'No awareness of market conditions' in council's Masterplan

DOUGLAS SHEPHERD with more revelations from The Middlemede Report

The absence of any appraisal of housing market conditions in Scottish Borders Council's Tweedbank Masterplan is a fundamental failure of the planning process, according to a wide ranging and hard hitting report from consultants.

Not Just Sheep & Rugby has already reported on the conclusions and recommendations from the report which was made public at the weekend over a year after it was presented to council officials.

Jones Lang Lasalle (JLL) was commissioned by Middlemede Properties Ltd, owners of the Upper Pavilion salmon fishery on the River Tweed to examine SBC's development proposals for the Tweedbank/Lowood area which will cost more than £200 million to implement.

The most contentious element of the Masterplan from Middlemede's point of view is the planned construction of an estimated 350-400 houses on Lowood Estate right next to the valuable salmon beat. In JLL's view the entire Masterplan is financially 'unviable and undeliverable'.

In their report, which includes contributions from a team of experts, JLL state: "It is important to note that it has been evident from our review of the Tweedbank Masterplan documentation, in particular the element of it with regard to the Lowood [housing] allocation, whilst there has been an absolute focus on design considerations and high level environmental considerations, there has been no market or commercial appraisal input to inform the Masterplan preparation whatsoever.

"This, in our view, demonstrates that the Council has not prepared the Masterplan in a sound and appropriate manner. Moreover, this situation fundamentally undermines the masterplanning approach taken and contravenes the objectives set in the Masterplan Brief.

"Given there has been no residential market information considered as part of the Masterplan process, it means that the viability and in turn the deliverability of what is proposed, in our considered professional opinion, which is underpinned by a robust development appraisal, is highly questionable, and the lack of this appraisal entirely undermines the proposed Lowood allocation. Indeed, in terms of the appraisal we have undertaken on the basis of our own market information, and taking into account the cost information provided by the consultants who prepared the Masterplan it is clear in our view that the development as proposed, is commercially unviable."

JLL add that from their review of the Masterplan they are very clear in their conclusions that the process followed by SBC, and the outcome as expressed in the Masterplan documentation, contained no information or any awareness of market conditions and did not set out a position at all on viability.

It was clear from the planning brief that there was a specific requirement, in terms of the housing component, that 25% of the total provision should be affordable. There was also clear anticipation that the impact on educational provision (in particular Tweedbank Primary School) needed to be considered - and there should be creation of new or additional sport and leisure facilities Secondary education was not mentioned but that would also be an important consideration. All of those matters had cost implications and clear consequences for viability of development.

The report sets out its own detailed development appraisal and examines market considerations.

"The appraisal overview demonstrates that the site cannot generate a positive land value. There is insufficient revenue to generate: a developer's profit or a positive land value.

"As it is presented, even if the land was sold for just £1, a developer would generate a loss of -£1.75 million. This represents a -4% profit on revenue.To put this into context, a developer in this location would expect to make a 15-20% gross margin on revenue.

"Based on our assessment of GDV (Gross Development Value) = (£43.3 million) this would equate to £6.5 - £8.7 million. If we assume a mid-point of say, £7m then the true extent of the negative land value would be -£8.7.

"In our experience the only way to increase the profitability would be to increase the density. However, given the significant difference between the current loss (as outlined above) and a positive land value, the increase of density would be unrealistic both in terms of planning viability, the urban design approach and standard sought and expectations locally in the market."