Steven Tolson - Investment Inputs: Citizens, Developers and the State
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Steven Tolson - Investment Inputs: Citizens, Developers and the State



A presentation given by Steven Tolson at the 2011 Design Skills Symposium which was held in Stirling and hosted by Architecture + Design Scotland and Historic Scotland.

A presentation given by Steven Tolson at the 2011 Design Skills Symposium which was held in Stirling and hosted by Architecture + Design Scotland and Historic Scotland.



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Steven Tolson - Investment Inputs: Citizens, Developers and the State Steven Tolson - Investment Inputs: Citizens, Developers and the State Presentation Transcript

  • Steven TolsonDirector Ogilvie Group, RICSDesign Skills Symposium 2011, Tollbooth, Stirling “Delivering Better Places”
  • Delivering Better Places Investment InputsCitizens, Developers and the State Steven Tolson
  • 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
  • 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 LeadershipA 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 Delivery Joined up working with NO SILOSAn 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 provisionLong 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 entityA multi developer approach speeds delivery, spreadsrisk, creates a competitive environment and producesvariety that helps form a socially balanced community
  • Investment & Stewardship over time • Asset Management not Development • Cultivate place to gain positive reputation • Good stewardship helps enhance valueMains Estate, Milngavie
  • Pride in Place, Mains Estate, MilngavieDeveloped by Lovell in 1990. Need sufficient funds to ensure good maintenance but good landscape should achieve good value.
  • VaubanA 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 VaubanIn Freiburg 24% walk 28% bike, 20% drive and 18% by bus or tram
  • Individual Houses in VaubanVariety of shapes and sizes. Not outstanding architecture but it doesn’t matter
  • Vauban Resident’s Car ParkingNo 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 byVauban Forum Communitywith Freiburg Municipality. A Mixed Use Place withHousing, Education, Retail, & Offices.
  • Consumer, Developer and the State Plot Purchase Developer / Tax State Place InfrastructurePropertyPurchase Citizen / Customer Tax
  • The Place Network Priorities, Risk and ValueThe Key Players• Citizen / Consumer – Long Term Investor• Developer & Funders – Short Term Investor• State – Long Term Investor
  • 3 Key Values of the Citizen / ConsumerDominant GroupComfort, Convenience and FamiliaritySubordinate GroupOpposite values to Dominant Group
  • House Builder’s MotivationsTried and tested product that:1. Is familiar and known to sell2. Is built with relative ease3. Gets quick statutory consents4. 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] DeveloperBespoke product that is:1. Different (less familiar) and value less obvious2. More complex to design and build3. More difficult to get statutory consents4. 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 CompanyEdinburgh Projects that fit the Place
  • Valuation and Funding• Mortgage for purchase of completed dwelling• Development Project FundingLevel 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 modernapplication of a recognised housing form.
  • 32no Town Houses 12no Detached Houses Block 102m x 92m 48 dwellings per hectareUrban Housing Block of Town Houses and DetachedBased on Ijburg Typology
  • Hypothetical Development Appraisal for Infrastructure and Housing DevelopmentHousing Development Serviced Land Valuation32no Town Houses @ £200,000 (Parc URC @ £180k) £6,400,00012no Detached Houses @ £256,000 £3,072,000Gross Development Value £9,472,000Development Costs £7,232,406Site Value after fees & finance £1,962,255 (£44,597 per plot)Infrastructure Development Valuation (non serviced land)Gross Development Value £1,962,255Infrastructure Costs £883,048Site 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.
  • Agreements Private Sector Public Sector Shareholders Asset Management Partner Partner Development Management Loan Developer Construction JV Place Equity Cash Match Land Asset for Assets Developer External Private Debt Funders Multi Developer Delivery Approach Public Loans Development Agreements PWLB Jessica TIFS etcDeveloper Developer Developer Developer “A” “B” “C” “D”
  • 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
  • FURTHERREADING PLACE MAKINGDELIVERYUrban Design inthe Real Estate Development ProcessSteve Tiesdell& David Adams Wiley – Blackwell
  • September 2011