ROYAL SANDS, RAMSGATE
To: Extraordinary Cabinet Meeting – 16th October 2014
Main Portfolio Area: Finance & Estates
By: Cllr Rick Everitt, Cabinet Member for Finance & Estates
Classification: Unrestricted
Ward: Eastcliff
Summary: Thanet District Council is the contractual partner of a development agreement dated 2006 and modified in 2009. For various reasons the development has stalled with both parties in dispute over a number of matters. The parties looked set to proceed to the courts where the outcome would be uncertain, so both parties agreed to participate in an arbitration process to aim to seek a practical resolution to getting the site built out. Cabinet are now being advised of the outcome of those discussions and asked to make a decision on the way forward
For Decision
1.0 Introduction and Background
1.1 Thanet District Council is the contractual partner of a development agreement dated 2006, modified in 2009, with SFP Ventures Ltd.
1.2 Following the successful grant of planning permission, the development agreement provides for commercial and residential property to be built on the site as follows:
· 107 residential units;
· one 60 bedroom hotel including reception, conference room and function room facilities,
· retail and food/drink units on the ground floor;
· a children’s play area
· and a health/fitness centre.
1.3 The development has stalled and the development agreement provides for a mediation process in the event of a dispute so both parties agreed to take part in discussions with the aim of making progress.
1.4 The Cabinet paper of 11 September 2014 summarised the progress made since the Cabinet paper of 20th February and made recommendations on the way forward. The Cabinet meeting of the 11 September authorised officers to defer the recommendations made on the 20th February and also that a report be brought back to Cabinet in October documenting the outcome of the mediation negotiations.
2.0 The Current Situation
2.1 In response to public interest in this project and the council have provided information through the web site including providing answers to some of the frequently asked questions, see annex 1.
2.2 The Overview & Scrutiny panel called-in the Cabinet decision and a meeting was held on the 25th September to consider the officer recommendations made at the Cabinet meeting on the 11thSeptember. As a result of that meeting overview and scrutiny requested further information and an Extraordinary Overview & Scrutiny Panel meeting is to being held on 15th October 2014.
2.3 The council have engaged in the arbitration discussions with Cardys, (brought into the discussions by SFP Ventures Ltd). The offer Cardys are making is to purchase SFP Ventures ltd, and by doing so take full control of the company. Cardys do not need the council’s permission to acquire SFP Ventures Ltd, but they do not want to purchase SFP Ventures Ltd unless the council are in support of their organisation taking this forward.
2.4 Following purchase of SFP Ventures Ltd, Cardys will take over the development agreement and this will put them in a position of direct contractual relationship with the council. This contractual relationship will enable them negotiate terms that would result in council having more control on delivering the development out in a reasonable time frame, and get the money they are owed upfront (instead of the current arrangement whereby the monies are passed to the council upon the sale of the units at a later time).
2.5 It is important to note here that when the council is contracted to a company by way of a lease or development agreement, it does not have vacant possession and therefore there is no opportunity for the council to market a site.
2.6 In these circumstances, if the council makes changes to an agreement and they change significant terms (such as when payments are made to the council) the council must obtain advice from an appropriately experienced and qualified adviser that it is getting the best terms. The council have procured the assistance of Strutt and Parker to satisfy this obligation. Strutt and Parker have already been asked to confirm the viability of the development and provide advice on the market value of the land. This information will be made available to the Overview and Scrutiny Panel on the 15th October.
2.8 The current situation therefore is that there have been further discussions with Cardys about taking this forward and some of the safeguards being considered are below:-
3.0 Performance Management
3.1 There will continue to be detailed performance measures in any contract including:-
3.2 The contract will provide that Cardys carry out the development in compliance with the planning permission.
3.3 The agreement will ensure that Cardys may not vary the planning permission, the specification, or the programme of works without the prior written consent of the council.
3.4 All works to be carried out in good and workmanlike manner and the council to receive collateral warrantees following completion of the scheme.
