Ed Fowkes and Gavin Barry are developing a 7-story, 350-room student accommodation building in Derby that is scheduled for completion by summer 2016. They secured the previously vacant site that had been used for car parking and discovered potential for student housing. With support from the local council and university, they obtained planning approval. The development has faced challenges including negotiating Section 106 costs and tight timelines to complete construction for the 2016 student intake. Lessons learned include persevering in negotiations, allowing extra time for legal agreements, and building a strong project team.

1. www.property-investor-news.com20 << PROPERTY INVESTOR NEWS
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T
his month's investor interview
focuses on another trio of
experienced property investors who
have recently moved on to doing larger
property development projects after many
years of learning the lessons, primarily with
smaller residential projects.
I met up with Ed Fowkes and Gavin Barry
at their latest project in Derby to learn more
abouthowthey,andthethirdmemberof their
team Fraser McDonald, are developing a
student accommodation site, now scheduled
forcompletioninjustoverninemonths'time.
Gavin told me how they first came across
the site. "The site was discovered through
one of our partner's land agents. It was a
cleared site, which had previously been used
as a petrol station and car hire company
while the vendor, also a developer, had a
consented scheme on which planning
approval had expired. This however was for
an office development, and due to the
financial crisis in 2008 the site had lay idle for
a number of years due to the lack of demand
for that type of accommodation in the city.
"Understandably no one really had the
appetite to develop a large block of office
accommodationparticularlyspeculatively,in
the past few years. When we discovered the
site it was being used as a car park. The site
was 'off market' so it was advantageous to be
able to make all our enquiries and prepare an
application for planning without any time
pressure or competition. This is something
we would prefer to do on all our deals - to be
in control of the acquisition process rather
than being told what to do and when you
have to do it by. If you're in control of the
process it puts you in a stronger position."
So what's being built and when did you
get the planning approval?
Gavin continued: "We are building a 7-
storeyblockhereinthecentreof Derbywhich
will host 350 student rooms with completion
by next summer, ready for the autumn 2016
universityintake.Wegotplanningapprovalin
February and commenced the construction
process in March. The rooms will be en-suite,
built in clusters of between 5 to 10 units and
this will be only the second purpose-built
accommodation block in Derby. We have
forwardfundedtheprojectandarrangedfora
30-yearleasewiththeuniversityitself whowill
also take over the management of the site
oncecompleted."
Ed Fowkes explained that the
development has to be all completed by
mid-August 2016 and that this creates an
urgency to ensure that there are no hold-ups.
"We are looking to have one room ready
to view on-site by December so that the
pension fund Aviva, who we have already
contracted for the project funding, can view
it whilst prospective students will also be
able to check out the accommodation
standards at the university's Open Days."
As already stated the site had been used
for car parking so I asked Ed Fowkes
whether the previous use had affected their
planning application?
"The earliest known land use for the site
was residential properties and parts of the
grounds of a school and a chapel in 1883,"
Ed replied. "The site was redeveloped to
form part of a coach building between 1914
and 1950. From the mid-1960s the land was
used as a garage/fuel station up until 1999
when it was operated as a car hire company.
The site became unoccupied in 2006
when the application was submitted for an
office development. So between the
coachworks, the garage and fuel station
and the car hire company there were both
above ground and below ground diesel and
petrol storage tanks up until 2006 when
they were decommissioned."
Given its previous use I asked what
I N V E S T O R I N T E R V I E W
P R O J E C T A N A LY S I S
Planning & Development:
Student Accommodation
in Derby
EdFowkesandGavinBarryofProsperityCapitalPartnerstalkwitheditorRichardBowser
This article has been reproduced from the October 2015 issue of Property Investor NewsTM
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clearance work was required to prepare the
site for the intended use and had there been
any problems with the 'clean up'.
Ed continued: "Demolition of the above
ground features and excavation of the
underground storage tanks were conducted
at the site back in 2010. Three
decommissioned tanks, along with several
large concrete stanchions were excavated
and backfilled with clean materials. This was
obviously important to demonstrate to the
council that the site had been satisfactorily
cleaned up ahead of any development let
alone one for student accommodation.
Although all the decommissioning work had
been undertaken by the previous vendors,
we still needed to show the council that the
land was still clean and fit for student
accommodation purposes."
Property developers' schemes are not
alwayswelcomedbylocalcouncilssoIasked
Gavin how helpful were Derby city council in
respect of their proposed use for site?
"Collectively we have done lots of
developments within different councils
throughout the country" he replied. "Derby
city council is definitely up there as one of
the most proactive and business friendly
councils to work with. In addition,
Marketing Derby, which is a public/private
partnership that has been created to
promote the city and attract inward
investment, was very helpful and supported
our application right from the outset.
