Developer looks for route out of Preston viability bind
Stoneygate Living claims a mechanism built into the planning agreement for a 467-apartment scheme on the site of the former Dryden Mill is preventing the project from being brought forward.
The developer has written to Preston City Council asking for the viability review mechanism to be removed. Under the terms of a Section 106 agreement, the mechanism allows the authority to reassess the viability of the project in future to see if contributions to affordable housing can be made.
A letter submitted by consultancy Cassidy + Ashton requesting the removal of the mechanism describes it as a “financial obstacle” that creates “uncertainty for investors”.
This uncertainty was reflected in the collapse of a deal for the sale of the site, reported by Place North West in September.
Stoneygate had exchanged contracts with Belgravia for the scheme, which comprises two blocks reaching 16 storeys. However, Belgravia walked away from the deal citing viability constraints.
Preston City Council recently set a precedent for dealing with this type of request. The authority agreed to remove the same mechanism from a Section 106 agreement attached to Heaton Group’s planned redevelopment of Park Hall.
Heaton Group plans to deliver a 65-bed aparthotel within the former hotel building and 360 apartments in two new-build blocks at the city centre site overlooking Avenham and Miller parks.
Preston removed the mechanism after Heaton claimed it was “threatening to prevent the scheme from being brought forward”.
Stoneygate Living said that viability concerns at Park Hall highlight just how hard it is to develop residential schemes in Preston.
Park Hall is “arguably located in the most sought-after location within the city centre”, Cassidy+Ashton’s letter states.
By comparison, the Stoneygate scheme is located in a “less desirable area”.
The letter adds: “Removing the requirement for a review mechanism from the Park Hotel development illustrates how unviable the mechanism is in respect of city centre apartment schemes even when sited in the most desirable locations, alongside other difficulties the market is presenting.”
Councils need to realise there is nothing left in developers appraisal. A tiny bit of profit that does no where near the risks taken.
By Anonymous
No developer would instruct a large building project based on the prospect of a “tiny bit of profit”, the risks simply wouldn’t be worth it. For sure the developer screws the contractor down which is why so many go bust but appraisals are based on certain assumptions and national benchmarks which in all likelihood bear no resemblance to their actual costs achieved through a tightly managed supply chain or the risk they hold, much of which is also passed down the supply chain.
By Anonymous
Preston City Council seems hell bent on preventing the city centre from moving forward. This is another example of the strangulation of the city centre . Also closing Fishergate to cars , by closing Corporation Street to cars by closing Frigate to cars … it is now nigh on impossible to enter Preston from the north. All out of town shopping centres have free parking. The council should take heed and get the roads open and the car parks open for free!!
By Anonymous
@ November 18, 2024 at 6:47 pm
By Anonymous
Moving a city forward does not entail surrendering to the car. Preston caused great damage to its city centre by driving Ringway through its centre.
Manchester with Metrolink on the other hand? It’s one of the fastest growing places in the country.
By Anonymous
If the council/government want affordable housing, they should be doing it themselves. Not offloading it onto the developers. As other commenters have said, for a development of this size, one small issue can wipe out any potential profit and make it just not worth the risk. The knock on effect being local trades and manufacturing don’t get work. Construction costs have rocketed in recent years and the idea you can make £20mill profit on a £5mill build (exaggerating to make the point) just doesn’t exist anymore. At least not outside of London.
Lack of affordable housing is a real issue, but it shouldn’t be the sole responsibility of the private sector to fund. If the government are serious about it they need to either do it themselves, or put their hand in their pocket and subsidies developers for the 20% hit they have to take on affordable housing provision. They are still offloading the risk of the build to the developer, but still allow developers to make a profit worth the investment.
By Egg
When the roads get too busy, where is all the road widening going to take place? Are we will to sacrifice losing old buildings and heritage in order to allow road widening to take place?
By Anonymous
I don’t think the two examples are comparable. Heaton Group are actually developers with a track record of building out. Where as Stoneygate Living are just flipping on the site for quick profit. From what I understand there was a £24m deficit on the scheme – I don’t think removing a requirement for affordable would fill that gap
By Anonymous
As a few of the responses have stated, developers are burdened through the need to provide affordable housing, pay for infrastructure improvements away from the site as well as meeting contributions to educational places and any unforeseen issues that arise during construction and feasibility of the scheme is called in to question.
Preston is not Manchester or Liverpool for that matter, it doesn’t have the pull and growth of them but has sufficient to stand out and be an attractive destination given the distance between the other cities and its strategic location. The problem is and will always be about mobility to get in and around the city and the local authorities aided by government seem hell bent on stifling the growth they encourage.
The geography of Preston is rarely called in to question yet has a massive bearing on how it grows and is affected by the traffic agenda, the urban historic ‘town’, for the most part sits to the north of the river whilst the the remainder of the city spreads predominantly north making ready accessibility to the commercial heart a key.
By IsmailR
@November 19, 2024 at 12:25 pm
By Anonymous
Have you heard of induced demand? The M6 east of Preston had extra lanes added a few years ago yet is often gridlocked with traffic.
I’d rather keep the heritage and go for sustainable transport thanks.
‘One more lane’ never fixes it.
By Anonymous
I think the point is being missed here. The viability review mechanism would just allow the LPA to re-assess at a pre-agreed point in the near future (1-3 years?) as to whether the scheme was viable and did generate a profit. Nothing wrong with a profit, LPAs allow developers to make a profit, but the review would probably have covered if the scheme made more than 15% or 17.5% profit on costs that it would be fair to recoup contributions to whatever the developer avoided in the first place. If it is more than viable, only fair to re-assess and the developer pay for associated elements that are deemed required i.e. open space, affordable homes contribution etc. If still not viable or over profit hurdle at re-assessment then book closed and nothing to contribute. What is the issue with that?
By RG