“Delivering Better Places”
Design Skills Symposium 2011, Tollbooth, Stirling
Steven TolsonDirector Ogilvie Group, RICS
Investment Inputs Citizens, Developers and the State
Steven Tolson
Delivering Better Places
Delivering Better Places in Scotland
• Delivering Better Places Summary• The Place Promoter (Vauban Case Study)• Consumer / Citizen Demand, Value,
Development Viability and Investment • A Delivery Model through Multi Developer
Participation
http://www.scotland.gov.uk/Resource/Doc/336587/0110158.pdf
Place Quality is Important
“Too much development in Scotland is a missed opportunity and of mediocre or indifferent quality. “
Scottish Government’s Council of Economic Advisers, First Annual Report, 2008
Good Leadership A Champion who Promotes and stays with the Project
• A leader drives the project, breeds confidence, reduces risk & widens participation
• A Place needs a passionate promoter
• The Leader must galvanise support and delivery
• The Leader must foster a place making culture
• A Leader can not be a shrinking violet
Co-ordinated DeliveryJoined up working with NO SILOS
An orchestrated approach where interests are stitched together
Control the spatial development framework
A Master Plan is not just a drawing with aspirational statements.
A Master Plan should be a proposition that:
• market tests• understands infrastructure
requirements • development appraisals testing
viability (business case)• delivery methodology.
Exercise ownership powerParticipation rather than offloading due to fear of risk
Attract funding for advance infrastructure provision
Long Term Investment through 30 + year loans
Secure design quality through procurement strategies
• The State should lead and participate as well as promote.
• Making a Place is an Investment (create & manage asset)
• Delivery through multi developer participation not single entity
A multi developer approach speeds delivery, spreads
risk, creates a competitive environment and produces
variety that helps form a socially balanced community
IJBURG
Investment & Stewardship over time
• Asset Management not Development
• Cultivate place to gain positive reputation
• Good stewardship helps enhance value
Mains Estate, Milngavie
Pride in Place, Mains Estate, Milngavie Developed by Lovell in 1990. Need sufficient funds to ensure good
maintenance but good landscape should achieve good value.
Vauban
A New “Green” Community for Freiburg
Vauban - A new place in an Intelligent City helped by a Place Promoter
• Chief Planner, Professor Wulf Daseking a person with leadership qualities and vitality bringing influence in Freiburg.
• Daseking and team not only plan they deliver.
• Also strong political leadership allows focus on long term investment commitment
Leaders are prepared to take RISKS
Simple Proposition for Freiburg
• Freiburg seeks to keep its people in its City.• Freiburg leaks young people out of the City in search
of affordable accommodation. • Young people commute many kilometres between
home and work. Bad for the city (congestion), bad for the planet (emissions), bad for social cohesion and bad for city prosperity.
Can we do the same in Scotland?
Going home for Lunch in Vauban In Freiburg 24% walk 28% bike, 20% drive and 18% by bus or tram
Individual Houses in Vauban Variety of shapes and sizes. Not outstanding architecture but it doesn’t matter
Vauban Resident’s Car Parking
No parking by house with resident Car Parking on the edge of Vauban – Allowed 20 mins to unload by front door
Sustainable Housing producing more energy than used
Market in the Square Vauban
Place managed by
Vauban Forum Community with Freiburg Municipality.
A Mixed Use Place with Housing, Education, Retail,
& Offices.
Consumer, Developer and the State
Plot Purchase / Tax State
PlaceInfrastructure
TaxCitizen /
Customer
Property Purchas
e
Developer
The Place Network Priorities, Risk and Value
The Key Players
• Citizen / Consumer – Long Term Investor• Developer & Funders – Short Term Investor• State – Long Term Investor
3 Key Values of the Citizen / Consumer
Dominant GroupComfort, Convenience and Familiarity
Subordinate Group Opposite values to Dominant Group
House Builder’s Motivations
Tried and tested product that:1. Is familiar and known to sell2. Is built with relative ease3. Gets quick statutory consents 4. Has cost price certainty once above DPC level.5. Is programmed and managed efficiently6. Minimises RISK
House Builders satisfy the Dominant Group’s Values of Comfort, Convenience and Familiarity
Specialist [Creative] Developer
Bespoke product that is:1. Different (less familiar) and value less obvious2. More complex to design and build3. More difficult to get statutory consents 4. Less cost certainty5. More challenging to manage work in progress6. Carries more RISK and UNCERTAINTYA Specialist Developer’s core customers are likely to
be from the Subordinate Group.
Some Issues for Good Quality Urban Development
• Need clients who appreciate good design and are “informed”. It’s not just about the designer.
