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All Party Parliamentary Light Rail Group House of Commons London SW1A 0AA “ Low cost, affordable& sustainable Trams ”. A NEW CONVERSATION By Gareth Gerner Partner – DLG Architects 8 th November 2011. PROPOSITION. Now is the time for a new conversation with developers!

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All Party Parliamentary Light Rail Group

House of Commons

London SW1A 0AA

“Low cost, affordable& sustainable Trams”

A NEW CONVERSATION

By

Gareth Gerner Partner – DLG Architects

8th November 2011

proposition
PROPOSITION

Now is the time for a new conversation with developers!

For too long developers have been regarded simply as sources of tax funding for infrastructure!

As development profits diminish, how can we better tap into this entrepreneurial resource?

Infrastructure has definitive benefits, but is perceived by developers as a cost with uncertain outcomes.

A "win-win" message could secure a joint venture partner, rather than just a reluctant funder!

So what should our key messages be and what questions will developers ask in return?

Gareth Gerner

g.gerner@dlgarchitects.com

introduction
INTRODUCTION
  • Proposition:
    • A New Conversation - with developers
  • Partner at DLG Architects LLP
    • www.dlgarchitects.com
  • Agenda
    • Overview of development and land values
    • Developers for beginners
    • Current funding/TAX arrangements (cost)
    • Potential opportunities (added value)
    • Developer’s Concerns of Light Rail
  • Simplification of the situation
  • Further discussion
    • g.gerner@dlgarchitects.com
land value overview
LAND VALUE: Overview
  • Location Rural Urban (good)
  • Undeveloped land Agricultural land £3,000 - £10,000 per hectare
  • No of units 40 units/ha – 200 units/ha
  • With a planning consent
    • Planning application costs £60,000 - £350,000
    • Housing land £800,000 - £2,000,000 per hectare
  • Developed land
    • Capital value
    • Cost of construction £4m £30m
    • Sale Value £6m £60m
    • Income value £300k per year £4m per year
developers
DEVELOPERS
  • Profit driven to survive!
  • Risk sensitive
    • Dealing in a high risk process
  • Manage risk based on experience
    • Risk to planning: no planning!
    • Construction risk:cost and time e.g. ground conditions
    • Exit risk: if no one wants to buy
  • Balance risk with opportunity
    • Supply and demand
    • First to market
    • Significant profits using leverage
  • Subject to the economic fluctuation
    • Developments can take 2 to 20 years
    • High failure rate amongst developers
funding existing conversation with developers
FUNDING: Existing conversation with developers
  • Profits are taxed by central government
  • Central government then funds major infrastructure
  • A perfect sustainable development does not place any new burden on infrastructure
  • Most developments are not perfect and place additional burdens on infrastructure
    • E.g. Schools
    • E.g. Transport
  • An imperfect development pays money to council to pay for “offsite” works as section 106 contributions / “TAX”
    • E.g. New schools, libraries, etc
    • E.g. Road improvements
  • New Community Infrastructure Levy
opportunities note video animations to large for website
OPPORTUNITIES:(note video animations to large for website!)
  • Lets Play Developer!
  • Noticed some open land on the way here – shall we buy it?
    • Attracting campers
    • Client will sell for £10m
  • Planning consent for large house
    • £50m : £150m
  • Good transport links: apartments
    • £70m : £200m
  • Central Location: offices
    • £150m : £600m
  • New tram: higher PTAL = greater density
    • £300m : £1bn

Sorry!

The Video animations are too large for the website so they will not work!

dlg architects LLP

opportunities
OPPORTUNITIES:
  • Disused railway track
    • re-open and develop along it
  • Capture uplift in land value before development
  • PTAL rating
    • Increase quantum of development x2
    • Reduce parking requirement
    • Increase demand and value of development
  • Section 106:
    • Control to ensure direct benefit to asset
  • Specific benefits of Light Rail offer
    • Fixed route vs variable
    • User experience & business uptake
    • Modal shift away from cars

MRC McLean Hazel Ltd

Tel:       +44 (0)131226 1045

Email: george.hazel@mrcmh.com

Web:   www.mrcmh.com

Toronto $3bn Metro

Uplift Sharing basis

concerns
CONCERNS
  • Lack of knowledge by developers
    • Information
    • Appropriate placement
  • Guide capital cost missing
    • Consultants
  • Risk of cost over-run
    • JV & profit sharing
    • Insurance
  • Running costs
    • Management options
  • Utilities
    • new developments should not require as extensive relocation of utilities!
thank you
THANK-YOU
  • g.gerner@dlgarchitects.com
  • 020 7620 1236