Viability Report
Paston College Site, North
Walsham - Viability Assessment
North Norfolk District Council
27 December 2012
Private and Confidential
North Norfolk District Council
Paston College Site, North Walsham
December 2012
Quality Assurance
Date
27 December 2012
Filename and path
C:\Users\Parm\Documents\AVL local (C)\_Client
Projects\1205 North Walsham_North Norfolk
DC\_Reports\121219 Paston College Viability
Report_v6.docx
Version
Final
Authorised by
Limitation
This report has been prepared on behalf of and for the
exclusive use of Aspinall Verdi Limited’s Client and it is
subject to and issued in connection with the provisions of
the agreement between Aspinall Verdi Limited and North
Norfolk District Council. Aspinall Verdi Limited accepts no
liability or responsibility whatsoever for or in respect of any
use of or reliance upon this report by any third party.
North Norfolk District Council
Paston College Site, North Walsham
December 2012
Contents
Report
1
Introduction
1
2
Site & Scheme Overview
3
Planning Background
Spatial Plans & Floorspace Schedules
3
Viability Analysis
Replacement College Buildings
Appraisal Outputs
Appendices
4
4
6
8
11
4
Operator Interest
13
5
Conclusions
14
Appendix 1 – Development Appraisals
Appendix 2 – Demand Survey Information
North Norfolk District Council
Paston College Site, North Walsham
December 2012
1
Introduction
1.1
AspinallVerdi and Tibbalds have been appointed by North Norfolk District Council to test the
viability of developing a foodstore on the Paston College Lawns site in North Walsham.
1.2
The Council recently had a retail and leisure demand, capacity and feasibility study undertaken
for North Walsham by SPA consultants. One of the key outcomes of the study was that in order
to create additional footfall in the town centre the Council should consider the potential for a
substantial supermarket as an alternative to Sainsbury’s.
1.3
This viability study is required to demonstrate whether or not a foodstore is deliverable on the
Paston College site. The key tasks that have been undertaken are as follows:

Met with Paston College to understand their requirements and undertake a site visit.

Worked up sketch scheme to illustrate how a circa 60,000 sqft foodstore scheme and
associated parking can be accommodated at the Paston College site.

Undertake high level viability analysis to test whether the proposed foodstore scheme
can afford to fund the relocation of the school.

Approach foodstore operators with sketch to ascertain their interest in operating a
store from the Paston College Lawns site.
1.4
Tibbalds have prepared high level concept scheme to demonstrate that a circa 60,000 sqft
store and associated parking can be appropriately accommodated on the site. AspinallVerdi
have undertaken residual land value appraisals to test whether the above proposals are viable
and identify whether there is any market demand for the unit.
1.5
In order to meet the aims of the brief, this report is structured as follows. In Section 2 we
provide a brief overview of the site and present the concept schemes drawn up Tibbalds. In
Section 3 we set out the appraisal assumptions that we have used in preparing the
development appraisals as well as the outputs and sensitivity analysis to test whether there is
potentially more viable scenario that the Council could consider in further detail. In Section 4 we
set out the findings of the market demand analysis. Finally in Section 5 we set out our
conclusions on the design, viability and market analysis.
1.6
We must stress that our appraisals have been undertaken in order to understand in broad
terms the financial viability of indicative development options. The advice contained in this
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
report, and the appraisals upon which the advice has been based, should not be regarded as
formal valuations as defined by the RICS Appraisal and Valuation Standards (the Red Book).
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
2
Site & Scheme Overview
2.1
The Paston College site is circa 1.5 hectares (3.7 acres) and is located to the west of Market
Street, the main retailing street in North Walsham. Please see site plan below. It is positioned
between residential to the west and commercial/retail uses to the east. The site is currently
occupied and owned by Paston College and includes a Grade II listed building which fronts
onto Market Street. The site currently includes 3,608 sqm (39,000 sqft) of accommodation as
well as staff/student car parking and green open spaces.
2.2
Vehicular access to the site is via Park Lane, which via King’s Arm Street and Norwich Road
links into the A149.
Figure 1 – Site Plan
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
Planning Background
2.3
The key planning policy for the Paston College site is set out in the Local Development
Framework – Development Plan Document (February 20110). Policy NW44 states:
NW44: Paston College Lawns Site
Land amounting to approximately 1.5 hectares is allocated for a mixed use development of
approximately 30 - 60 dwellings, retail, commercial and community uses. Development will be
subject to compliance with adopted Core Strategy policies including on site provision of the
required proportion of affordable housing (currently 45%) and contributions towards
infrastructure, services, and other community needs as required and:
a) The prior approval of a development brief to address the mix of uses, access,
layout, and conceptual appearance;
b) provision of pedestrian links to Market Place;
c) development that is functionally well related to the town centre;
d) off street servicing and provision of limited car parking to serve the proposed
development;
e) demonstration that there is adequate capacity in sewage treatment works and
electricity provision; and
f) careful attention to design and layout to enhance the Conservation Area.
2.4
The other key policy within the Core Strategy (Adopted September 2008) that need to be taken
into consideration are

