CAR PARK ADJACENT TO THE AGORA SHOPPING CENTRE, CHURCH STREET, WOLVERTON, MK12 5LG VALUATION REPORT PREPARED FOR MILTON KEYNES COUNCIL

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1 CAR PARK ADJACENT TO THE AGORA SHOPPING CENTRE, CHURCH STREET, WOLVERTON, MK12 5LG VALUATION REPORT PREPARED FOR MILTON KEYNES COUNCIL DATE OF VALUATION: 27 SEPTEMBER 2016 Prepared by: Peter Wilson FRICS (RICS Number: ) Kirkby Diamond 15 Shenley Pavilions Shenley Wood Milton Keynes MK5 6LB T REFERENCE NUMBER: M VS2

2 CONTENTS PAGE INSTRUCTIONS... 3 BASIS OF VALUATION... 4 INSPECTION AND INVESTIGATIONS... 4 LOCATION... 4 DESCRIPTION... 5 THE SITE... 6 ACCOMMODATION... 6 SERVICES... 8 TENURE... 8 LOCAL AUTHORITY... 9 PLANNING... 9 LOCAL TAXATION HIGHWAYS STATUTORY REQUIREMENTS ENVIRONMENTAL RISKS METHODOLOGY OF VALUATION VALUATION COMMENTARY Appendices Appendix 1 Appendix 2 Appendix 3 Appendix 4 Letter of Instruction Title Plan Appraisal Using Proposed Purchase Price of 2.15 Million Residual Appraisal Car Park adjacent to The Agora Shopping Centre, Wolverton Page 2 of 14

3 Our Ref: M VS2 27 September 2016 Milton Keynes Council Saxon Court 502 Avebury Boulevard Milton Keynes MK9 3HS For the attention: Mr Ed Palmieri Dear Sirs Car Park adjacent to The Agora Shopping Centre, Church Street, Wolverton, Milton Keynes, MK12 5LG In accordance with your recent instructions, we have inspected the above property, made our usual enquiries and now have pleasure in reporting as follows: INSTRUCTIONS This valuation has been prepared in accordance with your instructions to provide a valuation of the freehold interest in the above property. A copy of your instructions and our Terms of Engagement applicable to this instruction are included at Appendix 1. We understand the report is required for internal purposes. The valuation and this report has been prepared for this purpose and may not be appropriate or applicable for any other purpose. The valuation has been prepared by P J Wilson FRICS, an RICS Registered Valuer. We confirm that the valuer has the necessary expertise and experience to undertake a valuation of this property. We also confirm that neither the valuer nor this firm have any previous involvement with either the property or another party with an interest in the property that would conflict with our duty to provide you with an objective opinion in this case. The date of valuation is the date of the report. This valuation report and the valuations and opinions contained in it have been prepared in accordance with the Royal Institution of Chartered Surveyors Valuation Professional Standards (The Red Book). Car Park adjacent to The Agora Shopping Centre, Wolverton Page 3 of 14

4 BASIS OF VALUATION In accordance with your instructions, the property has been valued on the basis of Market Value. i. Market Value is defined in the RICS Valuation Professional Standards as The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion." INSPECTION AND INVESTIGATIONS The inspections and investigations that we have undertaken to prepare this valuation, together with the limitations that apply are described in the Terms of Engagement and associated correspondence at Appendix 1. LOCATION Wolverton is one of the three original towns which were incorporated within the new town of Milton Keynes. The town was originally built up around the Wolverton Railway works which have now been substantially redeveloped with retail, housing and other commercial uses. The majority of housing in Wolverton is typical Victorian terraced housing although some new developments have been undertaken in recent years notably the Places for People development near to Wolverton station and on the former McCorquodale site at the western end of the town. Car Park adjacent to The Agora Shopping Centre, Wolverton Page 4 of 14

