Otterpool Park Update: £800 million profit for Otterpool Park Development

Given all the documents available in the public domain regarding the Otterpool Park development, even the redacted Viability Assessment, it’s clear Folkestone & Hythe District Council’s anticipated profit for the Otterpool development will be in the region of £750 – £800 million, in today’s prices.

At para 1.7 of the redacted Otterpool Park Viability Assessment it states:

• The Lees (Sellindge) does not benefit from direct access to a train station. We note that Westenhanger Station is approximately 4km by road from The Lees. By comparison, the Subject Site (Otterpool) benefits from immediate access to Westenhanger Station. Consequently we would anticipate the subject scheme to achieve sales values in excess of The Lees by approximately 5%.

The minimum and maximum house price broken down by number of bedrooms is as follows:

Land registry data suggests that significant premiums were achieved on smaller units, with 2- bedroom houses achieving an average price per sq ft in excess of £330. The average price per sq ft, broken down by number of bedrooms, is as follows:

The average 3 bedroom house at 1050 square feet would sell in East Kent for approximately £290 per square foot which equates to a sales price for a 3 bedroom house of £304,500.

The costs that come out of that sales price then leaves you with the house builders profit.

• Land – £50,000 per house this includes the cost of recreation land, open space, ecology corridors, suds corridors, suds areas which normally equates to 30-40% of the land take

• Site Prep or Remediation – £2,000 per house

• Utilities – £4,500

• Drainage – £3,000

• Section 106 – £14,000

• Highways – £5,000

• Build Costs – £147,420 – £130 per square foot on the gross (1134 square foot against a net figure of 1050 square foot represents an 8% difference between the two)

• Landscaping – £3,000

• Sales Costs – £4,500

• Legals – £1,000

• Marketing – £2,000

bring the approx Total Costs to: £236,420

House Builders Profit – £68,080 – this equates to 22.3% of the sales price.

However, due to the fact the land costs will not be as high as they would normally be for Otterpool Park, due to the fact the racecourse was purchased for £25,000,000, means the house builder profit and return to the council will be higher at approx 27.5%.

This means the profit for Otterpool in today’s prices, will be between £750m – £800 million, over the course of the build out of the development.

However, there are two issues on the horizon which could possibly put a spanner in the works for the Otterpool Park development.

Issue No 1:

The uncertainty of district councils due to Govt reorgansiation of local government as mentioned by Cllr Monk at the Overview & Scrutiny Committee on 6th Oct 2020.

Issue No 2:

This is far less known and that is our council like many other councils ignored rules that forbid councils borrowing purely to make a profit on subsequent investments.

As you may or may not know our council borrowed £30m on long term borrowing to secure the land at the racecourse from the Reuben Brothers. They also borrowed to purchase Connect 38 in Ashford.

A little Borough Council in Surrey – Spelthorne –  has been accused of likely breaking the law and could be taken to court by its own auditors (KMPG) after borrowing £1bn in public money to invest in commercial property/land.

KPMG, the auditors of Spelthorne Borough Council accounts, has spent two years refusing to sign off the accounts of Spelthorne Borough Council because they ignored rules that forbid councils borrowing purely to make a profit on subsequent investments.

These two issues raise potentially significant problems for our council especially the second one.

With all the available evidence, Otterpool Park development will make an expected profit of up to £800m in today’s prices. Is it any wonder then why Cllrs heads have been turned, as this windfall over the build time of twenty to thirty years, for up to 10,000 homes, would make our council one of the richest, if not the richest, in the country.

The Shepway Vox Team

The Velvet Voices of Dissent