3.5 Furthermore the council is permitted to monitor the development and pre-lets to ensure compliance with the planning permission and quality assurance standards.
3.6 Cardys will update the council as to the progress including regular meetings attended by representatives of the council, including the Cabinet Member for Finance and Estates.
3.7 The contract will contain a restriction in favour of the council not to use the hotel site part of the property other than for a hotel.
4.0 Call in options
4.1 The contract will be changed to give the council greater control including providing for a date by which works would recommence on site, adequate monitoring measures to ensure the development gets built out in a reasonable time frame and also include a long stop date.
4.2 Also the council will be able to exercise a call in option to get the site back for non-performance. This arrangement will be considerably simpler than the current provisions in the development agreement.
5.0 Due Diligence process
The council is now aware that funding is available to Cardys to deliver the scheme.
However, before making any significant variations to the development agreement Cardys would need to satisfy the following due diligence process:-
5.1 Evidence of meeting funders requirements for the scheme and funding in place
5.2 Development viability appraisal
5.3 Compliance with TDC Money Laundering regulations
5.4 Credit Checks - 3 year audited accounts – including asset and liabilities statements
5.5 Evidence that Cardys have purchased 100% share capital of SFP Ventures Ltd and incorporated into Cardy Construction Ltd.
5.6 Full breakdown of Company structure and CVs on key individuals
Satisfactory achievement of the above would require approval by the Director of Corporate & Regulatory Services & 151 Officer.
6.0 Money owed to Thanet Council
6.1 By entering into the development agreement in 2006 council has substantially disposed of its legal interest in this site; the outstanding contractual interest is the money owed to the council which was to be paid upon the sale of the completed flats and commercial units.
6.2 Under the existing contracts once the scheme is substantially completed the freehold would transfer to the developer but the overage money owed to the council would only be paid as the units sell.
6.3 Cardys offer includes the opportunity for the council to have the money before the freehold transfers and before the units are sold. The sum would be subject to a current market valuation to ensure the council gets the best consideration for the site. This offer is to be the subject of further negotiations.
7.0 Cliff Wall
7.1 The area of cliff wall adjacent to the site is approximately 4 meters from the developed out property boundary. The cliff wall forms part of common land and the council recognises its duty to ensure that all reasonably foreseeable steps are taken to ensure it is adequately maintained.
7.2 The council undertakes regular inspections of the cliff wall to monitor the cliff face for movement and repairs. The next survey has been ordered for later this month
7.3 Should Cardys be successful in taking this development forward they have agreed to a financial contribution towards any remedial works that may be identified in the survey. There would also be further discussions about on-going maintenance requirements.
8.0 Conclusion
8.1 The strategic decision to proceed with a joint venture to develop a scheme as permitted through the planning process was taken many years ago and now the council are bound by a legal contract to take all reasonable steps to get the scheme built out.
8.2 SFP Ventures Ltd has spent considerable money to date on the development and for this reason will seek to recover their costs. SFP Ventures Ltd have confirmed that should the parties not be able to reach agreement in mediation, they will take the matter through the courts and there is no guarantee that after a lengthy legal battle, that the council would get the site back, nor get its legal fees paid.
8.3 The scheme has been granted planning permission and it is this planning consent that give the site its highest market value. This value is significant and the council cannot afford to buy the site back from its contractual partner.
8.4 The current shareholders of SFP Ventures Ltd have confirmed they are willing to sell 100% share capital in the company to Cardys and upon completion of the sale would have no further interest in the development.
8.5 Cardys has the potential to deliver the scheme built out in a reasonable time frame, and that scheme has the potential to contribute significant regeneration of Ramsgate.
9.0 Corporate Implications
9.1 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.
9.2 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.
For clarity, if this does not proceed for any reason the Council’s position reverts to the existing and it would need to continue with the process to terminate the existing leases by action through the courts.
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.
9.3 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.
9.4 Equity and Equalities
If Cabinet agree to taking this forward, all discussions and agreements are subject to a Council equity and equalities assessment.