Policy SS5: Economy – which refers to North Walsham as a large town centre within
which any large scale development will be located.

Policies EN2 Protection and Enhancement of Landscape and Settlement Character
and EN8 Protecting and Enhancing the Historic Environment given that the site is
within the Conservation Area and includes a listed building.
Spatial Plans & Floorspace Schedules
2.5
Based on the analysis undertaken by SPA and the characteristics and size of the site, Tibbalds
have prepared spatial plans to accommodate the following level of floorspace:


Option 1
o
50,000 sqft foodstore
o
219 car parking spaces (55 located on adjacent site (healthcare centre))
Option 2
o
59,000 sqft foodstore
o
230 car parking spaces (part provided on roof of foodstore)
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
2.6
The above proposals are illustrated in the sketch scheme below:
Figure 2 – Sketch Scheme
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
2.7
At this stage we have shown that the Doctors Surgery could be used as overspill car park under
Option 1, however, subject to the requirements of the foodstore operators, it could be possible
to develop a petrol filling station on this site. We have not tested this option in design or viability
terms at this stage and will explore this in further detail if the Council and the College decide to
proceed with the development of the Lawns site.
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
3
Viability Analysis
3.1
We have undertaken a viability analysis based on the development scenarios identified by SPA
your retail consultants and the spatial plans prepared by Tibbalds to demonstrate the
development possible in terms of size and scale. The schemes upon which the residual
development appraisals are based on the following areas:
Use
Option 1
Option 2
Foodstore
50,000 sqft
59,000 sqft
Retail
2,000 sqft
2,000 sqft
Refurbished Existing Listed Buildings for Retail/Commercial
7,000 sqft
7,000 sqft
219 spaces
230 spaces
Car Parking Spaces
Table 1 – Schedule of Accommodation
3.2
Option 2 tests the possibility of developing a larger store with car parking provided on the roof
in order to deliver additional parking spaces without having to acquire the site on the other side
of Park Lane as in Option 1, which isn’t ideal from an operational point of view for foodstores.
3.3
We have used the residual method of appraisal to calculate an indicative land value for the
College’s interest using Argus Developer - industry standard software. The residual land value
is calculated by deducting all the total development related costs e.g. construction (including
relocation of the College), fees and financing and an allowance for a developer’s profit from the
gross development value of the scheme, if there is a surplus this equates to the residual land
value of the scheme.
3.4
The residual value will also need to cover the cost of acquiring the properties needed to create
the pedestrian link to the Market Place and also the Doctors Surgery under Option 1 to enable
additional parking to be provided. We have assumed at this stage that the owners of these
properties will be willing sellers; however, it may be necessary to use CPO Powers in order to
guarantee that the land can be assembled. This will have cost implications as compensation
packages would need to be agreed and pursuing a CPO process could add 12 months onto the
delivery timescales. However, to mitigate costs alternative accommodation for the existing
tenants would need to be found within the town centre if at all possible.
3.5
The key assumptions within the development appraisal are set out below:
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
Replacement College Buildings
3.6
With regards to replacing the buildings on the Lawns site onto the main Paston College
campus, we have been informed that approximately 3,608 sqm (39,000 sqft) of floorspace will
need to be reprovided. Please refer to Figure 2 which demonstrates that the replacement
floorspace can be reprovided on the main campus, however please note that the plans
provided are at this stage are high level and will need to be fully tested with the Council’s
Design and Conservation Officer given that the school is in a conservation area and the main
building is listed. Furthermore the plans will need to be refined to fully reflect the College’s
requirements, including car parking. If necessary, we understand that part of the Bank Loke car
park may be made available by the Council for development of the replacement college
buildings subject to planning and appropriate terms being agreed.
3.7
We have allowed for a cost of £4.6m for the replacement buildings, this is based on information
available from the RICS Building Cost Information Service’s which identifies an average cost of
£1,276 sqm (£119 psf) for building sixth form/tertiary colleagues. This figure does not include