5 Commercial activity in Wolverton is largely restricted to small retail units along Church Street and Stratford Road with some larger retail accommodation on Glynn Square and a very large Tesco supermarket. The Agora Centre which is a multi-tenanted commercial development lies immediately to the west of the subject property and the redevelopment proposals for which impact on the subject property. The subject property lies on the south side of Church Street at its junction with St Georges Way. The site is bounded by Church Street, St Georges Way, The Agora, St Georges Church and a terrace of houses fronting on to Buckingham Street. DESCRIPTION The property at present comprises a broadly triangular shaped site providing car parking and open areas associated with The Agora Centre. The site extends to approximately hectares (1.52 acres). Redevelopment of The Agora Centre is proposed which will provide 8 retail units and 100 flats of which 25% will be affordable / shared ownership. The redevelopment will involve the reinstatement of Radcliffe Street between Church Street and The Square. The proposed development will involve approximately 50% of the Council s land with the remaining 50% continuing as car parking associated with the development. In order to arrive at our valuation of the subject land we have, therefore, undertaken a residual appraisal of the proposed development in order to arrive at a residual land value which we have the apportioned between the subject property and the Agora building itself. Whilst we are aware of a proposed purchase price for the Agora building we have not taken that into account in arriving at our final valuation. Car Park with Agora Centre Car Park Car Park adjacent to The Agora Shopping Centre, Wolverton Page 5 of 14

6 Car Park Car Park THE SITE The subject property occupies a level and roughly triangular shaped parcel of land that extends in total to approximately hectares (1.52 acres). The total development site extends to hectares (3.08 acres). Therefore, the proportion of the development site which is occupied by the subject land equates to 49.36%. As previously indicated approximately 50% of the subject land will be developed upon. As far as we are aware the property is not situated on made up ground. The property is shown edged red on the attached Title Plan at Appendix 3. ACCOMMODATION The accommodation to be included in the proposed development has been taken off plans obtained from the Local Planning Authority website. We have, however, measured the gross internal areas of the development off plan in order to calculate the construction costs of the proposed development. Car Park adjacent to The Agora Shopping Centre, Wolverton Page 6 of 14

7 The property has been measured off plan. Commercial Accommodation FLOOR DESCRIPTION AREA SQ M SQ FT Block A Ground Unit A Retail Ground Unit B Retail Ground Unit C Retail Block B Ground Unit D Retail First Unit D Storage Ground Unit E Retail First Unit E Storage Block C Ground Unit F Retail First Unit F Storage Ground Unit G Retail First Unit G Storage Block D Ground Unit H Retail First Unit H Storage TOTAL: FLOOR DESCRIPTION AREA SQ M SQ FT Residential Accommodation Block A Block B Block A comprises 17 apartments on first, second and third floors. Each apartment provides entrance hall, living room / kitchen, 2 bedrooms; one of which has an en suite shower room and a bathroom. The Gross Internal Area of the apartments range from approximately 67.3 sq m (724 sq ft) to 79 sq m (850 sq ft) in area. The total gross internal area of Block A is: The apartments in Block B are on first, second and third floors and provides 22 units ranging in size from 67 sq m (721 sq ft) to 89 sq m (957 sq ft) in area. The accommodation in each flat provides entrance hall, living room / kitchen, 2 bedrooms and bathroom. The total gross internal area of the flats in Block B is: Car Park adjacent to The Agora Shopping Centre, Wolverton Page 7 of 14

8 FLOOR DESCRIPTION AREA Block C Block D Block E Block F The residential accommodation in Block C is on first and second floor levels and comprises 10 flats ranging in size from 67 sq m (721 sq ft) to 89 sq m (957 sq ft) in area. Other than flat C4 which has an en suite shower room the accommodation is entrance hall, living room / kitchen, 2 bedrooms and bathroom. Block D comprises of 10 flats on first and second floor level ranging from 67.1 sq m (722 sq ft) to 76.4 sq m (822 sq ft) in area. The accommodation includes entrance hall, living room / kitchen, 2 bedrooms, en suite shower room and bathroom. The total gross internal area of Block D is: Block E is on ground, first and second floor accommodation and provides 21 apartments ranging in size from 50.5 sq m (543 sq ft) to 75.9 sq m (816 sq ft) in area. The total gross internal area of Block E is: Block F is on ground, first and second floors and provides 20 apartments ranging in size from 67 sq m (721 sq ft) to 79 sq m (850 sq ft) in area. The accommodation includes 2 bedrooms, living room / kitchen and bathroom. Some of the units have en suite shower rooms. SQ M SQ FT SERVICES We have assumed that all mains services will be available to the proposed development. We have assumed that the individual flats will be heated by means of gas fired central heating boilers serving wall mounted radiators. We have also assumed that the individual apartments will be provided with fire alarms and carbon monoxide alarms. TENURE We understand the property is freehold and held under Title Number BM We have assumed that the Title is free from encumbrances or any unduly onerous or unusual easements, restrictions, outgoings or conditions which might have an adverse effect on the value of the property. Car Park adjacent to The Agora Shopping Centre, Wolverton Page 8 of 14

