Monday, 1 September 2014

Pleasurama here we go again.

Bit of a council U-turn here, I wonder if it’s a vote winner, it seems to back on with The Royal Sands, no flood risk assessment, the council get full liability for the cliff for the life of the development, and from the bandstand we get to look a 100 feet of corrugated rubber, instead of the beach and harbour.

This is what they have to say:

Royal Sands Development
To: Cabinet – 11 September 2014
Main Portfolio Area: Cllr Rick Everitt, Cabinet Member for Finance & Estates
By: Edwina Crowley, Head of Economic Development & Asset
Management
Classification: Unrestricted
Ward: Eastcliff
Summary: Further information has become available since Cabinet adopted
the recommendations of the Overview and Scrutiny Panel on 20th
February. Cabinet are asked to consider this information and
determine the resolution.
For Decision
1.0 Introduction and Background
1.1 On 20th February Cabinet made a number of decisions based upon the
recommendations of the Overview and Scrutiny Panel which it received and adopted.
2.0 The Progress since the Decision on 20th February
2.1 Since the Cabinet report of 20th February there has been a change in project team as
follows:
Edwina Crowley Project Lead, Head of Economic Development and Asset
Management
Steven Boyle Interim Legal Services Manager
Mike Humber Technical Services Manager
Grant Burton Capital Development Manager
2.2 The team is supported by Stuart Wortley and Luke Miotte of Pinsent Masons (legal
advice) and Tim Mitford-Slade of Strutt and Parker (valuation advice). The project team
have re-visited the site and reviewed the documents and correspondence.
2.3 Acting on the recommendations contained in the Cabinet report made on the 20th
February the Council served Notice on the developers legal advisor requiring remedy
of the breach of the agreement.
2.4 Following the service of the Notice the development agreement contractually provides
for parties to enter into mediation when there is a significant dispute and therefore on
10th July, a without prejudice meeting took place at the offices of Pinsent Masons.
2.5 At this meeting the Developer informed officers that they had been approached by
Cardy Construction Ltd to acquire the share capital of SFP (Ventures) Ltd thereby
proposing to take ownership of all SFP contractual obligations (including this
development agreement with the Council) and that in principle, the Developer is keento accept the offer. This would mean that Cardy Construction Ltd would become
responsible for finishing the construction works in accordance with the planning
permission.
2.6 Furthermore Cardy Construction Ltd would amalgamate this company into the
established parent group of companies which has an long history of successful
performance with such schemes.
2.7 Additionally, Cardy Construction Ltd are, in principle, in a position to enter into an
agreement which, subject to successful negotiations between the parties, would mean
the Council would not only receive the overage payments in advance of completion of
the construction but also provide additional benefits for the Council.
2.8 Cabinet is asked to note at this point that the current contractual arrangements with
SFP entered into in 2006 mean that the Council has substantially disposed of its
freehold interest in the land (with freehold transfer provisions documented in the
development agreement); the Council’s only continuing legal interest is the right to
receive overage payments in respect of the completed units.
2.9 Notwithstanding the problems that the developer has outlined which they state have
caused a problem in developing out this construction (see 3.2.3) if the matter
progressed to Court, the Courts would expect the Council to undertake an objective
assessment of all reasonable offers put forward in order to complete this construction
project and by doing so receive the overage payments owed to them.
3.0 The Current Situation
3.1 In light of this offer advanced through the mediation process, the council development
project team has reviewed all the documents and correspondence and can provide
the following comment on the position.
3.2 It is clear following legal advice that terminating the development with SFP would not
be straightforward for the following reasons:-
3.3 Notwithstanding the expiry of the date for compliance contained within the Notice
served on the developer’s legal advisors, the procedure for terminating the
development requires the service of 3 additional separate notices. The Notice served
referred to the breach committed and had to allow the developer reasonable time to
comply with performance documented in the notice. The developer may comply in full
or in part, and at the end of the period for compliance the developer would be allowed
further time to proceed to the next phase of works.
3.4 To continue down this route of performance management means the process will be
likely to be drawn out over a number of years.
3.5 Furthermore, SFP (Ventures) Ltd could at any stage decide to contest any attempt to
terminate the development agreement by formal action on the basis of several
arguments. Whilst there are varying degrees of merit to these potential challenges
they might include:-
a) some of the delays to the development were caused by matters outside of their
control and therefore may validate the request by SFP to extensions of time, for
example the problems with the cliff face wall, access and egress restrictions.
b) SFP have also made allegations about the actions of a particular Councillor
trying to undermine its attempts to fund the scheme and promote the
development (including its attempts to identify a suitable hotel operator).
c) Notwithstanding the programme of works agreed at the time of the 2009
variations required the developer to build in an illogical manner because the
hotel could not sensibly be opened with the residential still underway; the
highways issue in 2010 made it practically impossible too for the reasons
documented in (d) below.
d) A review of the programme of works in light of the access/egress restrictions
mentioned means that it would be extremely difficult to follow in a safe and
practicable manner (given that if the hotel was built first in accordance with the
programme, access to the remaining site would be obstructed by the hotel), and
Health & Safety Construction Regulations require adjustments to works
programmes where there is a safer way of delivering the project.
3.6 SFP claim to have invested significant sums of money in the development, accordingly,
they are likely to fight very hard to protect SFP's interest in the development site.
3.7 For these reasons, any formal attempt to terminate the development agreement would
undoubtedly take a considerable time and there is always a risk with litigation that the
Council may be unsuccessful and at the very least the outcome would be uncertain.
Contentious litigation would be very likely in this case and progressing with such action
would be expensive (with uncertainty as to where the Court would award the costs) and
could tie the development site up for many years.
3.8 The Council's decision through Cabinet to terminate the development agreement on
20th February 2014 was reached on the basis of a summary of Pinsent Masons' legal