10.0 Recommendation
10.1 It is recommended that Cabinet concludes negotiations with Cardys over their proposed purchase of SFP Ventrues Ltd involving variations to the existing agreement or a new agreement in respect of Royal Sands in accordance with existing delegations.
11.0 Decision Making Process
11.1 This is a key decision subject to call in.
Contact Officer:
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Edwina Crowley, Head of Economic Development and Asset Management
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Reporting to:
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Madeline Homer, Acting Chief Executive
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Annex List
Annex 1
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Royal Sands Questions and Answers
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Corporate Consultation Undertaken
Finance
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Nicola Walker, Finance Manager - HRA, Capital & External Funding
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Legal
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Steven Boyle – Interim Legal Services Manager & Monitoring Officer
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I have mixed feeling over this one which I will try to summarise below.
First I think it should be understood that the planning
consent stands and will continue to stand with a different developer.
Second Cardy Construction are one of the better local
builders and developers, they use local labour and I can’t think of anything
they have built in Thanet that is a bad development.
My main concern is the condition of the cliff façade and I am
getting somewhere, both with the MD of Cardy Construction and the reporting
officer at TDC towards getting this issue addressed.
A normal approach when building next to an unsupported chalk
cliff, particularly one in poor condition, which this one is, would be to build
a new cliff façade designed to last for as long as the development. This is
what was done at Turner Contemporary and I can’t think of another recent development
in front of a cliff in East Kent.
The main problem with this one is that doing a proper job on the cliff façade is likely to very expensive, the alternative which is patching up the cliff façade and the having to keep on patching it up for the life of the development is likely to be even more expensive, but the key word here whichever way it goes is expensive.
My understanding is that they will have to act on this
report, I just hope it doesn’t lead to further years of delay.
The main problem with this one is that doing a proper job on the cliff façade is likely to very expensive, the alternative which is patching up the cliff façade and the having to keep on patching it up for the life of the development is likely to be even more expensive, but the key word here whichever way it goes is expensive.
In many ways I prefer the idea of ensuring that there is a
reputable developer in place before addressing the flood risk assessment aspect
of the site, mainly because it doesn’t become a really urgent issue until there
are people living in the development and honestly I don’t think that they would
be able to borrow the money to buy an apartment without having a flood risk
assessment.
The cliff is another matter and the intention that people
intend to work on the site again means that I have reported it to ICE, using
the reporting method instituted after the Ramsgate ferry walkway collapse.
There's 4 problems with this document/Cardy taking over:
ReplyDelete1. SFP is just Keegan (and Painter?) who is presumably bust given no work has been done for c.2 years
2. The default notice was served in February so TDC can take back the site now - and could have done months ago
3. Why bother entering into any arrangement with Cardy/Keegan or permutation of what is essentially the same deal ie just cancel and start again
4. 107 apartments and a hotel etc looks far too cramped for the site
The whole thing seems like a cosy TDC councillor/civil servant stitchup originally with offshore funds etc etc now it's just ridiculous.
Cancel it completely and start again.
As the article in the latest issue of Thanet Watch magazine shows, this deal was being stitched up between TDC and Cardy over a year ago.
ReplyDelete.....................Purple Om
DeleteYes I've seen that but what about his colleges ??
11:21
Deletethis is a fake statement, Purple Om did not write this.
Michael is there anyway I can be unmarked as spam so I can use my Google Acc again?
................Purple Om
DeleteMichael 11:21 was me. Someone is taking the p*ss because of my spelling.
.....................Purple Om
ReplyDeleteIn short, TDC have no legal right to the land.
They don't have the funds to get the land back
There is no long stop date
SFP can sell the land and P/P to who ever they want
If TDC stop collecting the rubbish for many years and do find the money there is no grantee that they will win a CPO which would take many years
TDC already own and maintain the cliff wall and the sea defenses
As a Ramsgate resident I'm just glad to see something built and I like whats going to be built
8:52 you should read the above statement before spouting such nonsense.
