Pros and cons of Borders council's £10 million estate deal revealed

CONTINUING OUR COVERAGE OF THE PURCHASE OF LOWOOD ESTATE

The members of Scottish Borders Council who sanctioned the £9.7 million deal to acquire the Lowood country estate in 2018 did so without being told how the subsequent £203 million needed for a Tweedbank village extension would be paid for.

But councillors did have before them a detailed confidential report from consultants which listed weaknesses, risks and threats as well as advantages and opportunities associated with the impending transaction with Lowood's owners.

Now, a copy of that document has been released by the local authority four years after the estate's purchase, and in response to questions posed by Not Just Sheep & Rugby. 

The report from specialists Ryden and Turner & Townsend was deemed commercially sensitive by the council when it was produced in May 2018. All local authority discussions linked to the Lowood deal were conducted in private.

There were a number of warnings outlined by the consultants including this one on viability for housebuilders: "There is likely to still be a considerable amount of work to be done to convince a volume builder that this postcode area is one where they should commit their attention at the present time. We recognise, however, that the Council are taking a much longer term view."

And commenting on the regional residential development market the appraisal team noted "The appetite from house builders within the Scottish Borders has been relatively muted in recent years with little interest from the large volume builders."

So far as the industrial development market was concerned, the report pointed out: "There has been very little speculative or new industrial development within the Scottish Borders in recent years. A majority of activity is associated with buildings constructed from the 1970s onwards with average transactions relating to accommodation below 500 square metres. Scottish Borders Council themselves are a significant landlord and the Central Borders has been where a majority of activity has been associated. Much of the activity relates to relatively short term lease arrangements of small units."

On the flip side, under a section headed Opportunities the appraisal says: " The larger Tweedbank expansion offers an opportunity to deliver a new settlement and unlock employment land opportunities over the medium to longer term. This would be aligned to infrastructure investment with the opening of the Borders Railway.

"Improved infrastructure associated with the Borders Railway may lead to increased developer confidence which may magnify as the destination becomes more established / mature and further complementary infrastructure is provided, thus seeking to attract a greater proportion of the target market to relocate into an area."

In drawing attention to a number of weaknesses linked to the proposed purchase and development of Lowood, the consultants wrote "At the present time, mainstream house builders remain selective in terms of postcodes and settlements and have continued to focus on existing legacy and land banked land parcels with acquisitions tending to be in established locations. 

"There is a recognition at this point in time that the private sector is unlikely to commit speculatively in major volumes within the Scottish Borders. A majority of established house builders continue to focus upon their existing land banked and legacy sites. There has not been particular evidence of these organisations venturing into the Scottish Borders as yet."

The newly released paperwork confirms that infrastructure costs to develop Lowood were estimated at £13.7 million (2017 prices), and at that stage it was unclear whether the council would have to meet the full amount or if the burden would be shared with developers. Councillors were told: "Some or all of this infrastructure cost may be met by Scottish Borders Council in order to return development opportunities that are more attractive to the market."

And the report makes clear the land for housing included in the estate purchase would be developed over 20 or 30 years.

As the appraisal explained: "If the Council were to acquire the asset then this would represent a substantial commitment financially but would bring control in terms of density, mix, timing and phasing of future land releases. It must be recognised, however, that significant further investment will be required in terms of infrastructure, enabling works, etc with future capital receipts received on a phased basis over the longer term by bringing individual tranches of land to the developer market."

The total sum needed for the entire Tweedbank extension if a particular option was to be adopted is quoted as £219.156 million.

A council spokesperson told us: "The public report to Council on 20 December 2018 mentions that a financial model has been prepared and that for the overall Tweedbank Masterplan, this project would cost £203 million and would potentially generate £1.3 Billion of GVA [Gross Value Added] giving a £8:£1 benefit-to-cost ratio. No mention was made within this report of how this £203 million cost would be funded. The financial model was not published at this stage as an appendix to that report."

We were also told that in the public report to Council on 31 January 2019 the financial model for the City Region Deal was referred to within the body of the report and included as an appendix to the report. However, the financial model was restricted to the £29 million city region deal funding of projects in and around the Central Borders innovation park and did not repeat any reporting of the wider Masterplan programme.

The council statement added: "Officers are currently developing a report which will be considered by Council before 31 March 2023. This is likely to include revisions to the final business case in relation to Lowood to reflect current market conditions and inflationary impacts."