advice. Issues which have been raised by Parry Law in response to the Notice served
for the breach have resulted in amendment to the original advice, including (as
requested by Members) a review of the comments around the absence of a long stop
date being a “material defect”
3.9 There was no one off long stop date in the development agreement whereby if the
developer had not performed the Council would have step in rights to get the site back.
The agreement did however have several performance indicators; failure to perform
one of them would trigger a review of the agreement with the Council taking action as
appropriate. In light of the amount of money that the developer would have invested at
each stage, Pinsent Masons advise it is unlikely that they would have been agreeable
to a long stop date when the contracts were being negotiated in 2006.
4.0 Cardy Construction Ltd
4.1 Focusing on the present situation, it is clear that circumstances have materially
changed in that there is now a reputable and established construction company,
willing to take over SFP and they in turn have indicated they are willing to transfer
their interest to this company. Upon completion of company transfer contracts
between SFP and Cardy Construction Ltd, the current owner of SFP would have no
further involvement with the development.
4.2 Cardy Construction Ltd have in principle funding in place to complete the
development within a reasonable time frame. Furthermore, they are of a sizable
nature, have proven technical expertise and a consistent record for delivering quality
projects of this type and scale. 4.3 It is also proposed that the Cardy Construction Ltd will employ local tradespeople for
this project and engage apprentices. A construction project of this scale will employ
up to 200 people on this project when in full operation, there is also the ongoing
opportunity for jobs aligned to the hotel trade, commercial units and servicing of the
residential common parts.
4.4 Overall, Cardy Construction Ltd is therefore considered a much stronger covenant for
the development and for this reason are able to attract funding for the scheme,
making delivery viable.
5.0 Commercial Considerations
5.1 The project team had been asked to consider the present value of the site and what
the implications would be if the council was able to buy the site from the developer.
Valuation experts Strutt and Parker were asked for advice on the present value of the
freehold interest.
5.2 Strutt and Parker advised that the site is worth a significant amount of money even in
its part developed state.
5.3 The Council does not have the funds to buy the site back (see section 7.1 below)
even if the developer was willing to sell the site. The market value of the scheme is
the value added by the granted planning permission for the finished scheme.
5.4 Even if the Council was able to buy back the site then the Council would still be
required to secure an alternative developer, in order to secure the best financial value
for the site, so it is likely that the same scheme or a scheme of similar type and scale
would be developed out.
5.5 Therefore, the offer by the Cardy Construction Ltd to finish the scheme and
compensate the council for the overage money owed is considered to be a good
solution. To get the site developed will not only bring financial return to the council but
will support regeneration in Ramsgate, both by direct and indirect employment
opportunities.
5.6 The project team have considered the benefits of receiving the overage payment in
advance of completion of the development. The project team are also confident that
they can negotiate better contractual terms for the council to include a call in option
for non-performance.
5.7 The offer from the Cardy Construction Ltd to build out the site in a timely manner is,
subject to successful negotiations, considered by the project team to be acceptable in
principle.
6.0 Recommendations
6.1 It is therefore recommended that Cabinet authorise officers to defer the
recommendations of the Cabinet paper dated 20th February whilst positive
negotiations continue;
6.2 Furthermore, that Cabinet authorise the project team (in consultation with the S151
Monitoring Officer, Head of Paid Service and Cabinet Member for Finance and
Estates) following due process and procedures to progress with negotiations;
6.3 That a report be brought back to Cabinet in October, documenting the outcome of the
negotiations for final decision.
7.0 Corporate Implications
7.1 Financial and VAT
The Royal Sands development is currently accounted for within the Council’s asset
register and subsequently within the Balance Sheet. The financial implications of the
aforementioned have been detailed below:-
To receive the overage monies owed to the Council would result in a substantial
capital receipt that would be used to fund council’s capital expenditure programme.
It is noted that preliminary investigations were held by the project team to get an
indicative present value for the site and that this amount is a considerable sum. There
is no allowance in the budgets to take this action, it would constitute as capital
expenditure for acquisition of the rights bought back that had previously been sold.
There has been a decline in capital receipts over the past few years due to the
economic downturn and the need to achieve best value. Currently the council does
not hold sufficient funds in the unallocated capital receipt reserve to fund such
expenditure as it has been fully committed to fund the existing capital programme. It
is likely the Council would need to borrow to facilitate the purchase of the leases,
which would result in increased revenue costs for the Interest on borrowing and the
minimum revenue provision for principal repayment.
Once agreement has been sought on which option would be the most appropriate
then specialist VAT advice will need to be sought.
7.2 Legal
The legal issues are broadly as outlined within this report.
There are processes to be followed to seek to terminate the existing agreements as
outlined. There is likely to be a challenge to this process which will be costly and time
consuming.
Careful attention needs to be made to any action taken either to terminate the existing
agreement, purchase the leases or seeking to sign a new agreement to ensure the
Council’s legal position is secured.
Appropriate advice has been sought at all stages so far to ensure that the Council’s
position is sustainable.
7.3 Corporate
As outlined within this report the position has changed materially since the Cabinet
Decision was taken in February.
Given that there is now an alternative which may bring about a solution to the
problem avoiding the legal challenges it is appropriate that members are given the
opportunity to consider this and to take a decision based upon all of the options.
7.4 Equity and Equalities
If Cabinet agree to taking this forward, all discussions and agreements are subject to
a Council equity and equalities assessment.
8.0 Decision Making Process
8.1 This is a key decision subject to call in.
Contact Officer: Edwina Crowley, Head of Economic Development and Asset
Management
Reporting to: Madeline Homer, Acting Chief Executive
Corporate Consultation Undertaken
Finance Nicola Walker, Finance Manager - HRA, Capital & External Funding

