Enabling Development #fail: Undervalued sales prices – even larger profit for Craighouse Partnership

ONLY TIL FRI MIDNIGHT TO GO:  A QUICK HOW TO OBJECT: Object to Excessive “Scheme 3″  (Ref No: 12/04007/SCH3) and include your name and address. Include at least one material planning objection and anything else you want to say. For more on How to Object and an example paragraph click here: https://friendsofcraighouse.com/how-to-object/

When questioned about the so-called enabling development case at the public meeting hosted by the Morningside Community Council  – William Gray Muir from the Craighouse Partnership repeated that the figures were the Council’s figures, not the Craighouse Partnership’s. The figures, he said, had been fully audited by the Council and an independent third party.  The sales were all the Council’s figures,  people were told. The Craighouse Partnership’s sales prices, he said, would have been even lower.
However, the story was somewhat different at a further presentation given at the Craiglockhart Community Council meeting. When challenged on the figures by members of the public, William Gray Muir admitted that the Council have not fully audited the Scheme 3 figures yet.

So which is it? We would like to get a bit of clarity on this – as on many things to do with Craighouse and the so-called “enabling case”.

The enabling development case at Craighouse is not credible. If the Council have been too closely involved,  this would raise some very serious questions.  According to the Enabling Development guidelines, the Council is not allowed to approve or involve themselves in putting together figures associated with enabling development  – let alone for such figures to be “the Council’s figures”.  They are also not allowed to validate profit levels.

If the Council seeks to recommend approval for an enabling development at Craighouse based on the figures presented – there must be a proper process undergone and a proper financial appraisal with a  report  released by the Council to explain their decision. So far, we’ve seen no evidence of any such report being put together at any time throughout this process.  We will have to wait and see if one is finally produced.

UNDERVALUED SALES PRICES HIDE EVEN GREATER PROFITS

The Friends have questioned the undervaluing of the sales prices before. Please check out this excellent article we were sent by Dr Nick Honhold called “The Deficient Deficit”. Particularly in relation to the listed conversions. However, a very direct comparator on price that has come up recently in the local area suggests that the newbuild has also been significantly undervalued.

A new development at Polwarth Terrace, of similar sizes and architectural type to the newbuild proposed at Craighouse, shows very high prices can be commanded for the proposed newbuild.

The Polwarth flats have sold like hotcakes – with a single flat priced at offers over £850,000 for a 4 bed c. 1900sq ft flat.

This works out at over £434 per sq ft – when William Gray Muir is claiming £325-£390 psf  for the newbuild at Craighouse which will be on a far more spectacular location with incredible views and settings. That these are being priced way below equivalent properties in the local area is not credible and the local community do not buy it. Pricing the proposed new-build at £434/sqft (i.e. in line with the local area) instantly doubles the developers’ profits of this scheme.

William Gray Muir is trying to argue there’s a cap on prices in Morningside, which means the huge flats at Craighouse would have lower prices. This is not credible in Morningside, Merchiston and Craiglockhart. The reason that local houses in Craighouse and Plewlands are less expensive than the rest of Morningside is simply that they are simply a lot smaller. The price per sq foot is comparable.

The flats the Craighouse Partnership are looking looking to create in the Craighouse listed buildings are mansionflats – some are truly enormous at more than twice the size of local houses in Craighouse and Plewlands.  There is no cap on prices for such spectacular properties in Morningside and Merchiston – as is proved by the Polwarth Terrace flats just a few minutes away which are similarly large in size and at £434 plus per sq ft (offers over £850,000 for a four bed flat).

Local people have a lot of expertise and knowledge in this area and this case is looking dodgier and dodgier to a lot of people.  Our team includes people with backgrounds in planning, economic development, architecture and surveying as well as numerous business people, economists, landscape and wildlife experts. But you do not have to be a financial expert with a development background to look at the figures and know something is badly wrong.

The developers are trying to claim a projected sales price of £290 per sq foot for the apartments in the listed buildings.

If the conversions of the listed buildings are priced more realistically at £350/sqft, which is in line with nearby properties, then the so-called “conservation deficit” completely vanishes. This takes the total profitability of just converting the listed buildings alone with no newbuild to 20% – which is a high profit level for development and also means that no newbuild can be justified under enabling development rules. Even at the very conservative £325 psf, the profit levels meet those recommended by the Enabling development guidelines.

This, in itself, shows that the listed buildings can provide a 20% profit for a reasonable developer without any newbuild at all.

But let’s now look at the scheme as a whole. If the newbuild proposed by the Craighouse Partnership is priced in line with the Polwarth Terrace development you will find that the developers’ profit DOUBLES over what they are presently claiming – at £30million. (You will now understand why the newbuild is being pushed so strongly.) If you adjust both the sales’ prices of the listed buildings and the newbuild in line with local sales prices – the development makes at least £33and a half million – a profit  level of 34% – a very high profit level indeed.

If this is indeed the amount of money the Craighouse Partnership are likely to make, this is completely unjustified under enabling development rules where the profit should be between 10-20%.

These large profits are in addition to the millions of pounds of professional fees being taken out the site for Sundial, architects etc – which would bring the total to at least £41 million being taken out of this beautiful site.

This is before you even look at the costs side of things. The conversion costs have significantly increased since Scheme 1, yet there has been no  proper explanation of why this should be. Has a double profit been included here ? If so, this also would be against the enabling development rules which warn planners not to allow this. When asked if a double profit was included, the planning department could not answer.

On costs again, an extremely high estimate for infrastructure costs has also been included at nearly £5million. Apart from the inflated costs for infrastructure (again a mystery), the Craighouse Partnership are trying to claim that this £5m cost splits 50:50 between listed and newbuild. But most of the infrastructure is for the newbuild over 6 new development sites as there is no existing infrastructure there at all. An upgrading of infrastructure to the listed buildings would be far less expensive and it is not credible that it would be 50% of the total infrastructure cost.

If there is some attempt here to distort the figures to get round the guidelines and pull wool over our eyes, local people are not going to accept it.

Getting the figures right and making sure the newbuild is at a minimum is important. Excessive newbuild and excessive profits made from building on the green space and woodland encourages the site to be exploited but makes it less likely that the listed buildings are saved as the majority of the profits can be taken from the newbuild. A plan based on the profit that can be made from the listed buildings first and foremost would be better for the site as a whole and certainly safer for the listed buildings themselves. That profit is less high – but it is still reasonable at 20% return on investment for a serious developer. But not a high-risk speculator.

The alternative plan, in development with local business people and the Friends of Craighouse has outlined viable alternatives based on the profit to be made from the listed buildings and maximising income streams. Such a plan would be lower risk and have a better chance of safeguarding the listed buildings for the reasons above. It could be taken up by the developers themselves as a viable alternative to the current unpopular proposals if they really wanted to benefit the listed buildings, whilst making a reasonable return on actual investment rather than just a killing by smashing through planning policy.

If we want to save Craighouse from unnecessary and ugly apartment blocks and future risk to the listed buildings; if we want to stop other protected sites being seriously spoiled through similar unevidenced figures – we have to stand up for this very special site and the policies that protect it.

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3 Responses to Enabling Development #fail: Undervalued sales prices – even larger profit for Craighouse Partnership

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  2. Pingback: What next for Craighouse? | Friends of Craighouse Grounds and Wood

  3. Pingback: Craighouse Audit Report finally released! But nowhere near the “fully audited” claimed | Friends of Craighouse Grounds and Wood

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