Finance is the watchword that has come up again and again at Craighouse.
It can be hard drilling down into figures. People who don’t feel confident with them can switch off or – worse – take everything the developers say on trust. But often it is just about a bit of common sense.
The Craighouse Partnership have tried consistently to undermine the Friends. But there have been many people over the last two years who have said they have come to trust the FoC more and more because, as time goes on, we tend to get it right.
And so it’s been quite interesting to see that the application now agrees with our earlier estimates of the average unit price of the homes at Craighouse.
Let’s remind ourselves of William Gray Muir’s letter to the Morningside Community Council about the Friends last year:
“The FOCGAW have made great play of their own financial analysis of the viability of the development of the listed buildings in isolation. They state that their analysis is backed by an expert “close to the planning application”. Whatever expertise this unspecified individual has, it is clearly not related to development finance.
“…they postulate an end value of £36m for these 66 units, which suggests an average value of approximately £545,000. Given that, in New Craig, for example, the average apartment has only 2.6 bedrooms this is a highly fanciful number. It is possible to buy a terraced house in Morningside for not much more than this amount. Our estimate of the values is very substantially lower than this average figure”
So, it is interesting to see in the summary finance page of the Craighouse Partnership’s planning application that their average price per unit is…da da!…£575,000. (With their own estimated end taking of listed buildings PLUS newbuild being £88million.)
Ah but, you say, this surely includes the new houses? And it those that will be pushing up the average unit price.
What many don’t realise is that most of the apartments proposed for the listed buildings are extremely large – 2 bed or not. And we now know that from early 2012, the Craighouse Partnership were showing example flats and prices in the listed buildings at over £520,000 for a two bedroom flat and…wait for it – £730,000 for a four bed flat. With the majority of the flats in the listed buildings 2-4 bedroom and even a couple of 5+ bedrooms, it looks as though our average estimate, in fact, corresponded very closely with the Craighouse Partnership’s example flat valuations.
These valuations show the developers valuing the flats in the listed buildings as almost bang on £274 per square foot (remember they paid £70 per square foot as stated on Mountgrange’s website.) Which means they are valuing the listed buildings at a total of … £38.5 million.
Hmmm. So it looks like the Friends’ “highly fanciful” number of £36million for the listed buildings alone is not looking quite so “fanciful” after all….
(In fact, we suspect it is likely even higher than £38.5 million from a closer study of the average price per square footage in equivalent properties in Edinburgh and we will be writing more about this in due course.)
What this shows is what we have always suspected – that the listed buildings ARE profitable alone.
With an estimated conversion cost of £20 million, Mountgrange would yield a healthy £18 million which would give a profit to Mountgrange of at least (with the most conservative estimate) £8 million – up to 80% return on their investment in a market where 14% is presently considered good. Remember, that’s just Mountgrange’s profit. Sundial would take their profit as a cut from the £20m of around £2m-£4m as well.
Even taking away substantial amounts for fees, marketing, stamp duty etc. And even paying some enormous sum to the developers’ lobbying company (which we would argue they do not deserve!) Mountgrange should easily make far more than their required 20% return on investment.
We have been analysing what little financial information there is in the enormous planning application and will be bringing you much more detailed information and analysis on this – despite the fact many of the figures quoted in the application simply make no sense.
The Craighouse Partnership won’t like this. Because they want to make an absolute killing: where they clean up both in terms of profit and extortionate professional fees. Under Enabling Development Guidelines they are not allowed to count the original £10 million they spent because Enabling Development is for sites that can’t find buyers, not for sites that have a bidding war. Either they can do it as an Enabling Development and wave goodbye to the cost price. Or they should give up trying to pretend it’s an Enabling Development and do up the listed buildings and take the nice clean profit to be made.
The fact is that if they had done the listed buildings quickly they would have had a nice profitable scheme. If they do the listed buildings now, they will still make the required profits. The longer they leave it, the less profitable – which is why if the developers care at all about the future of the listed buildings, they should take away the majority of the new-build and put in something the local community is happy with.
We hope this goes to prove why people must examine the figures and not take what the developers say on trust just because people don’t feel confident with numbers. Their letter to MCC was misleading on the valuations, despite similar figures to our estimates being put out elsewhere around the same time.
This development needs research, scrutiny and questioning. This is what needs to be done by the planners, by the Councillors, by the Community Councils and anyone else being lobbied by the Craighouse Partnership. Because, despite trying to undermine us to the Morningside Community Council, the Craighouse Partnership have shown that on the unit price and sale price of the listed buildings, we got it roughly right.
Let’s not let this beautiful special site be ruined unnecessarily simply for private companies to make excessive profits by refusing to respect the landscape or protections and pushing for excessive and unnecessary new-build (not to mention roads, car-parks and private areas) that will spoil this beautiful protected site.
Let’s go for a positive solution for everyone. The Craighouse Partnership could get a reasonable profit, the buildings can find a use and the landscape can be saved and enjoyed by everyone – both local community and new residents alike – if they develop the listed buildings alone or with a modest amount of new-build. It’s perfectly possible.
So, how about it, Craighouse Partnership?