Legal Steven Boyle – Interim Legal Services Manager & Monitoring Officer

10 comments:

  1. Statement from Friends of Ramsgate Seafront

    Dated: Monday, 01 September 2014
    Re: Pleasurama Site
    Following the release of the Cabinet papers today Friends of Ramsgate Seafront would like to make it clear that the proposed deal with the current builders Cardy allowing them to rewrite the Development Agreement with TDC is inappropriate and is the wrong use for the site.
    Allowing for the caveat that Planning has been granted in 2004 and “work” had started it is unbelievable that TDC would still be considering allowing housing on this site despite their own call for leisure related activities in their own plan (Ramsgate Renaissance documents) in 1998.
    Notwithstanding this we believe that 3 things are made clear in the new Development Agreement that will have to be signed by TDC and Cardy before building can start.
    1. The Freehold of the site must remain with Thanet District Council and not be sold to Cardy or any other party
    2. That the cliff face maintenance be part of the leaseholders responsibility as it used to be up until the current leases were assigned
    3. That proper “due diligence” be done on the new developer to ensure that Shaun Patrick Keegan and his associates cannot benefit in any way from any profits ensuing when the development is sold
    FORS want to make it clear that we in no way condone the Council’s actions however we understand the position past actions by previous administrations have placed the Council in a very difficult situation.


    Never should the Freehold be given away

    ReplyDelete
  2. From the July without prejudice meeting SFP and Cardy can simply be told thanks but no thanks from thr February failure to complete Looks like Edwina is making a mountain out of a derelict molehill. Who she?

    ReplyDelete
  3. My personal opinion only: to take your points in order. Airport- TDC will not agree to any "solution" to the airport that is detrimental to Ramsgate's environment. However, there is considerable emotional support for retaining aviation related activities on the site so TDC has laid down a procedure that in my opinion will show that an airport CPO is not economically viable. We are waiting for the owners alternative proposals. King Street - Allowing the peripheral areas of Ramsgate Shopping centre to revert to housing has been policy for at least 10 years to my knowledge as an alternative to a proliferation of empty shops. I have been pressing TDC to bring forward a plan for the redevelopment of King Street and Staffordshire Street car-park for some time now and it is just about ready for public consultation. The particular planning application mentioned will come before TDC Planning committee shortly so everyone can write in and have their say and can be represented at the committee. My objection is that no decision should be made until the redevelopment plan has been consulted on and agreed. It is proposed that Staffordshire Street Car-park is redeveloped for Leisure wilst retaining the Car-parking. The Pavilion, has laid derelict for many years and despite representation by me and others, previous administrations at TDC ignored their obligations. I greatly regret that. On gaining some influence, we marketed the building, later extending the offered lease period to to try to gain interest. We had just two offers, one from Weatherspoons for two thirds of the building, and one other, locally based. The second one required public help and our advice was that it was marginally viable. We are progressing the Weatherspoons offer. It will come to Planning Committee shortly where everyone can have their say. I have examined Weatherspoons elsewhere. They appear to be very popular and well run. The alternative risked continuing dereliction. Finally, Royal Sands. Another "problem" we inherited from the previous administration at TDC. I was one of very few that fought this development at planning committee and afterwards. I felt that it was too big and contained too little leisure. However, we are lumbered with a valid planning consent, two lease agreements and a flawed development agreement all agreed by the Ezekiel/Lachford regime at TDC in 2005 and 2009. Once again we are faced with dereliction or a less than perfect development. Decisions will be made on the 11th and finally in October, s representations are welcome. However they need to be realistic. My preliminary view is that we need to reinvest the money from the development into leisure facilities on Ramsgate seafront. I am promoting two ideas, a Town Square development around Pier Yard and a Beech Activities Club on the Marina Carpark. Views are welcome.

