Ed. I have just received the following by email from Cllr Allan Poole, I will respond to this and publish my responses, between the lines. If anyone has any thoughts that may assist in forming the responses please leave them as comments.
Due to the concern in Ramsgate about the future of the Royal Sand (Pleasurama) site the council has received a considerable amount of correspondence, including yours. In response I have tried to set out below the main facts and the actual position relating to these, as the information both in the media, on blog sites and at local meetings may not represent the current position with complete accuracy:
· Freehold - Whilst the council currently holds the freehold for the site, the future transfer of the freehold is already part of an existing agreement with the developer which was approved by the Council in 2006. This agreement also granted the developer three 199 year leases covering the whole of the site - granted to enable the developer to secure funding and have possession of the site for construction purposes. Following completion of the flats, commercial units and hotel, the freehold will pass to the developer. The agreement was made against the aim to achieve value from the council’s sites, as well as trying to address our top priority of generating sustainable employment.
· The Current Agreement - The 2006 agreement was subsequently revised in 2009, at which time it was secured by a bond paid by the developer which will only be released on completion of the development. The freehold is still retained by the Council and the developer retains the long leases.
· The Latest Discussions - The council has more recently been approached by the developer and asked to consider transferring the freehold before completion, at the signing of a new agreement, in exchange for the agreed sale value. In that event, in order to ensure that the agreed development goes ahead, the council will retain control of a number of flats within the development, which it will only release on practical completion and fitting out of the hotel. In the event that another agreement is to be signed, the council will take the opportunity to strengthen the legal requirements should the site be transferred to another developer to ensure that all the provisions within the agreement are transferred to them as well.
· Work on Site - Despite assertions to the contrary the developer has invested nearly £5 million in the site so far. This has funded cliff works undertaken by the council, as well as significant drainage and road works. In addition, this has also included the foundation works completed on site and the associated design works, as well as the bond payment (mentioned above) that has been paid to the council.
· Development Funding - The developer has been seeking in excess of £20 million of external funding to allow the completion of the site, and this has proved very difficult since the revised agreement was signed in 2009. In the current financial climate the banks and other lending institutions are reluctant to financially back investments on land outside of a freehold than they used to be.
· Development Funding - Under the current agreement, if a development financier wanted to exercise ‘step in’ rights because the developer was in financial difficulties, they would take on all the liabilities associated with the development, which would not be the case if the developer held the freehold - hence the latest request for an earlier transfer of the freehold
· Compliance with Agreement - It is a fact, despite assertions to the contrary, that the main fundamentals of the agreement have been met by the developer. Although the development is due to be completed in 2014 under the agreement, there are provisions that this can be extended to 2017 if market circumstances dictate this; and given the existing national economic position any such request would have to be given proper consideration. The Council could decide to refuse a request for an extension taking into account the slow progress of the development to date. However given the amount of funds already invested we would expect the developers to make a legal challenge to this. This would inevitably result in expensive and uncertain litigation, therefore the council would need to consider its chances of succeeding in terminating the agreement against the cost of legal action. More importantly, it must be noted that even if the council was successful, there would remain the long leases which the developer holds, which would remain valid even if the agreement was terminated. It would take further legal action by the Council in order to terminate those leases and recover possession of the site, the success of which would also be uncertain.
· Financial Return - There have been some misconceptions about the value of the site and that this has been undervalued. However, this has been looked at in some depth by the council’s professional property officers and for a site on which all the investment cost and risk lies with the developer the council is getting above the market average for this type of deal based on the calculated profit. This even excludes the wider benefit of a hotel being constructed on the site that reduces the possible profit margin for the developer.
· Due Diligence - The council has already set out its requirements before accepting a revised agreement, and one of these is in relation to due diligence on the funding of the development. Despite concerns raised about this, the deal has always required the large majority of funding to come from external lenders, and the council’s focus will be primarily on whether this is financially robust. However, as an external lender will be providing a large amount of funding the council will also be taking some assurance from their due diligence processes as part of the approval process, due to the level of risk to them.
· Nature of Proposed Development - the question of whether this is the correct development for the site has been raised since it was first discussed over 10 years ago. Although this is a fair question, and will remain so, it does not provide a route forward for the council. The development has a valid and enacted planning application for the proposals, and has a valid development agreement under which it can be constructed if the funding is available. These cannot be set aside without legal action and as explained above, this has limited chance of success at this stage.
· Action by council - The council has already agreed to consider its options in relation to the current agreement and action to be taken if matters are not moved further by the developer before the end of May 2013.
· Alternatives - Due to the issues discussed above there is no advantage to considering alternatives at this stage.