It's almost a year since Poole was almost lynched for trying to push this through.
ReplyDeleteits been rejected and Tdc are putting up a smokescreen of the same people involved. Everitt should go
....................................Purple Om
ReplyDeleteMichael Some things you must have left out for some reason, but don't worry I'll put them in my comments for everybody to read, From the same document above.
The existing construction work has been lying in the ground for some time – is
TDC taking steps to ensure the existing construction is adequate?
The foundations have been designed by a professional practice of Chartered Civil
and Structural Engineers with many years of experience of engineering design and
coastal defence works around the Kent coast, including Thanet. They have been
designed in conjunction with specialist Geotechnical Engineers with very detailed
reference and due regard to the extensive site investigation documents, including
trial holes, trial pits and integrity testing, all of which have proved and verified the final
choice that has been taken.
The design of the foundation complies with Building Regulation Requirements and
very detailed and extensive calculations have been undertaken to verify this. The
foundations have been inspected and approved and signed off at various stages of
the works by Building Control and by the surveyor on behalf of the warranty provider.
What are the risks of flooding to the units once built?
The likelihood of flood to this area is a 1 in 200 year risk. It is worth noting that the
design of the buildings has taken this into account by putting the car parking on the
ground floor, there is no residential accommodation at ground level.
Cardy Construction Ltd would ensure that it worked with the Environment Agency
and Thanet District Council to have suitable and sufficient measures documented in
a flood risk management plan to safeguard future occupants.
Who will retain control for the maintenance of the cliff wall?
The cliff wall adjacent to the building site remains in the ownership of the council. The
cliff wall supports the land above the cliff including the promenade. The council will
retain responsibility for inspections and maintenance of the cliff wall.
11. Are there any other monitoring authorities that TDC is consulting with to
ensure the project is built in a safe manner and that the property once built will
be adequately protected from flood risks?
There are specific construction laws that the council complies with to ensure suitable
and sufficient safety systems are in place. A project of this size is notifiable to the
Health and Safety Executive (HSE) so that they can monitor progress. The council
has contacted the HSE and invited them to review all safety files and they will be
invited to project meetings if the project re-commences.
point 1. doesnt say whether these foundations have been inspected in the last 3 months. Foundations are not expected to remain exposed for 3 years in a salty environment. Last heard the civil engineer appointed by TDC was refused entry to the site by Keegan.
Deletepoint 2 the original planning permission had an escape route to the pro above. the amended plans had this removed hence why the EA asked for a flood risk assessment which has never occurred.
point 3 As pointed out by structural engineers independent of TDC and Cardy what needs inspecting is the state of the cliff face behind the facade as that is what will ultimately cause the facade to fail. TDC and Cardy have failed to inspect behind the facade using cameras to see into the void. Until that is done no one knows if it is safe or not.
Its funny that TDC make a statement and PO believes it all. TDC have no idea whether this is safe or not, Time will judge them
3:46 its lucky you don't do construction for a living as you seem to worry about everything. My house was built in 1874 and all the walls are as fine as when they were first built, I don't feel that I need to get in a engineer to check them.
DeleteWell said 5:11 this guy is scaremongering, obviously doesn't want anything built on the land, it's because of this type of person nothing has been finished yet. Doom and gloom seems to be his thing......what happens if we're invaded by aliens bla bla
DeleteUtter rot 10:46 as TDC as planning authority have already issued a default notice in February. Wanting anything built is idiotic too we want the right thing built not some dodgy tax haven deal
ReplyDelete12:18
Delete................Purple Om
TDCs default notice was a bluff if they had anything but a very small chance of winning this they would have gone to court already. If you don't know about business and legal affairs then making such sweeping statements is just unhelpful.
TDC have had the best outcome they could have wished for with the hand they have been given. If you don't believe me then READ the legal part of the document above.