9 LOCAL AUTHORITY Internet enquiries with the local planning authority, Milton Keynes Council, have confirmed the following: The statutory development plan for the area is the 2005 Local Plan which set out how the area would be developed up to An updated Local Plan is being prepared but in the meantime decisions on planning applications are made in line with the saved policies in the Local Plan. According to the Local Plan, the property is situated in an area allocated for Commercial Facilities, Local, District and Town Centres and other shopping. The property is situated within a Conservation Area which means it is in an area of special architectural or historic interest, the character of which it is desirable to preserve or enhance. There may also be an Article 4 Direction which would remove permitted development rights. We understand that Planning Consent has been granted under reference 15/00913/FUL for the proposed development. It is understood that it has been agreed in principle that the development will include 25% affordable / shared ownership housing together with Section 106 Contributions of 1.15 million. Should any of the assumptions or information provided to us prove to be incorrect it may be necessary to amend our valuation. We recommend that the above details are confirmed by your legal advisers. PLANNING We have established from our enquiries that the property has the following planning history: REFERENCE PROPOSAL DECISION DATE 15/00913/FUL Demolition of existing Agora building, reinstatement of Radcliffe Street, reconfiguration of existing car park and constriction of new mixed use development including 100 residential units and 8 retail units Approved 11/03/2016 We are not aware of any other proposed planning, highways or development schemes that are likely to have a detrimental impact on the value of the property. Car Park adjacent to The Agora Shopping Centre, Wolverton Page 9 of 14

10 LOCAL TAXATION The property is entered in the current rating list as follows: ADDRESS DESCRIPTION RATEABLE VALUE The car park at The Agora Centre, Church Street, Wolverton, MK12 5LG Car park and premises 7,700 The Uniform Business Rate for the financial year 2016/2017 is currently fixed at 48.4 pence, applied to qualifying properties with a rateable value of 18,000 and below in England and Wales. HIGHWAYS We have assumed that Church Street is adopted by the Highway Authority and maintainable at public expense. The property has direct access to the adopted highway. STATUTORY REQUIREMENTS It has been assumed for the purposes of the report that the proposed development will comply with all relevant statutory requirements including Fire Regulations, Building Regulations (at the date of construction), Employment Regulations and Health & Safety at Work Legislation. ENVIRONMENTAL RISKS Contamination: Our valuation assumes that there is no contamination affecting the site. Flood Risk: Inspection of the Environment Agency flood maps indicates that the property is not in an area at risk of flooding. Radon: We have established from the radon maps published by UK Radon that the property is in an area where between 3-5% of properties may be affected by elevated level of Radon gas. Our valuation assumes that the development will be constructed in order to take account of this factor. Invasive Species: We have assumed that there is no Japanese Knotweed or any other invasive species on the site occupied by the property. High-Voltage Electrical Supply Apparatus: Where there is high-voltage electrical supply equipment close to the property, there is the risk of public perception that may affect marketability. We have assumed that the presence of high voltage electricity apparatus in the proximity of the property will not impact on the valuation. Car Park adjacent to The Agora Shopping Centre, Wolverton Page 10 of 14

