Looking at the cabinet agenda for tomorrow, see http://tdc-mg-dmz.thanet.gov.uk/ieListDocuments.aspx?MId=2238 it looks as though there is going to more secret discussion about The Royal Sands Development.
Quite why this major development which is about three or four times the size of The Turner Contemporary is only ever discussed by the council in secret is a bit of a mystery to me.
Of course there will be aspects of the agreements that may need to be secret, I don’t expect the council to publish the developers mobile phone number or bank account details, but with something the size of this development the information soon leaks out and of course we can all see what is going on, on the building site. I was going to say it is like trying to keep an elephant secret, but with the size of this thing I guess it is nearer to trying to keep 100 elephants secret.
With the ten years of delays and nothing to show for it apart from a few concrete posts and a couple of huge roundabouts, the question “where do we go from here?” is an important one for Ramsgate.
There is a “just give the developer anything he asks for and hope he finally gets something built” school of thought, and a “stop the thing at any cost” school of thought over this development.
I think looking at both ideas is the best plan at the moment.
So first going ahead with the developer and trying to get the thing built:
I think the reason the development has stopped and the developer has gone back to the council at the moment is entirely about funding.
When this came before cabinet three years ago the funding to get the thing built £10m was pretty roughly based on promises from the contractor Cardy, who promised to put up £1.5m and the hotel backers Wetmore Investments £5m and that the developer had already spent £3.5m.
I would guess the works done over the last three years, the surface drain and part of the building’s foundations probably cost around £1m give or take.
Anyway one way or another the funding isn’t there anymore, so the developer has come to the council asking for help with the funding, this is essentially asking the council to sell the freehold of the site to him, for around £1.6m now and another £1.6m in overage, which is a proportion of the sale price of each apartment when it is sold.
The overall financing plan seems to be that the developer than gets a loan on the security of the freehold land to build the first block of flats then sells them and uses the money from selling them to finance building the next block and so on.
I think the main stumbling block here is that since the plans were first approved The Environment Agency has designated the site a high risk flood zone. Under normal circumstances this would have made a flood risk assessment mandatory, but because of the timing factors we are instead going down the road of putting a new development on a high risk flood zone without a flood risk assessment, here is the EA letter about the situation http://www.michaelsbookshop.com/ea/id2.htm
Putting aside the obvious safety implications, this situation is probably going to make it more difficult to borrow money against the development and the site. I would guess the developer has some plan for doing this or he wouldn’t have gone down this road, however when people come to buy the flats, getting a mortgage on a new build built on high risk flood zone without any flood risk assessment may not be possible.
The number of apartments reserved fluctuates a bit and is available on the developments website http://www.royalsandsramsgate.co.uk/availability.asp obviously the deposits of £2,000 per apartment could also be taken into account, I think there are eleven apartments reserved at the moment. When contracts are exchanged there would also be further 10% deposit although I couldn’t make out from their website if this has actually happened with any of the apartments.
So lets say we get a year or so down the line and the first block or two, of flats at the Broadstairs end of the site is finished, the people who don’t need to get a mortgage buy their flats and the rest are unable to, so the developer can’t continue the development.
You understand here, that it is the future banana skins that I am looking out for, as I guess none of us want to see the building site, still a building site in another ten years.
When it comes to financing the development, so that it is reasonably likely that is ever gets built, I think the key question is:
Do you consider it would be possible to obtain borrowing based on the security of residential building land or new build residential dwellings, on land that is designated as high risk flood zone by The Environment Agency? This is both in respect of the developer obtaining finance using the freehold as security, in the immediate future and at the point when prospective buyers attempt to obtain mortgages to buy apartments and the monies obtained from the sale of apartments is required for further funding of the development.
I have put this question to the council officer in charge of the issue and various local councillors; so far no one has given me a definite answer and many of them seem to have the same reservations as I have.
The other side of this financial coin is the council’s potential liability for maintaining the cliff and sea defence for the life of the development. What I mean by this is over say the next hundred years before the development is demolished, what is it going to cost the Thanet council taxpayer to maintain the cliff façade and sea defence to a suitable standard relative to their proximity to residential development.
Residential developments between unsupported chalk cliffs and unassessed sea defences are not very common, so it is difficult to assess, I would think that the £1m the council has spent over the last ten years is about all we have to on.
There is also the a side issue to going down this road of selling the land to the developer, and that is that the sale would have to go through the asset disposal process. This is a fairly involved process that local authorities have to go through when the sell publicly owned assets. I think the idea here is that it prevents members of the council from selling of public assets for less than they are worth, perhaps to friends or associates.
I suppose the council could decide to miss out this process altogether, but I guess that this would leave the sale open to legal complications.
Now we come to the alternative of not going along with what the developer would like.
I guess one factor here would be how the site was left, it obviously couldn’t be used for leisure or parking with the concrete posts sticking up.
I guess the cliff safety issues would resolve to the don’t sit under the cliff level that applies to most of the unsupported chalk cliffs in Thanet. The flood risk issue only really relates to anything there in the winter months.
I would say the main potential banana skin relates to the money the developer has already spent and whether he would take the council to court to try and get some sort of compensation.
I will give this some more thought and try and add anything else that occurs to me.