12:18 utter rot again the default notice is legally binding yo end the site. The strange negotiations delivering nothing much are the error
Delete2:58
DeleteYou read TDCs statement how it suits you, as for me this has been written so the most simple of people can understand it.
ITS NOT TDCs LAND ANYMORE THEY SOLD IT......
good job for you anon 5:16 that they did
Delete2:58 you explain why then tdcs own report confirms its a contractual partner in the site....and tdc are discussing ending the lease etc....
DeleteIn 1.4 it says there was a report on 11th September of progress since 20th February. Anyone know what the progress is as Everitt and Crowley seem to have spent 7 months simply ignoring the decision to serve a works notice to end/complete the site. This supposed new negotiation is simply Cardy and SFP continuing as before. What has Iris been doing as the same sort of delays have happened on Dreamland?
ReplyDelete...............Purple Om
ReplyDeleteThe Future is very bright for Ramsgate
Even though many people cant see how progress benefits the local area and is residents, they will do all they can to stop or hinder it but just imagine what Ramsgate will look like and how attractive it will be to outside investment, when we have a seafront with the Pleasurama site completed, the pavilion put back to its splendor, the slipways development started and finished, (with the very ugly winding house removed) the maritime museum back in full use, with its new glass restaurant and art gallery, the new town square with trees and seating area, the motor museum finished, the Winterstoke gardens all done with its fountain working once more, the fast link going all the way to Ramsgate, the manston site with lots of jobs in industry, a new train station, westwood x doing so well and every large business wanting to come here (as it already is)
How long before Ramsgate has no empty or run down buildings?
How long will Ramsgate's huge expanse of seafront lie unused?
How long before Ramsgate jobs/tourism problem is fixed for ever?
Sorry to be so positive in a sea of negativity but I really do think its time for some people to stop and think how some big investors can change a place for the good for everybody and make a profit at the same time.
................Purple Om
DeleteThe Future is very bright for Ramsgate
I forgot to sayy that we will also have our own airport at Manston.
I forgot to add
Michael, This is a helpful post. Thank you.
DeleteThought Westwood Cross was in Broadstairs. Certainly the contact address is. But good to see you believe Manston is an airport.
DeleteSembob you dissemble manston was an airport.
Deleteit isnt now is it
I do apologise anon @ 7:28 pm. For once your attempt to ridicule my every remark about Manston falls on stony ground. Purple Om insists that "we also have our own airport at Manston" Again you hide your real intentions and feelings or the facts, and it is you who are therefore dissembling. I see while you are fond of using "dissemble" at every possible opportunity you seem to have run out of commas, apostrophes, and capital letters in your John Bull printing press.
DeleteDreamland was an amusement park, it isn't now, but like a phoenix from the ashes it will apparently rise again, Manston can too.
We are agreed that manston is not an airport any more Sembob. Why do you think it can be so again and when do you think that is likely? Will you be investing your pension in it?
DeleteLuckily SEMBOB an airport requires more safety procedures than an amusement park. And if Dreamland was on the aquifer then like Manston it would no doubt be closed.
Delete" It is worth noting that the design of the buildings has taken this into account by putting the car parking on the
ReplyDeleteground floor, there is no residential accommodation at ground level."
When it floods this kind of building leads to ll sorts of problems for residents. all though all they loose is their cars!
The ones in residence get trapped with possibly no food and medical supplies and even problems with their utility services. Lifts stop working.
The one away from their properties cant get back
I think your persistence Michael, re the cliff face safety and maintenance issues you identified, seems to have got attention. Well done. Still one to watch.
ReplyDeleteThe latest development is simply a confirmation of the "Goldenballs" email Thanet Watch magazine published last year which revealed that Cardy Construction had been invited by the council's "chief exec" to negotiate an agreement secretly. Thanet Watch has published a major piece about this whole affair in its latest issue and has written to Mike Stannard, director of Cardy Construction, asking him to respond to it. We have received no answer from him to date..
ReplyDeleteGet over it, without Cardy who else would employ local labour and who knows the site best? I think you have a massive chip.
Delete