Property Development - Is there life after death?

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02 October 2009

Some of the key points covered at our seminar on Thursday 23rd September on property development in the current climate were:

LAND ASSEMBLY

  • The percentage discounts to market value offered by developers need not be lower in the current climate; market values reflect the current market and are self regulating, whilst the percentage discount reflects the distribution of that value between landowner and developer.
  • Individuals within a consortium of landowners frequently have different priorities which need to be managed. We often perform a role of honest broker between consortium members to ensure that interests are aligned to allow development agreements to be progressed.
  • Equalisation of values between consortium members is normally fair, but beware the disastrous tax consequences of creating an inadvertent landpool.
  • We have used an alternative structure to allow an option period to exceed 21 years.

PLANNING

  • With the general election approaching, consideration of Conservative Party policy is essential. However, the Party's policy is less than clear at the moment.
  • LPAs may charge Community Infrastructure Levy from April 2010, if they have an up to date development plan, fully costed infrastructure proposals and if these have been to public inquiry. Will the levy survive if a Conservative government is elected?
  • Section 106 Agreements:
    • LPAs are open to negotiation in the current economic climate;
    • Viability is a key issue and developers are seeking innovative s106 solutions to overcome significant costs liabilities;
    • Mechanisms can be put in place for temporary arrangements in respect of section 106 obligations until the market recovers.

DEVELOPMENT FUNDING

  • Speculative Development is unlikely to reach the levels we have seen previously in the foreseeable future
  • Some lenders do have cash to lend for the "right development". Quite how lenders will define the "right development" remains to be seen although factors such as previous performance of the developer and the covenant strength of pre lets will now be looked at closely

A SUMMARY FROM THE CHAIRMAN, DAVID GIDNEY

"The interactive forum gave us a great opportunity to hear the views of our guests from several different disciplines, as well as to share our views with them. Whilst we remain in a planning led world, the promotion of land for development is still imperative despite the current economic climate. With some invention on the part of clients and their advisers, we think there most certainly is life after death for property development."

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