11 METHODOLOGY OF VALUATION In determining the Market Value of the subject land we have undertaken a residual appraisal of the proposed development to arrive at a residual land value of the combined Agora and car park site. We have then apportioned the residual land value between the two areas. In carrying out our residual appraisal we have adopted the following assumptions: Gross Development Value Residential Units: We have adopted a rate of 250 per sq ft of gross internal area for the private flats based upon the following comparable evidence: i. 287 Stratford Road, Wolverton: A modern purpose built 2 bedroom flat of 71 sq m (764 sq ft) in area sold in March 2016 for 186,000 equating to 243 per sq ft. ii. 6 Wodell Drive, Wolverton: A modern purpose built 2 bedroom flat extending to 69 sq m (743 sq ft) in area sold in February 2016 for 178,000 equating to 240 per sq ft of gross internal area. iii. 12 Eastmoor Drive, Wolverton Mill: A modern purpose built 2 bedroom flat of 61 sq m (657 sq ft) in area sold in February 2016 for 168,500 equating to 257 per sq ft. iv. 56 McCorquodale Road, Wolverton: A modern purpose built 2 bedroom flat of 70 sq m (753 sq ft) in area sold in February 2016 for 175,000 equating to 232 per sq ft. v. 45 Trevithick Court, Wolverton: A modern purpose built 2 bedroom flat of 65 sq m (700 sq ft) in area sold in December 2015 for 210,500 equating to 301 per sq ft. None of the above properties are new build and we would expect new build properties to achieve in excessive of these figures. We have however adopted a value of 250 per sq ft for this exercise to reflect the location of the development. In respect of the shared ownership accommodation we have allowed for 80% of the Market Value and in respect of the affordable rent we have allowed for 66% of the Market Value. Commercial Units: We have applied a Market Rent of 15 per sq ft to the larger commercial retail units with a rent of per sq ft to the small units. We have based our assessment of Market Rent on the following comparable evidence: i. Asda, Newport Road, New Bradwell: A new standalone store of 15,084 sq ft has been let with effect from June 2016 at a rent of 301,680 per annum equating to 20 per sq ft overall. ii. Oakgrove Village, Milton Keynes: A single storey retail unit of 15,042 sq ft has been let with effect from April 2016 at a rent of 35,000 per annum with six month rent free period. After taking into account the rent free period the rent devalues to per sq ft. Car Park adjacent to The Agora Shopping Centre, Wolverton Page 11 of 14

12 iii. Barnsdale Drive, Westcroft District Centre, Milton Keynes: A unit of 1,444 sq ft has been let on a 10 year lease at a rising rent basis averaging 23,750 per annum. The average rent equates to per sq ft. iv. Unit 5 Barnsdale Drive, Westcroft District Centre, Milton Keynes: A unit of 1,453 sq ft has been let on a 15 year lease at a rising rent basis equating to an average of 28,800 per annum equating to per sq ft. Recognising that Wolverton is a less desirable area for retail accommodation we consider that the rental values that we have applied are realistic. In considering the appropriate investment yield to apply to the valuation of the commercial element of the scheme we have considered the following comparable evidence: i. 38 High Street, Hemel Hempstead: A small freehold retail unit of 840 sq ft in area producing an annual income of 10,000 per annum sold in May 2016 for 127,500 representing a net initial yield of 7.7%. ii. 83 High Street, Banbury: A freehold building on four floors with retail accommodation on the ground floor and upper floor ancillary accommodation let on a 10 year lease from 2012 at a rent of 32,000 per annum sold in March 2016 for 485,000 representing a net initial yield of 6.31%. iii Midland Road, Bedford: A double fronted retail unit with ancillary upper parts totalling 5,480 sq ft in area and let on a 10 year lease from 2010 at a rent of 70,000 per annum was sold in March 2016 for 1,000,000 representing a net initial yield of 6.62%. iv Queensway, Bletchley: A ground floor retail unit with first floor ancillary accommodation totalling 2,942 sq ft and let on a 10 year lease from 2014 at a rent of 30,000 per annum sold in February 2016 for 410,000 equating to a net initial yield of 6.98%. Recognising that the subject property is likely to attract tenants of a somewhat weaker covenant strength we have applied a yield of 7.5% to our valuation. Construction Costs: We have taken our construction costs from the latest edition of the BCIS Quarterly Review of Building Prices. We have allowed a figure of 115 per sq ft in respect of the residential elements of the development and 100 per sq ft in respect of the retail elements which will be constructed to shell and core. In addition, we have allowed for the costs of the construction of Radcliffe Street and the substation in line with those put forward by the Developer. We have also allowed for a development contingency of 2.5% of construction costs. i. Professional Fees: The allowances for professional fees are as set out on the attached appraisal summary which we consider to be in line with industry norms. Car Park adjacent to The Agora Shopping Centre, Wolverton Page 12 of 14

