A long post below so here’s a summary:
- Still waiting for Fifth Capital to sign S106 agreement. They in turn are waiting for the land owner, Comer Homes, to approve. Planning permission isn’t finalised until S106 is signed.
- Fifth Capital still trying to agree price with builders. Demolition will be carried out before main build contract is let.
- Fifth Capital likely to keep ownership of commercial ground floor space.
- Community meeting on 2 June.
The Full Explanation
In April last year Bristol City planning committee told the Carriageworks developer to go away and improve their planning application. Up until that point CAG had had a rather hostile relationship with the developer, Fifth Capital. But afterwards we managed to sit down together and find out what we each wanted to achieve. Over the following months there were many changes to the scheme. By October, when it went back to the planners, we felt that it was good enough to secure our support albeit with reservations especially about the amount of affordable housing.
So what’s been happening since? Everyone wants to see something happening to the dereliction on the site. But before that can begin many other things have to happen:
- The planning permission has to be formalised by the signing of the S.106 Agreement. This is a legal document mainly, but not exclusively, concerned with contributions to affordable housing. The main signatories are the Council and Fifth Capital, but the landowner also has to sign and that’s our old friends Comer Homes. They are dragging their feet, failing to respond and because of that everything else is getting held up. We’re told that Comer just needs to agree the last details of wording and it can then be signed. We wait, and we wait.
- Once the S.106 agreement is signed Fifth Capital are able to exercise their legal option to buy the site. Comer are then out of the picture and Fifth Capital can get on with the rest of the development process. Once the S.106 is signed the developer has two years to start on site.
- Since last October Fifth Capital has been trying to agree a price with its builders for carrying out the work on site. The site has lots of risks, mainly to do with demolition of Westmoreland House and protecting the listed Carriageworks building. In fact the Carriageworks building is so dangerous that no one can even go inside to work out what needs to be done.
- When it comes to building works, higher risk means higher price. Conversely, the lower the risk, the lower the price. Fifth Capital are therefore going to split the contract so that demolition and shoring-up take place in a separate contract. That will allow surveyors and the like to get into the Carriageworks to figure out what needs to be done. That will reduce the risks for the builders and allow them to give Fifth Capital a final (and lower) price.
- Before any demolition work begins the travellers currently living on the site will relocate. Safety and peacefulness is in everyone’s interest.
- With Westmoreland House demolished, the Carriageworks shored up and the price with the builders agreed, the building works can begin.
- Fifth Capital are talking to Housing Associations regarding the long term management of the residential units.
- We’ve had discussions with Fifth Capital about the ground floor units. Currently they are thinking of retaining ownership of the units, having a management company oversee the lettings and a separate company run the market. They agree that the company should have local input from other businesses and residents in the area.
But at the moment everything hangs on Comer. Heard that one before?
With all the delays there are inevitable questions, and they usually begin “what if ….?” What if Comer Homes don’t sign the agreement, what if Fifth Capital can’t agree a price with the builders, what if Fifth Capital sell the site, what if there’s no Housing Association, what if the ground floor units aren’t let, and so on.
CAG has stayed in regular contact with Marc Pennick of Fifth Capital, meeting on a number of occasions to discuss many issues. He remains upbeat and is confident that Comer will sign and that the scheme will be built by him. But we nevertheless thought it worth mulling the following questions:
What if Comer or Fifth Capital doesn’t sign the S.106 Agreement?
The S.106 Agreement creates the legal agreement between the Council, the landowner and the developer that secures the affordable housing units. Until it is signed there is no planning permission in place, just a recommendation from the Planning Committee to grant permission. If the S.106 does not get signed the planners will have to take a report back to the Planning Committee. The Committee then has two options: 1) Decide that there is a different way of securing the affordable housing or 2) decide that the S.106 will not be signed and that the affordable housing will not therefore be secured. If the latter, the Committee would then have to consider whether the permission should go ahead without any affordable housing or whether planning permission should now be refused.
What if a build price can’t be agreed?
It will be an expensive site to develop (something like £20m). As with all development there’s an equation:
Value of the finished development MINUS Cost of land & building works = Profit
If the cost is too high then the profit goes down and eventually it becomes uneconomic to build. The developer then has three options: 1) Change the scheme so that the cost is lower and/or the value is higher 2) Sell the site to someone else and let them figure it out 3) Do nothing and sit on the site until values go up and/or costs go down. Developers will normally aim at a profit of 20% of the development value – this is what they make in return for their effort and financial risk. Last September Fifth Capital said they were aiming at 17%.
What if Fifth Capital sell the site before building?
This is always a possibility. Fifth Capital might be able to sell their option on the site – that depends on the legal agreement with Comer. But it would be more likely that Fifth Capital would wait until they’ve signed the S106 agreement and purchased the site before selling it on; that way they’ll maximise the value. If they do sell it there will be a new developer to deal with. That developer may try to change the planning permission in order to increase the value of the development and their profit. This is something we’d need to be alert to.
Is this likely to happen? Marc has consistently said he intends to build out the scheme so we don’t think it is likely. But you never know.
What happens if nothing happens?
In theory we could go back to compulsory purchase. This was previously on the cards because Comer owned the site but was making insufficient progress redeveloping it. Knightstone were lined up to back the compulsory purchase order (CPO) but that process ground to a halt when Fifth Capital emerged. If Comer again block the scheme or if another owner just land-banks the site then the CPO process could be restarted. The Council would have to demonstrate that the owners are unable or unwilling to develop the site themselves and they’d also have to find a new development partner. Difficult, but not impossible.
What if there’s no Housing Association or tenants for the ground floor?
Essentially this means there would be no one who wants to buy the scheme. In this market, that’s unlikely. If it were the case it would suggest the price is too high. The price could be lowered but eventually it would get to the point of being uneconomic to build (see above). If there was no Housing Association it would mean there would be no organisation willing to take on ownership and management of the affordable units – but the developer would still have to build them as it’s a condition of the planning permission. If there were no tenants for the ground floor it suggest a need to revisit the rents and/or terms of occupation. Space generally finds occupiers if the price is right.
Community Meeting in June
We haven’t met since December but whether or not there’s real progress we felt we needed to see you all again! So: Thursday 2nd June, 6:30pm, venue to be confirmed. Marc Pennick of Fifth Capital will be there to tell you what’s happening and, we hope, confirm that Comer is no longer the owner and that building works will be starting soon. Cross your fingers.
See you then
Lori, Julian and the Liaison Group