the fit out costs of the buildings as the College’s specification requirements are unknown at this
stage.
Construction Costs
3.8
We have used construction costs from the RICS Building Cost Information Service as the basis
of our appraisal. We set out below the costs assumptions for the core uses we have taken into
consideration in preparing our development appraisal for the Paston College foodstore scheme:
Use
Construction Costs £ psf (£ psm )
Foodstore (Option 1)
£98 (£1,055)
Foodstore with Parking on Roof (Option 2)
£120 (£1,291)
Retail Units
£79 (£850)
Refurbished Unit
£100 ((£1,076)
Surface Car Parking
£1,500 per space
Demolition (including site preparation)
£100,000 per acre
Table 2 – Schedule of Construction Costs
NB: Costs have been rebased to the Norfolk market.
3.9
To reflect the risks associated with working with a listed building have included a build cost that
is higher than the standard build cost for a retail unit.
3.10
We have allowed for a notional cost of £500,000 covering highway works and £250,000 for
public realm related works. We have also allowed for a notional cost of £250,000 towards
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
S106/S278 Costs. These figures are estimates based on previous experience but will need to
be fully costed and tested as the scheme is worked up in further detail.
Contingency
3.11
We have allowed for a contingency of 5% on build costs including the new college buildings,
public realm and highway works. We consider the contingency figure that we have applied to be
robust and necessary to allow for any unknowns, for example, working with a listed building,
contamination or archaeological issues that may arise in the future.
Professional Fees
3.12
In recent years, we have seen professional fees fall from an average 15% to 10%. We have
allowed for professional fees at 10%. This percentage figure has also been applied to the new
college buildings.
Rental Values
3.13
We set out below the value assumptions that we have taken into consideration in preparing our
development appraisal for the Paston College development scenarios. These figures are based
on our understanding of the property market as of Q4 2012.
Use
Rental Value
Foodstore
£20 psf (£215 psm)
Retail
£12.50 psf (£135 psm)
Table 3 – Schedule of Values
3.14
We have not allowed for an income stream for the car park, on the basis that it will be servicing
the store and also the rest of the town centre. The foodstore operator may implement their own
payment system (e.g. refund at till).
Yields
3.15
Based on our market research we have adopted a yield of 5.25% on the foodstore element and
7% on the other retail. The investment yield is the yield received by a property purchaser - i.e.
rent as a percentage of purchase price.
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
Letting & Disposal Fees
3.16
We have applied letting agent fees at 10% and letting legal fees at 5% of the first years rent.
3.17
We have applied purchaser’s cost at a rate of 5.7625% on the investment sale of the
commercial elements; this rate includes Stamp Duty Land Tax, legal and agency fees, and
survey charges.
Tenant Inducements
3.18
We have assumed a 6 month rent free period on the foodstore and 18 month on the other retail
units. If a competitive process between two or three operators can be generated, then this
incentive could be substantially reduced.
Environmental/Contamination
3.19
We are not aware of any environmental audit, environmental investigations or soil survey which
may have been carried out on the site and which may draw attention to contamination or the
possibility of contamination. No investigations into the past or present uses of the site have
been undertaken to establish whether there is the potential for contamination. Therefore we
have not allowed for any contamination costs within the appraisal.
Title Information
3.20
It has not been possible to examine Deeds, Leases or the documents relating to title/tenure
under which the properties. We have assumed that the site benefits from unfettered and
marketable title with no onerous or restrictive covenants.
Finance
3.21
In light of the current economic circumstances, the Bank of England base rate has been
substantially reduced to 0.5% since March 2009. We have applied a finance rate of 6.5%. In
normal circumstances the finance rate is dependent upon the standing and track record of the
developer and is normally 1.5% to 2.5% above the Bank of England Base Rate, which as
mentioned above currently stands at 0.5%. However, due to the fact that credit is still not
readily available we have applied 6% above rate to reflect that banks are still not willing to lend
at the lower rate and when they do so it is on stringent terms.
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
4
Operator Interest
4.1
Using the document prepared by Tibbalds, we have approached on a strictly confidential basis
identified foodstore operators including:
4.2

