6%
3. Capital value of resi’ ground rents (a) £497,697 £463,203
Commercial rentable area (sq ft) 7,470 10,872
Rent psf £10.00 £10.00
Annual rent from commercial units £74,700 £108,720
Yield 8% 8%
4. Capital value of commercial rents (b) £898,501 £1,307,698
5. Gross Development Value (1+2+3+4) £29,717,018 £28,061,690
LESS
Site value £1,426,820 £1,353,953
Stamp duty & fees £82,756 £78,529
Construction area (sq ft) 112,235 105,797
Construction cost (c) £17,738,360 £17,306,114
CIL & S106 payments (d) £638,480 £587,000
Professional fees 10% £1,773,836 £1,730,611
Marketing & letting £438,660 £419,128
Sales fees £445,755 £420,925
Finance @ 7% £1,422,108 £1,394,942
6. Total Costs £23,966,775 £23,291,203
Profit (5-6) £5,750,243 £4,770,487
Profit on GDV 19.35% 17%

(a) Calculation includes Present Value @ 6% for 3 months

(b) Calculation includes Present Value @ 8% for 6 months

(c) April construction cost = £158.05psf. September construction cost = £163.63psf

(d) April retail space Community Infrastructure Levy (CIL) = £79,080. September appraisal does not show this budget line.  Council CIL charging schedule charges retail space at £120psm but B1,B2,B8 (i.e. office and light industrial) space at £0psm.

JRF call for guidelines on viability assessments

Viability assessments, like statistics, can be used to prove just about anything.  Interesting that the Joseph Rowntree Foundation have found that recent changes to the planning system have made it even more difficult to secure social housing from private development.  Reported in Inside Housing.

Viability assessment guidelines should be introduced to make it more difficult for developers to reduce affordable housing in planning agreements, a research charity has said.

“The Joseph Rowntree Foundation has today published a report, which finds that changes to the planning system have made it more difficult for planning agreements to ensure homes are built for those on the lowest incomes.

“The charity argues that the National Planning Policy Framework (NPPF), introduced by the coalition government, has led to negative impacts, including a greater emphasis on viability assessments, giving developers more ability to renegotiate agreements if they can show they make the scheme unworkable.

“JRF is calling for the introduction of viability assessment guidelines, which would set parameters for building costs and land values and allow councils to extract an amount from the rise in land value resulting from the granting of planning permission.

“It is also calling for the NPPF definition of affordability to be changed so it is aligned with households’ ability to pay.”

Fifth Capital scheme is over valued

Analysis of the values put on their flats compared to local comparables show that Fifth Capital may have seriously over valued their scheme, to the point that it is not viable.

In their Viability Report, Fifth Capital follow standard procedure by calculating  the value of their flats by comparing them with others on the local market; ‘comparable valuation’. But just how comparable to Stokes Croft are these properties?  (Note that Fifth Capital’s one bed flats will be 500-600 sq ft)

finzelsreachFinzels Reach

Dockside development on the old Courage brewery site. “The height of contemporary living” with “views overlooking the Floating Harbour and Castle Park”. 1 bed flats for c.£175,000 – £225,000.

horizonandeclipseHorizon and Eclipse

In the towerblock at Cabot Circus above Harvey Nicks. “Some of the most desirable flats in Bristol city centre” 1 bed flats for £177,000 to £199,000.

invictaInvicta

“The location of these new apartments in Bristol is as stunning as the building, facing the Millennium Promenade and overlooking the Floating Harbour and Porto Quay.” 1 bed apartments for £160,000 to £190,000.

The Viability Report accepts that all of these are far superior to the Carriageworks site. So they also consider some properties in the local area for better comparables. Of those, five are one bed flats.

armidaleArmidale Place

Redevelopment of the old White Tree Garage site.  They quote a 1 bed flat (657 sq ft) for £227,000.  But look at Rightmove and you’ll see most go for £138,000 to £150,000 (485 sq ft). And that’s with secure basement parking.

pictonstreetPicton Street

Flat 1 at Number 50. Cited as a one bed flat at £217,500 but check Zoopla and it describes it as a 2 bed flat. Oops.  Rightmove shows 47a, a genuine one bed flat, for £136,000.

Others

The other three one bed flats listed are up in Kingsdown or Cotham where you obviously get a bit of a premium over grungy living at bottom of hill.

The Council’s assessment of the viability appraisal

As is normal practice the Council asked their own consultants, in this case BNP Parisbas, to assess the validity of the viability appraisal.  They thought that the best comparable is other new build (the newness, the hype of a new development and the substantial marketing budget will always give a boost to values). Consequently they could expect Armidale Place to have lower values than a new build.  They only found one comparable new build.

prospectcourtProspect Court, Kingsdown

“Prospect Court is a stylish purpose built development of just nine, 2 and 3 bedroom, apartments arranged over three floors designed to blend with the existing period properties. Located in a prime elevated position”.  There are no one bed flats but two beds (c720 sq ft) have sold for c.£245,000 (Fifth Capital’s are being valued at £250,000).  But this is a small quite exclusive development and, as the sales blurb says, it’s up the hill!

catherinecourtCatherine Court, Picton St

We’ll throw this one into the pot as it’s just across the road.  Built in the 1990s, it’s a gated community with parking. Units are being sold for £205,000 (2 bed flat with courtyard parking) to £265,000 (house with internal garage).

