Cash-strapped Borders council buys country estate for £9 million

EXCLUSIVE by DOUG COLLIE

Scottish Borders Council, which has repeatedly cut front line local government services in recent years after pleading poverty and laying the blame for their financial woes at the door of the Scottish Government has just completed the purchase of the Lowood Estate next to Tweedbank village for £9.6 million, Not Just Sheep & Rugby can reveal.

Details of the transaction were posted on the council's website tonight (Thursday) as part of a report which will be submitted to councillors next week by the authority's executive director Rob Dickson. The deal with Lowood's owners is for the remaining 109 acres which were in private hands.

Fifty years ago Lowood owner Constance Hamilton fought a long battle with SBC's predecessors to prevent them from taking her land for the construction of Tweedbank. Her opposition was eventually worn down by legal procedures and compulsory purchase orders.

The new report to council reveals that the remaining Lowood land is now in the ownership of a newly formed company called Lowood Tweedbank Ltd., yet another arms length company set up and wholly owned by SBC.

According to Companies House documents the sole director is David Robertson, chief financial officer at the council. The company has just one £1 share with SBC as the shareholder.

Mr Dickson's report confirms that Lowood Estate was acquired by the Council on 6 December 2018. The property comprises a compact residential estate set on the south bank of the River Tweed and extends to 44.38 hectares (109.66 acres). It includes an attractive and substantial principal dwelling and a further eight residential properties. Of the total land area approximately 15.78 hectares (38.99 acres) is parkland and a further 14.28 hectares (35.29 acres) is woodland.  .

"The Council paid £9.6 million for the estate (lower than the price cap previously agreed by Council) and is now finalising the expenses due on the purchase which will form part of the overall project cost", says the report.

"The existing Lowood Estate has several tenants occupying the residential properties. The Council has ascertained the basis of those existing agreements. Following extensive legal review these residential properties are now held by Lowood Tweedbank Ltd, a company wholly owned by SBC. 

"The tenant’s existing lease arrangements will continue and the Council will act as property manager. SBC Property officers held face to face meetings immediately in advance of acquiring the estate with each tenant. These were positive discussions with no immediate issues identified by any tenant.

"It is now possible to commence work on the Supplementary Guidance in the light of the acquisition of Lowood Estate and this will commence early in 2019 and is anticipated to be completed in the final quarter of 2020. In parallel with the development of the Supplementary Guidance an appropriate marketing and development strategy will be developed for Lowood Estate. This will require careful analysis of both desirable public and private sector potential uses and will need to ensure an appropriate balance between the two. This strategy will be heavily influenced by the emerging Supplementary Planning Guidance and is likely to be come forward to Council for approval at the same time."

The purchase of Lowood is seen as part of a so-called Tweedbank Masterplan.

According to Mr Dickson's report: "Lowood Estate - This project would cost £90 million, including the cost to purchase the land. It would potentially generate £150 million of Gross Value Added (GVA) in the Scottish Borders economy. It would create a maximum of 179 jobs and a maximum of 173 construction jobs. The project would give a benefit-to-cost ratio of £2:£1 (comparing the value of the economic benefits with the cost of the Lowood Development).

"Overall Tweedbank Masterplan. This project would cost £203m and would potentially generate £1.3 billion of GVA. It would create a maximum of 1,412 jobs and a maximum of 1,276 construction jobs. The project would give a benefit-to-cost ratio of £8:£1 (comparing the value of the economic benefits with the cost of the overall development). It is that evident from market analysis and the lack of current speculative development in the region, that without a comprehensive approach, strong Council leadership and public-sector pump priming these development opportunities are unlikely to be delivered in the immediate future."

Councillors will also be asked to consider a financial model for the entire venture. Mr Dickson writes:

"The Council has developed a detailed financial model for the costs of acquisition of the Lowood site and the wider redevelopment of Tweedbank. The model shows the costs of development of the various tranches of the Tweedbank development, including Lowood, as these are currently understood along with and the associated economic benefits and a range of scenarios associated with funding. The full development appraisal of the site is now in draft; however, initial modelling indicates that the Council’s investment in the site should be recouped through the development phases through the onward sale of the site with 179 jobs created during the construction phase and a further 173 jobs created in the post construction period, and a potential economic impact of £150 million GVA in the economy.

"The Council is currently assessing whether to opt to tax the new site; to ensure there is no future impact on the Council’s partial VAT exemption."

In a previous report to the council in November 2017 Mr Dickson claimed that the overall cost of delivering Lowood/Tweedbank was (at that time) estimated to be £58 million.

He explained that Scottish Borders expected to get £15 million from the Edinburgh and South East Scotland City Deal (against an “ask” of £26.9 million). After all financial factors were taken into account there was an estimated shortfall of £25.7 million to deliver the project.

He wrote: “The annual cost of borrowing to meet the shortfall would be £1.2 million. Commercial rents and contributions of £10.6 million are assumed as part of the funding package”.

The City Deal provision of £15 million was said to be payable over 15 years. Mr Dickson claimed: “The key risk to the council [from the City Deal] is that it will be required to front fund the net costs of capital and revenue projects taken forward within the Scottish Borders. At present the grant funding levels and mechanisms around the City Region Deal and whether any ‘payment by results’ model will apply remains subject to agreement with the UK and Scottish Governments”.