Updated @18:50 13/01/21
The Council have released the Business Plan for its Otterpool Park Garden Town project, where up to 8,500 homes might be built, if planning permission is granted.
The Business Plan makes clear using current modelling the project suggests that over circa 28 years, and across eight phases of development, there will be a return of circa £193,000,000 to Folkestone & Hythe District Council.
The £193m return is equivalevent to 27.83% Profit on Cost and the Otterpool Park Financial Viability Assessment prepared by Gerald Eve makes it clear that the Profit on Cost was 27.56% [See Para 11.16]. So it’s clear the numbers make the project viable inded to the Council.
Profit on cost is expressed as a % figure and takes your gross profit figure and divides it by the total development costs.
Profit on cost is preferred by some developers as their target return metric over profit on Gross Development Value, however, there is no right or wrong method, provided you have your targets set in your business plan and investment requirements.
All costs and revenues are day one, i.e., do not include inflation. So if inflation rises, cost change and profit may well fall and who knows what’s around the corner!
On Jan 20th 2021 at 5pm the Cabinet will meet to discuss the Business Plan, but they will also discuss the more detailed Phase 1 part of the Otterpool Park Financial Plan behind closed doors.
Back in Nov 2019 the Council agreed a facility for up to a £100 million funding allocation for the Otterpool Park project.
To date the Council say they have borrowed circa £30m, but not explained from who or what organisation they’ve borrowed the money from, this is despite repeated questions by Cllrs wanting to know the answer.
The Council has used the £30m for land acquisition, planning and specialist reports required to progress the project and, importantly, provide evidence required as part of the local plan examination process. Therefore from the funding decisions that have been made to date £70m remains available.
The £70 million left will be apportioned as follows:
£5m working capital to cover the operational costs of the LLP and professional fees both for work associated with the planning application and to prepare plans for the delivery phases of the scheme.
This is for the forthcoming financial year 2021/22. This leaves £65 million. Approx £21.5 million will be drawn down for each year for the preceding years taking us up to 2024/25.
The £65m is to develop deliver essential infrastructure and community facilities, in line with the principle of ‘infrastructure 1st ’, and land acquisition.
Peak debt for the project is projected to be in the order of £65 million and will ensure that all key infrastructure is provided prior to the occupation of the 1st home.
The Business Plan and Report Number C/20/69 speaks about the Strategic Land Agreement which sets out the mechanism for transferring the Council’s land to Otterpool Park LLP [which is acting as the Master Developer] so it can come to agreements with housebuilders, developers and infrastructure providers. This is fundamental to the LLP’s ability to implement the Business Plan.
It is also referenced in a summary of the Heads of Terms drawn up by the Council’s legal advisors for the project Browne Jacobson.
There is a lot to digest in all these documents [Item 14], but it is clear that the numbers according to all the well paid advisors and consultants, appear to be stacking up before a penny is spent.
Now of course not everyone agrees Otterpool Park is a good thing for the district, as many questions like water, climate change and other issues have not been answered. But the Council see £193m profit as a persuasive reason to move at pace with regards the Otterpool planning application to fill its coffers as soon as possible.
The Shepway Vox Team
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