Tuesday, 26 July 2016

Pleasurama aka Royal Sands, update

Back in 2014 the council decided to let Cardy Construction take over the development on the council owned site that used to be Pleasurama Amusements on Ramsgate seafront.

From around 2003 (I haven’t checked the dates here so I am writing this off the top of my head) the development there over 100 flats was being carried out by SFP Ventures, who appeared to  be an offshore company that had never actually built anything.   

SFP had engaged about four different contractors to build the site and I think that Cardy were the fifth.

I think it was in 2009 that Cardy started to build something there, possibly foundations, although as these were not connected to the chalk bedrock but just concrete pillars mounted on pads sitting on sand which is in tern held in place by a 150 year old sea defence with no maintenance record, this could just have been a tactic to secure the lease and planning consent for other reasons.


Here is a picture of Cardy building this convenient henge, at the time it was't a major construction site for a year, just two or three men with a dumper and a digger.    

Anyway it seems now that they have started the first stages of bankruptcy due to the economic effects of brexit, see http://www.kentonline.co.uk/canterbury/news/cardy-construction-files-for-administration-99603/

Here is the council wosisname in red.


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 

Anyway I phoned the council up and asked them if they had anyone there who would like to talk to me about the Pleasurama issue, most particularly to find out if we could get any temporary use for part of the site this summer, leisure or parking would be favourite.

The council promised to get someone to phone me back with their thoughts on the Pleasurama situation now. 

Below is their previous, most recent 22nd Jan 2016 update on the Pleasurama situation.

Ref No: 84703/3211812
Subject:        Pleasurama
Dear Mr Child,
Thank you for your communication received on 15th December 2015 where you requested information about the Royal Sands Development and Wellington Crescent Cliff Facade Wall.
For ease of reference I have summarised your questions with a response in each case below:
Can you kindly give me an update on the Pleasurama aka Royal Sands development on Ramsgate seafront?
An update has been provided on the Council’s website but for ease of reference I have provided the text below:
Work to the cliff façade on the Royal Sands site has taken place as planned, however unfortunately weather has delayed the final paint finish.
Due to the weather conditions expected this winter a decision has been made to delay this work until the early spring. This final painting is estimated to only take a few weeks after which the Development can commence.
If there is an officer coordinating the project can you please provide contact details? If not, please consider putting someone in charge of coordinating the whole project.
The project to deliver the new Royal Sands development is the responsibility of Cardy Construction.  Chris Rolle the Interim Head of Economic Development & Asset Management at Thanet District Council is the appropriate officer to contact for any questions relating to the site itself prior to sale.
Last week various rumours which were apparently supported by some TDC councillors, appeared on the internet, saying that the wrong paint had been used to coat the façade.  This was followed by the council issuing a statement, saying that the paint job wasn’t finished when the scaffolding was up, and a further coat of paint still needs to be applied.  Does this mean that the scaffolding will need to be re-erected? Or does this mean that the council intends some other method of applying the paint and if it does what method will be used?
The paint used does meet the required specification however the coating to some of the blockwork panels will need to be repeated due to poor weather conditions at the time of the initial application at the end of the contract period.  It is better to leave this until the warmer weather in the spring. Arrangements have been made for the contractor to return to complete the work.  The method of access is still to be confirmed but it is possible that this will be via a hydraulic platform which will avoid the need to re-erect scaffolding.
Since the initial planning application was approved in 2003, the Environment Agency have designated the site a “Flood Zone 3a (High Probability)”
Have the council either conducted a flood risk assessment or produced any report detailing why one isn’t necessary?
You have previously requested information on the subject of a flood risk assessment for the site.  This was responded to in an email from Doug Brown on 18th November 2009.
Does the whole liability of maintaining flood protection for the new development rest with the council or has any of it been mitigated either to the developer or the EA?
Flood defences are provided and maintained by Local Authorities under permissive powers, they are not duties.  However the existing sea wall at Ramsgate is likely to continue to be maintained by the Council in accordance with the ‘Hold the Line’ policy indicated in the Isle of Grain to South Foreland Shoreline Management Plan.
In 2005 the council commissioned Jacobs Baptie to examine the cliff façade, the conclusion of their report states that the structure has a short serviceable life. Since the report the council have had the façade pointed and recoated twice.
Do the council envisage this happening every five years for the life of the development and do the council envisage funding this?
The structure is the subject of regular inspection and the observations from these inspections inform the maintenance regime.  The 2005 inspection report predates the maintenance work undertaken in 2008 and 2015 which has improved the condition of the structure and extended its service life.  It is not possible to confirm the frequency of future maintenance work but the cliff facade will remain a TDC owned and maintained structure.
To facilitate the ongoing cliff maintenance do the council have any report stating the distance required between the development and the cliff façade, needed to maintain it economically?  With the structure having a short serviceable life, do the council have any plan for replacing the cliff façade with the new development in place?
The Council has not commissioned a report which identifies the most appropriate distance between the building and the façade to facilitate economic inspection and maintenance.  There are no plans to replace the façade with a new structure.
Do the council hold any engineers report stating that it is safe to build a residential development in front of the cliff façade?
The Council has not commissioned and does not hold a report on this specific subject.
If you are dissatisfied with the handling of your request, you have the right to ask for an internal review. Internal review requests should be submitted within two months of the date of receipt of the response to your original letter and should be addressed to: Information Request Assessor, Thanet District Council, PO Box 9, Cecil Street, Margate, Kent CT9 1XZ, or email to foi@thanet.gov.uk
Please quote the reference number above in any future communications.
If you are not content with the outcome of the internal review, you have the right to apply directly to the Information Commissioner for a decision. The Information Commissioner can be contacted at: Information Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9 5AF
Yours sincerely,
Mike Humber
Technical Services Manager

It seems that workers have been sent home from Cardy Construction sites, see http://www.constructionenquirer.com/2016/07/26/workers-sent-home-from-cardy-construction-sites/  

I have now had a response from the council, which is:- The council will make a statement about the situation once  the notice of intent to appoint administrators is confirmed. The council expect to send this to me in the next couple of days. 

2 comments:

  1. I suspect that the ongoing beach erosion will permanently solve this particular problem for TDC in a few years anyway... but will probably create a lot more :(

    ReplyDelete

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