    ReplyDelete
    Replies
    1. And David taking yours, but first thanks for what looks a reasonable appraisal of what is being perceived in Ramsgate as TDC taking it out on Ramsgate.

      I can’t and never could see why the petition and campaign was directed towards TDC and KCC who are the authority covering the airport’s catchment. In fact I would think that having TDC as a cpo partner when TDC are the airport’s planning authority would be a considerable disadvantage from the compensation point of view.

      On the issue of the council buying up shops to convert the ground floor to social housing, I can see some sense in this where there are a lot of vacant shops, but to do it in a fully let shopping parade adjacent to the town’s main car park just doesn’t make sense.

      Perhaps the council just don’t have any defined limit as to how much the town should contract and intend to continue until there is no town.

      On the Pavillion, this is the last large vacant council owned leisure site in the town, it is grade 2 listed so should be eligible for grant funding, the council are managing to run, The Winter Gardens, The Theatre Royal and intend to run Dreamland in Margate, so my take is that it is the council that should be looking for the grant funding and running a leisure venue for Ramsgate.

      On Pleasurama, as you know I long ago gave up trying to get this site used primarily for leisure purposes and have concentrated on the safety issues, which boil down to the cliff and the sea defence.

      Back when I first brought up the safety issues I pointed out that since the council removed the a great deal of sand and the wartime defences, it was only a matter of time before the 1860 sea defences that last were in contact with the sea in 1917 came back into contact with the sea, well after last winter we are nearly there.

      So the big question is will there be a flood risk assessment?

      I guess I don’t really have to say much about the condition of the cliff as you me and everyone else in Ramsgate can see it. So is the plan the council forks out another million to try and get it into good enough condition to build flats next to? In an ongoing sense this maintaining of the cliff in good enough condition for people to live next to, do the council expect to finance this for the life of the development?

      Delete
    2. There is no doubt that the public like what Wetherspoons provide. Kentonline reported last week that in the first 4 weeks of trading, at the new Belle and Lion in Sheppy 2,575 breakfasts were sold, staff poured 3,503 hot drinks, dished out 3,191 burgers and hot dogs and pulled 10,791 pints of lager.
      The top two food products are fish and chips, ordered 780 times, and the chicken and rib combo, sold to 679 customers.

      The only problem will be for other Ramsgate pubs that have to compete.

      Delete
  4. the king street shos issue i seem to remeber that the olicy would be change to housing from P.O.W UP TO TRAFFIC LIGHTS leaving shops from P.O.W DOWN TO MARKET AREA AS SHOPS

    ReplyDelete
  5. DAV seems to have missed one off his list ie what about the port is tdc working with ostend coucil to actifley find a new operater for the crossing?

    ReplyDelete
  6. Looks like the cash strapped TDC have only Hobson's choice in this matter. The legal advice seems to confirm this and provided that the due diligence can come up with a positive outcome including delivering the hotel then the Cardy option seem to be the only one. Due diligence must also check that the buildings will be insurable when completed. Otherwise this could drag on for a decade and calls to use the site for other leisure purposes would have to wait. However I cant see anyway that those people that were involved with SFP cant be employed by Cardys or that SFP dont receive a disproportionate sum from Cardys,

    ReplyDelete
  7. I'm a bit confused by the bit where it says that the Council has effectively disposed of its freehold interest in the site. How did this happen? Surely disposal of the freehold was dependent on the development proceeding and this is the basis for cancelling the 2006 agreement and reclaiming the site. If the council did dispose of the freehold without securing development this is gross incompetence and negligence. The people responsible need to be exposed and, if necessary prosecuted.

    ReplyDelete
  8. the word effectively is the key. they promised it in 2002, 2006 and 2009 however they still retain it as no money has changed hands. what is wrong is the fact they considered it at all. TDC is the custodian of something they inherited by default. selling the family silver springs to mind and thats silver not purchased by taken by default

    ReplyDelete

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