In conclusion

So, in light of the comparable evidence, it is a bit surprising that Fifth Capital conclude (and BNP Parisbas confirm) that their one bed flats will be worth £215,000 (students of Estate Management and Valuation would probably be marked down for failing to take proper account of the comparables!).

If the value was put at £150,000 (still outrageous, but there you are) it would result in a reduction in the total sale values of the 59 one bed flats of £3.8m.  A similar reduction for the two and three bed units (we haven’t the time to do that analysis but we’d guess they may also be over valued) would wipe out all profit on the scheme and, we suspect, make it a non-starter.  That doesn’t help a case for more affordable housing, but it does suggest that something else is going on in the figures that is not fully disclosed in the viability report.

Unredacted viability study released

The unredacted reports have been released – here they are:

Economic Viability Appraisal Report

Viability Review

Also on the Council’s website

Headlines

Commercial units.

Rent = £10psf (£107psm) per annum for a shell unit (so services, rates etc will all be additional).  “The values attached to these units reflect the likely tenants of the accomodation, being local occupiers”.  Really affordable for locals?  By comparison Co-Exist charge £12-14psf for Enterprise Space and £10-12psf for artist studios, but that’s inclusive of all services.  Meanwhile the old Princes Trust unit on Stokes Croft (4,815sq ft on 3 floors) is on the market at £5.20psf and another recently refurbished 547sqft unit on Stokes Croft is on the market for £8.20psf. However, 32 Stokes Croft is on the market at £13.50psf.

Freehold of the commercial units will be sold to an investor for £900,000.  YP=8%.

Residential Units.

  • 1 x bed flat = £215,000.
  • 2 x bed flat = £250,000.
  • 3 x bed flat = £300,000.
  • 3 x bed house = £375,000.
  • Affordable units (which comprise all the units in the Carriageworks building) will be shared ownership with 40% sold to the occupier and 60% to a RSL.  So the three 2 bed duplex units, which each have a value of £265,000, would be bought on shared ownership for £66,000.

Freehold of the residential units will be sold to an investor for £500,000 (ground rent of £300/unit with 6% YP).

Development costs

Construction cost of all types of unit = £158psf (£1700sqm).

Costs are based on the fourth quarter 2014 but Fifth Capital won’t be on site until third quarter 2015 at the earliest; this could add 4-5% to costs (BCIS estimate). This inflationary increase will have to be covered either from the developer’s profit, the contingency fund or by an increase in sale values.

Costs assume that works will be procured by a national housebuilder – which Fifth Capital is not!

Development cost (construction cost + fees + marketing + agents + legals + finance) = £24m or £213psf (£2,300psm)

The difference between net and gross floor areas is 26%.

There is no allowance for the cost of archaeological works, works in relation to flora and fauna, bats, pvs, artwork, any works to adjoining properties (e.g. underpinning), Japanese knot weed, asbestos etc.  The assumption must be that these will be picked up by the 5% contingency fund or from the developer’s profit.

Developer’s Profit

£5,750,000 (19% of gross development value).

Land Value

£1.4m.  The benchmark landvalue used to justify this land value is Huller House & Cheese Warehouse.  This is a Victorian and early 20th Century warehouse block fronting the harbour in Redcliffe – some of the most expensive real estate in Bristol. Questionable if that’s a good comparable.

Total cost

Total cost of development (£29.5m) equates to £2,800psm (assuming 10,430 sqm gross area developed).

Viability Appraisal released but redacted

Viability Appraisals are a key document for proving whether or not a developer can afford to provide social housing.  Historically this has been considered a commercially sensitive document which even the members of the planning committee won’t see, although this view is starting to change and increasingly the appraisals are being released to the public. So, knowing its importance for the Carriageworks, we put in a Freedom of Information request back in early February, and yesterday the document was released.

The Viability Appraisal has been prepared by Upside London, specialists in advising developers on affordable housing.

Unfortunately both the Appraisal and the assessment of the appraisal, which the Council commissioned from BNP Parisbas, have been heavily redacted. So we can see the framework of the appraisal but not the actual numbers used.

It’s worth noting though that a recent decision by the General Regulatory Chamber, which hears appeals against the decisions of the Information Commissioner, has cast doubt on whether developers and Councils can withhold any of the information in a viability appraisal.  They concluded “We find it particularly hard to accept that the pricing and other assumptions embedded in a viability appraisal are none of the public’s business. They are the central facts determining the difference between viability and non-viability. Public understanding of the issues fails at the starting line if such information is concealed, and discussion of the “point in time” nature of viability models is frustrated.”  CAG would obviously like the redacted information released before the Planning Committee makes its decision on 8th April.

Here are the two documents:

VIABILITY_APPRAISAL (7Mb PDF)

VIABILITY_APPRAISAL_ASSESSMENT (8.5Mb PDF)

If anyone can help fill in the missing numbers we’d love to hear from you 🙂 ideas@carriageworks.org.uk