The sale of Hornsey Town Hall to a company based in the British Virgin Islands has been controversial since the Haringey cabinet announced its intention to make the sale two days after the best ever Crouch End Festival came to a conclusion in and around the Town Hall and Square. Councillor Goldberg has consistently , and wrongly, claimed that the square is underused.
The sale is now rapidly reaching a conclusion and several more documents are available for review, wrapped up in something called a Section 106 agreement.
One of the appendices is an assessment of an assessment of the profit FEC will make from the deal. The assessment was carried out by ULL (which probably doesn't stand for U La La) and the assessment of the assessment by Anthony Lee, a bigwig in the RICS and a director of BNP Paribas Property Services. Mr Lee's conclusion is that it is 'clearly surprising' that going from 123 to 146 dwellings, building in a hotel and reducing the amount of community space available does not result in a greater profit for the developer. Now , from a scholarly and august personage like Mr Lee, the expression 'clearly surprising' carries some weight. If I were to hit my thumb with a hammer (it has happened) my response might be that that was 'clearly surprising', or I might let out a string of oaths and epithets known only to those who have hit their thumbs with hammers. Mr Lee's 'clearly surprising' is , in this context, more like my string of epithets. Ask yourself, why would a multi-billion dollar global development megacorp, with offices all round the world (especially in the British Virgin Islands) go to all the trouble of hiring architects, and transport consultants and knot weed experts and archaeologists and many others, for no additional benefit. Well of course they wouldn't.
The calculations below suggest that the additional dwellings, the hotel and the stitch up over community space would roughly double the amount of value left in the deal. And Haringey has quietly rolled over and eased the way for FEC to pocket the lot. The scheme now proposed is materially different both in physical scale and financial return compared to what was originally agreed. And Haringey hasn't noticed. Clearly a breach of their duty to us, the taxpayers..
1. Financial implications of the revised scheme
So, the new Planning Application and the designs contained therein are materially different to the previously agreed project (ie. a project in compliance with the 2010 extant application, 123 units, limited to 5 storeys). The scheme now presented being different to that accepted by Haringey at the bidding stage, and at the exchange of contracts (Development Agreement) in February 2017.
Simply put, the revised scheme increased the value of the development, so Haringey should have demanded a proportionate increase in the capital receipt. Why did they not ask for this? As far as we can see the receipt appears to remain at £3.5m.
(Currently understood purchase – £3,500,000 + £250,000 Duty & Fees = £3,750,000)
In the following calculations we accept all of the revisions made by FEC without question, so that accusations of misleading statistics cannot be made.
2. How much extra should Haringey have asked for?
To answer that you need to calculate the uplift in developmental value. A simple calculation based on the extra residential floorspace in Blocks A & B would appear to show a marked increase – the larger and higher Blocks add 28 units and 30,159 sqft at a valuation of £925psf = an uplift in sales value of £27,897,075. Even after factoring in the increase in construction costs & fees, perhaps £9,125,000, this equals £18,772,000. Surely someone in Haringey noticed this?
However having said that, other inputs have apparently changed across the overall project, with affordable units added and restoration costs increased, and these must also be accounted for. -
3. BNPP figures
To assess the full range of inputs it is necessary to employ the only independent assessment of the project numbers which is publicly available – those contained in the evaluation, by BNP Paribas, of the applicant’s Economic Viability Assessment (a report carried out to establish planning obligationsand which I referred to as the assessment of the assessment):
– In headline, the BNPP EVA evaluation gave the Net Development Value as £141,139,505
– The Outlay is given as £89,618,340
– Profit is shown as £27,300,684 (19.34% on NDV)
– A residual amount is therefore calculated as £24,220,481 (ie. in addition to profit)
This is expressed in the report as –
Residualised Price £22,619,052
Stamp Duty 5.58% £1,262,143
Agent Fee 1.00% £226,191
Legal Fee 0.50% £113,095
(*NB. The authors of the viability exercise do not present actual acquisition costs, nor are invited to calculate land values. The BNPP report employs the residual figure to calculate a surplus for the purpose of establishing planning obligations, using a benchmarking methodology. We do not repeat this exercise).
4. Post BNPP report revisions
Since the BNPP evaluation was made, certain substantial changes were proposed (and accepted?) to the financial analysis, these are as follows –
(a) The restoration and construction costs associated with the listed buildings should be increased by £6,886,259 (29,278,741 to 36,165,000 – from applicant’s restoration costs statement)
(b) 11 affordable rent units are now included in the scheme, the value foregone by the developer being £4,620,846 (market value @925psf, versus value of affordable rent units @196.16)
(c) The contributions for s106 and s278 work are stated as £611,252
(d) The rental value for the community space seems at issue. It is given in BNPP inputs as £15psf (which values the halls as if they were private venues in Camden Town), but is identified in the explanatory text as £5.50psf (valued as a community centre). It also states that Haringey have confirmed that the rent will in fact be £5.50psf. In consequence the capitalised value for the space should be adjusted downward by £4,543,660
– Total adjustments are therefore, £16,662,017
This still leaves a £7,558,464 surplus (24,220,481 minus 16,662,017).
After Duty and fees the £7,558,464 would be a potential £7,058,708 capital receipt to Haringey, representing a £3.5m increase on the published £3.5m settlement, a doubling of money for the taxpayer.