Tesco

Wm Morrison plc

Cooperative

Marks & Spencer

Asda Walmart
Each of the above has received a letter along with the plans prepared by Tibbalds, please refer
to Appendix 2. At the time of writing this report we have not received replies from all of the
operators. We tabulate below the responses received:
Operator
Response
Comment
Asda Walmart
No requirement
Very quick response
received
Wm Morrisons
Aware of the Scott Properties
proposal no requirement for
this area. Consider that
Sainsburys are taking the
majority of spend in the area.
Cooperative
Would consider a smaller
opportunity in the order of 400
sqm
Table 4 – Operator responses received
4.3
We have endeavoured to obtain responses from the other operators, but as yet without
success. It would appear that operators have been approached and are aware of the Scott
Properties/Marrick’s Wire Rope site. The timing of the market testing exercise therefore may
not be ideal as operators may not wish to overtly declare an interest in anticipation of the
planning decision for the Marrick’s Wire Rope site.
4.4
Having said the foregoing operators will be mindful of the catchment spend potential and the
presence of existing operators within North Walsham and the wider catchment. It is reasonable
to assume that there is not the opportunity for two further sizeable foodstores in North Walsham
and hence operators may ‘prefer’ the easier option in terms of delivery, which is out of centre.
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
5.7
This high level viability analysis demonstrated that a foodstore could be accommodated on the
Paston College site, and therefore in planning terms is a sequentially preferable site. The retail
statement prepared by Scott Properties for the Marrick’s Wire Rope sites shows that there is
sufficient spend within the catchment area to sustain a new 60,000 sqft foodstore.
If the
planning application for the Marrick’s Wire Rope site was to be declined, then the foodstore
operators are more likely to consider the Paston College site in a more positive light.
5.8
Although, the viability of the scheme is important, we also need to consider the fact that
foodstore operators will be looking at North Walsham from an operational point of view i.e.
potential turnover. If, following the Marrick’s Rope site decision, we were able to instigate
competition between 2 or more foodstore operators there could be a ‘bidding war’ which
increases the potential acquisition price of the Paston College site.
5.9
Subject to a favourable outcome of Marrick’s Wire Rope planning application (i.e. assuming
planning is declined); the Council will need to work closely with Paston College to bring the site
forward for development. The following tasks will need to be undertaken:

Detailed analysis of Paston College’s requirements, including the ability of the main
site to accommodate the additional floorspace to be relocated form the Lawns site. It
may be that the Council will need to consider including the Bank Loke car park if the
main college site cannot accommodate all the floorspace. At the end of the process
an outline specification and associated costs need to be agreed. The College will need
to decide whether they want to secure a financial payment from the developers of the
scheme or ask the developers to reprovide the College buildings.

Prepare development brief, setting out detail on the opportunity and background
information e.g. land ownership, utilities, design guidelines, planning policies and draft
Heads of terms/legal requirements etc. Importantly, the development brief will need to
include a list of the Council’s and the Colleges objectives and requirements, including
the need to relocate the current college buildings from the Lawns site.

Undertake full marketing of the site to select a preferred developer/foodstore operator
– this will include preparing an advertisement to market the site and placing it in
national property press. We will need to carefully consider whether EU OJEU
requirements apply or whether a straight land disposal can be undertaken. The answer
to this question will in part relate to the level of control the College and the Council
want to retain but also whether the selected developer is required to provide the
replacement college buildings.
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
5.10
We set out below a high level timeline to show the key tasks and associated timescales that will
need to be achieved in order to secure a store opening in December 2016. This timeline
assumes that the College decides to proceed with the scheme within the next 3 months.
5.11
College Decision
Making Process
Developer
Selection Process
January - March
2013
April - December
2013
Planning Process
for College &
Foodstore
January - July
2014
Build New
College
Build New
Scheme
Scheme Opens
July 2014 - June
2015
July 2015 -
December 2016
December 2016
The future of this site hinges on the outcome of the Marrick’s Wire Rope’s site, once the
outcome of that planning application is known; we recommend that a workshop is held with
relevant officers to agree the way forward before meeting with the College.
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North Norfolk District Council
Paston College Site, North Walsham
December 2012
Appendix 2 – Demand Survey Information
North Norfolk District Council
Paston College Site, North Walsham
December 2012
North Norfolk District Council
Paston College Site, North Walsham
December 2012