13 ii. Funding Charges: We have allowed for funding charges at the rate of 6%. iii. Developer s Profit: We have allowed for a developer s profit of 15% of Gross Development Value which we consider to be the level that developers should be seeking for a scheme with this level of risk attached to it. VALUATION COMMENTARY We have considered the developer s own appraisal based on the proposed purchase price for the Agora building of 2.15 million. Whilst this produces a profit of 11.5% of gross development costs, this appears to be on the basis of the developer s anticipated construction costs being lower than those we have used in our own appraisal, which were based on both the BCIS figures and discussions with our in-house quantity surveyor. The developer s appraisal does not make any allowance for the acquisition costs of the Council s land. Applying the purchase price of 2.15 million to our own appraisal results in a profit level of million, equating to 8.43% of Gross Development Value. We consider that this is unacceptable and, in our opinion, the scheme is unviable and undeliverable at the proposed purchase price of 2.15 million for the Agora building. A copy of this appraisal is attached at Appendix 3. Our own residual appraisal, using the assumptions outlined above, and specifically a profit level of 15% of Gross Development Value produces a residual site value for the entire site (both the Agora and Council s land) of 900,000. A copy of this appraisal is attached at Appendix 4. We consider that the value of the Council s land should be a proportion of the residual site value. The Council s land represents approximately 50% of the total site area and the whole of the Council s land is needed for the development to proceed. Accordingly, we consider that the Council should be entitled to 50% of the residual site value. On the basis of our appraisal the value of the Council s land is 450,000, but this figure assumes that the developer will pay a similar sum for the Agora building, which is clearly not the case. Car Park adjacent to The Agora Shopping Centre, Wolverton Page 13 of 14

14 The developer has offered either: i. 1 plus 75% of any profit in excess of 15% and less than 18%, and 60% of any profits in excess of 18%; or ii. 100,000. On the basis of our appraisals we do not consider that either basis of offer represents best consideration for the purposes of S123 of the Local Government Act Yours faithfully P J Wilson FRICS RICS Registered Valuer For and on behalf of Kirkby Diamond peter.wilson@kirkbydiamond.co.uk DDI N Andrews MRICS RICS Registered Valuer For and on behalf of Kirkby Diamond nathan.andrews@kirkbydiamond.co.uk DDI Car Park adjacent to The Agora Shopping Centre, Wolverton Page 14 of 14

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16 From: Palmieri, Ed Sent: 15 August :21 To: Peter Wilson Subject: Agora shopping centre car park - valuation Attachments: Circular General consent LGA 1972.pdf; Agora - Viability pdf; Annex 1 Agora Wolverton HOT docx; Agora_Site_- _MKC_land_edged_Red_Private_edged_in_Blue.pdf; Commission Communication on State aid elements in sales of land...doc Good morning Peter Thank you for your quote. I am pleased to confirm your instructions to value the Council Car Park at the Agora Shopping centre, Wolverton as shown edged red on the attached plan, on the following basis; The Council require an open market RICS Red Book valuation to establish the value of the Council s Car Park and to satisfy the requirements of both the General Consent and the EC Communication on State Aid elements in sales of land and buildings etc. (copies attached). It is anticipated that this will necessitate the carrying out of two valuations, one for the purposes of section 123 Local Government Act 1972 on the basis set out in the technical appendix to the General Consent (for S123) and the other for the purposes of State Aid, on the basis set out in Part II, 2 of the EC Communication. The valuations should also provide commentary on the 2 offers the Council has received from Brickhill Estates (MK) Ltd to purchase the Car Park which are as follows: First offer - see Heads of Terms attached dated , to purchase the Car Park for 1 plus a share of profit overage from the development of the Car Park and Shopping Centre (see also attached Brickhill development appraisal dated ) in accordance with planning consent ref 15/00913/FUL Second offer - 100,000 one off payment. I note the timescale for you to issue the valuation is 2 3 weeks. Many thanks. Regards Ed Ed Palmieri Head of Property (Interim) T: +44 (0) E: ed.palmieri@milton-keynes.gov.uk Milton Keynes Council l Resources l Property and Estates l Saxon Court l 502 Avebury Boulevard l Milton Keynes l MK9 3HS