• Urban site characteristics need a design solution that fits (none standard). Therefore, non volume developer has greater opportunity to be competitive
• However, specialist developer find it more difficult to access funds so development scale limited to equity input
• Public project procurement barriers due to process and evaluation favours financial strength of corporate entity (risk aversion).
The Burrell Company Edinburgh Projects that
fit the Place
Valuation and Funding
• Mortgage for purchase of completed dwelling• Development Project Funding
Level of Funding based on Loan to Value (LTV) Mortgage 70%-90% (if you are lucky)Development Funding 60%-70%
Loan on value not on price. Therefore the Valuer has an important role to play
Valuation Approach• Two valuation elements
- Occupier Functionality- Investment Value
• Value of Good Design- “Few people treat housing as a work of art” It is a
luxury that most can’t afford”.- Premium for Design is possible but only if purchaser
is convinced they will get their money back- Premiums more likely where there is “intelligent”
design such as green sustainable housing where there are energy savings benefits
Valuers don’t value it if the People don’t value it!
The Valuation of a Place• What is the ownership interest(s)?• Single interests – shopping mall etc. Value
based on an investment method – capitalisation of a net rental income.
• Multi interests –Value based on summation of investments (landlord and tenant) and owner occupation value.
• Values of individual assets strongly influenced by Place reputation
Better Places in Multi Ownership?
• Single Ownership with good estate management practices – London estates
• Long term Places in Multi Ownership. Quality depends on multi owners coming together to establish and care for the Place. But State has reduced its role and self help approach is variable. (note self help is not “convenient”).
• Possible collective benefit from Place Leasehold arrangement
Good Reputation = Good Value• Good Places are not about style but substance• Good Places take 20+ years to be recognised.
Requires a combination of good physical design, people’s activity and interaction and collective caring for the Place.
• Valuers don’t think that good architecture represents higher values but they do recognise that a place’s reputation will be reflected in market demand and value.
Place making design does have long term value
Lessons from Continental Europe
• More sociability with less concern over privacy. • Continentals love their cars but also use public transport.• State is active in making places, adopts a long term
investment approach and takes risks.• Planners have greater respect and are at the top table• State limits the scale of developers participation. There
is wider participation from individuals and small companies.
• Greater variety achieved giving consumer choice.
Familiarity
A modern application of a
recognised housing form.
Urban Housing Block of Town Houses and Detached Based on Ijburg Typology
32no Town Houses
12no Detached Houses
Block 102m x 92m
48 dwellings per hectare
Hypothetical Development Appraisal for Infrastructure and Housing Development
Housing Development Serviced Land Valuation
32no Town Houses @ £200,000 (Parc URC @ £180k) £6,400,000
12no Detached Houses @ £256,000 £3,072,000
Gross Development Value £9,472,000
Development Costs £7,232,406
Site Value after fees & finance £1,962,255
(£44,597 per plot)
Infrastructure Development Valuation (non serviced land)
Gross Development Value £1,962,255
Infrastructure Costs £883,048
Site Value after fees & finance £999,671
(£22,720 per plot)
Cost of Quality
• Evidence from Exemplars suggest design quality cost around 20% more than conventional development costs.
• There is no evidence that developers can recover this additional cost therefore the impact is on land value.
• The perimeter block value based on 20% design cost premium reduces the land value from £1,962,000 to £21,000. (NIL VALUE)
Delivery through a Multi Developer Approach• Europe - State is the Place Developer• Scotland - public sector has assets but is risk averse • Serviced sites sold to multi developers (volume, small
builders, housing co-ops, associations and individuals for serviced plots)
• Greater range of dwellings creates healthy competition, quick delivery and a balanced community.
• Public sector has access to relatively long term finance whereas private sector has little equity and debt is difficult.
• Public sector needs to use its covenant strength and think about guarantees. Public sector needs to take more risks.
Public Sector Partner
JV PlaceDeveloper
Private Sector
PartnerDeveloper
Equity Cash Match for Assets
AgreementsShareholders
Asset ManagementDevelopment Management
LoanConstruction
ExternalPrivate Debt
Funders
Public LoansPWLB Jessica TIFS etc
Developer “A”
Developer “B”
Developer “C”
Developer “D”
Multi Developer Delivery Approach
Development Agreements
Land Asset
Summary• We need creative informed Leaders who can inspire a
change of culture. These leaders should be at the Top Table of Decision Making
• Get clear and consistent joined up design policies. • We need a switch to long term investment having faith
that good place making will bring value in the end. • Place makers need to have skills in economics and
delivery• We should refrain from talking about style and
concentrate on the real ingredients of place; PEOPLE! • We should not be frightened to take a risk
Urban Design in the Real Estate Development
Process
Steve Tiesdell & David Adams
Wiley – Blackwell
FURTHERREADING
PLACE MAKING
DELIVERY
September 2011