News: Council set to help Chambers conversion complete
Rotherham Council is being asked to give up potential further income from selling a building in Rotherham town centre so that regeneration can continue.
The developer is having difficulty in securing further funding against the part-completed scheme.
Rothbiz reported in April on progress at Westgate Chambers - the largest private-led regeneration project currently ongoing in Rotherham town centre.
Renovation plans for the block of buildings, by Peter Hill of developers HMP Bespoke Construction Ltd, were approved in 2018.
A £10m scheme designed by Sheffield-based Self Architects involves the conversion of the first and second floor offices to provide a mix of 1 and 2 bed apartments, alterations to the existing ground floor shop frontages, demolition of Nos. 2-26 Domine Lane and the construction of a new 4-storey building to provide retail/leisure space on the ground floor and a mix of 1, 2 and 3 bed apartments on the first, second and third floors.
The developer has now achieved practical completion on the first phase of the development, that being ten apartments with four commercial units below. Phase II is currently ongoing and demolition of 2-26 Domine Lane is now completed. This phase will bring about a further 19 apartments to the market. The final and third phase will be the new build part of the project and a new 4-storey building will deliver a further 32 no. apartments.
Unable to take the project forward itself, Rotherham Council agreed to sell the Westgate complex in 2014 at a reduced price. As part of the sale, a number of clauses were inserted in the contract including a clause for the Council to buy back the property if sufficient progress was not made.
The council went on to approve the removal of this clause, as it was hindering the developer's attempts to secure further finance for the development.
Now Rotherham Council's cabinet is being asked to remove an overage clause so that work can continue.
An overage often sees purchasers make a further payment to the seller once a specified "trigger event" occurs – for example, where the developer increases the value of the land by obtaining planning permission.
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A report states: "Included in the sale was a number of overage provisions to provide extra security to the Council in the event that there was a significant upturn in the market and scheme viability was no longer an issue.
"The developer is now having difficulty in securing further funding against the part completed scheme, a number of lending institutions have been approached and none are prepared to release any funds against schemes where overage provisions are in place. This is causing serious financial issues as it was always the developer’s intention to secure borrowing on the completed first phase of the development to then continue and complete the full scheme.
"The developer has now approached the Council to see if they will consider the removal of the overage provisions to allow the additional funding to be secured and the full redevelopment of the site will then be completed in a timely fashion."
Removing the overage would enable the development to be completed in full and council officers believe that even if the clause remained in place, "there does not seem to be any realistic prospect of any overage being payable."
The report adds: "Completion of the development will lead to an additional 51 apartments being brought to market. This will enhance the regeneration of the area and lead to additional council tax receipts for the Council.
"Given the current property market in the town centre, and the increased build costs as a result of inflationary pressures, the current position is that the Council will not benefit from the existing overage provisions, so there is minimal financial risk to the Council if the recommended option is approved."
Renovation includes work on the historic listed part of the complex on Main Street that was originally constructed in 1794 by local architect, John Platt as a residence for himself.
Images: Self Architects
The developer is having difficulty in securing further funding against the part-completed scheme.
Rothbiz reported in April on progress at Westgate Chambers - the largest private-led regeneration project currently ongoing in Rotherham town centre.
Renovation plans for the block of buildings, by Peter Hill of developers HMP Bespoke Construction Ltd, were approved in 2018.
A £10m scheme designed by Sheffield-based Self Architects involves the conversion of the first and second floor offices to provide a mix of 1 and 2 bed apartments, alterations to the existing ground floor shop frontages, demolition of Nos. 2-26 Domine Lane and the construction of a new 4-storey building to provide retail/leisure space on the ground floor and a mix of 1, 2 and 3 bed apartments on the first, second and third floors.
The developer has now achieved practical completion on the first phase of the development, that being ten apartments with four commercial units below. Phase II is currently ongoing and demolition of 2-26 Domine Lane is now completed. This phase will bring about a further 19 apartments to the market. The final and third phase will be the new build part of the project and a new 4-storey building will deliver a further 32 no. apartments.
Unable to take the project forward itself, Rotherham Council agreed to sell the Westgate complex in 2014 at a reduced price. As part of the sale, a number of clauses were inserted in the contract including a clause for the Council to buy back the property if sufficient progress was not made.
The council went on to approve the removal of this clause, as it was hindering the developer's attempts to secure further finance for the development.
Now Rotherham Council's cabinet is being asked to remove an overage clause so that work can continue.
An overage often sees purchasers make a further payment to the seller once a specified "trigger event" occurs – for example, where the developer increases the value of the land by obtaining planning permission.
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A report states: "Included in the sale was a number of overage provisions to provide extra security to the Council in the event that there was a significant upturn in the market and scheme viability was no longer an issue.
"The developer is now having difficulty in securing further funding against the part completed scheme, a number of lending institutions have been approached and none are prepared to release any funds against schemes where overage provisions are in place. This is causing serious financial issues as it was always the developer’s intention to secure borrowing on the completed first phase of the development to then continue and complete the full scheme.
"The developer has now approached the Council to see if they will consider the removal of the overage provisions to allow the additional funding to be secured and the full redevelopment of the site will then be completed in a timely fashion."
Removing the overage would enable the development to be completed in full and council officers believe that even if the clause remained in place, "there does not seem to be any realistic prospect of any overage being payable."
The report adds: "Completion of the development will lead to an additional 51 apartments being brought to market. This will enhance the regeneration of the area and lead to additional council tax receipts for the Council.
"Given the current property market in the town centre, and the increased build costs as a result of inflationary pressures, the current position is that the Council will not benefit from the existing overage provisions, so there is minimal financial risk to the Council if the recommended option is approved."
Renovation includes work on the historic listed part of the complex on Main Street that was originally constructed in 1794 by local architect, John Platt as a residence for himself.
Images: Self Architects
6 comments:
I'd love to know what RMBC sold this premium piece of development for.
If I've read the article correctly: Developer buys land at a knocked down price. Developer bites off more than it can chew, developer can't make as much money as they hoped, so ask RMBC to withdraw rights to the land, so they can complete the development and then sell on at a profit.
Surely the sensible thing to do here from a RMBC perspective, is to invoke the overage clauses and find a company that will complete the scheme... However, I suspect they will pander to the developers needs, and simply rub its hands at the prospect of additional income coming in through the new council tax bills the flats will generate.
... Or have the developers sniffed out an opportunity to grab some of the levelling up fund?
Sadly, the fiasco over Tesco/ Forge Island, Corporation Street burned out buildings and countless others has shown time and again that RMBC have no appetite to fight things like this.
Either way, sadly, I think the real losers will be RMBC and the town centre.
Time for RMBC to show a bit of backbone on issues like this.
If the developer wants it removing maybe they should pay the going rate either in the first place or pay it now.
Yeah let's punish the developer and end up with another derelict site for next tens years !I give up 😔
Totally agree with reply 1, as reply 2 says pay the rate to remove the clause.
Bit off more than they can chew and will be raiding every pot available.
Do the due diligence beforehand.
Isn't greed one of the deadly sins?
So bite so basically your saying bite nose off to spite face,cos that's what punishing developer is .Let's have another unfinished eyesore ,yeah great idea Always known Rotherham is run by idiots,seems many idiots live here too!
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