17 From: Peter Wilson Sent: 03 August :20 To: Palmieri, Ed Subject: RE: Agora shopping centre car park - valuation Dear Ed, I refer to your and our earlier telephones conversation regarding the above matter and thank you for asking us to quote for a valuation of the above property. Our fee for this valuation would be vat. Whilst we would endeavour to respond within 2 weeks we may have to allow 3 weeks to complete the exercise. I should mention that one of our agents in our Luton office is currently acting for James Pargeter in connection with a 60,000 sq ft design and build scheme in Leighton Buzzard. Regards Peter Wilson FRICS RICS Registered Valuer DDI T M E. peter.wilson@kirkbydiamond.co.uk 15 Shenley Pavilions, Shenley Wood, Milton Keynes, MK5 6LB Chartered Surveyors and Property Consultants The information contained in this message or any of its attachments may be privileged and confidential and is intended exclusively for the addressee. The views expressed may not be official policy but the personal views of the originator. If you are not the addressee, any disclosure, reproduction, distribution, dissemination or use of this communication is not authorised. If you have received this message in error, please advise the sender by using the reply facility in your software. All messages received by Kirkby & Diamond are monitored for viruses, high risk file extensions and inappropriate content. As a result users should be aware that mail may be accessed. Please consider the environment before printing this . Thank you. From: Palmieri, Ed [mailto:ed.palmieri@milton-keynes.gov.uk] Sent: 03 August :37

18 To: Peter Wilson Subject: Agora shopping centre car park - valuation Good morning Peter As discussed here is a link to the planning permission (15/00913/FUL) on the shopping centre which includes the Council car park, for which the valuation is needed. A schedule of accommodation is also attached for the proposed development and an aerial plan of the car park edged red and the shopping centre edged blue. Look forward to receiving your fee quote and timescale for the valuation. Regards Ed Ed Palmieri Head of Property (Interim) T: +44 (0) E: ed.palmieri@milton-keynes.gov.uk Milton Keynes Council l Resources l Property and Estates l Saxon Court l 502 Avebury Boulevard l Milton Keynes l MK9 3HS Visit the Milton Keynes Council web site at Please consider the environment and don't print this unless you really need to **** This and any attachments hereto are strictly confidential and intended solely for the addressee. It may contain information which is privileged. If you are not the intended addressee, you must not disclose, forward, copy or take any action in reliance of this or attachments. If you have received this in error, please delete it and notify us as soon as possible. The anti-virus software used by Milton Keynes Council is updated regularly in an effort to minimise the possibility of viruses infecting our systems. However, you should be aware that there is no absolute guarantee that any files attached to this are virus free.**** Visit the Milton Keynes Council web site at Please consider the environment and don't print this unless you really need to **** This and any attachments hereto are strictly confidential and intended solely for the addressee. It may contain information which is privileged. If you are not the intended addressee,

19 you must not disclose, forward, copy or take any action in reliance of this or attachments. If you have received this in error, please delete it and notify us as soon as possible. The anti-virus software used by Milton Keynes Council is updated regularly in an effort to minimise the possibility of viruses infecting our systems. However, you should be aware that there is no absolute guarantee that any files attached to this are virus free.****

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