"I think as the site was lying idle, albeit
being used as a car park, the council were
keen to see it developed. It's a big site in a
key location within the city centre and
nobody wanted to see it remain
undeveloped so the council were very
supportive - across the council from the
Chief Executive to the Head of Planning
they all wanted to see this site developed.
"When we managed to agree a deal with
the University of Derby and we signed our
Heads of Terms we were able to add that
weighttotheapplication.OncetheUniversity
wereworkingwithusweknewtherewasvery
little chance of the scheme being rejected.
The University is a very important working
partner of the council so it would have been
bizarre had the council rejected a scheme
fullysupportedbytheUniversitywhichitwas
benefiting from. At the planning committee
meeting the vote was 9-1 in our favour which
wasn'tahugesurprise."
Gavin went on to describe the planning
process that they went through to achieve
approval for their development.
"Ahead of submitting the application we
had a number of discussions and pre-
application meetings with the council. It was
very evident from day one that the council
were very positive towards this development
and couldn't do enough for us to get the
application submitted. There was one slight
delay in the application process which was
thearchaeologyinvestigationworksrequired
as part of the planning permission, which
were much more extensive than originally
envisaged. Along with our positive dialogue
with the council and the support of
Marketing Derby, and then the University of
Derby being involved, it was a very straight
forward application. Our design and massing
was very similar to the previous consented
scheme for the office development, so we
were not expecting any objections on that
issue. So all in all, this led to a reasonably
trouble free application process."
Even the smallest property development
project will encounter challenges and
unexpected setbacks so Ed Fowkes explains
some of the issues which to-date they have
had to deal with as the developer.
"There were a number of hurdles
throughoutthisdevelopmentfromthefunding
totheplanning.Aswehadagreedasubjectto
planningdealwiththevendortherewasquite
a lot of design work to be done ahead of a
planningdecisionif weweretostartonsiteas
soon as possible post the planning decision.
Thatalsomeantlotsof costincurred.Wehad
exchanged on the site with the vendor in
October 2014 and were expecting a decision
inFebruary/March2015.
"When we agreed the deal with the
University,inJanuary,todelivertheroomsfor
August 2016 it then became a very tight
schedule-andthiswasbeforewehadactually
received planning permission. So we had no
timetowastewhatsoeverandactuallyhadto
commence construction on site while we
werestillnegotiatingthefundingpackageand
thepre-letwiththeUniversity.
"So we were funding the site in the faith
the council would give is the decision we
needed. I wouldn't recommend this usually
but I suppose it shows how confident we
were in the council and how keen they were
for the scheme to be approved and built.
"There was an issue with the Section 106
contribution as this was originally set out as
a sum appropriate for 350 apartments
rather than 350 bedrooms. The residents,
being students, have many facilities also
provided by the University rather than the
Local Authority per se, so this took a lot of
negotiation but we managed to finally
convince the council's surveyor to see our
point of view. Had we not managed to agree
on this particular issue it would have killed
the viability of the deal but we eventually
managed to agree on a payment, which was
close to 10% of the original amount. There
was also a right to light issue with a
neighbouring hotel which required some
negotiation until agreed and paid."
I then asked Gavin what were the key
lessonsthattheylearntbytakingonthislarge
project. "In terms of the deal we did with the
University when we first approached them
about a potential deal, it seemed like it wasn't
going to happen as the terms of the deal
were unattractive to what we were expecting
so we left it - it wasn't a negotiation tactic we
just left it and walked away.
"However for many months after we were
convinced there was a deal to be done and
decided to approach the University again. It
made perfect sense for us to work together
in some capacity in that they wanted new
accommodation for their students and we
were building a similar amount to what they
required. We had an excellent site location
and once complete we were not too
interested in retaining or managing the
asset so eventually we were able to agree a
deal. So, if unsuccessful on your first
attempt, then try, try again.
"Once we had agreed the deal (Heads of
Terms) with the University we had a very
short period of time to get the solicitors to
agree the paperwork which was not
unsubstantial. What everyone thought
would take 6-8 weeks to get ready to sign,
actually took five months which could have
jeopardised the funding for the deal.
"Havinggreatsolicitorsissoimportantand
can either be the making or breaking of a
deal. We constantly came up against
challenges with this deal and our solicitors
were fantastic finding solutions every time.
Lastly, I would say surrounding yourself with
theverybestteamyoucangetissoimportant
to a successful development and I'm glad to
say that we have that team in place. The site
has a gross development value of £20m with
costs expected at £16m and with a gross
profit of £4m, provided we complete
constructiontotheagreedschedule."
I N V E S T O R I N T E R V I E W
P R O J E C T A N A LY S I S
PIN
Editor's note: The 30 minute on-site video
interview with Ed and Gavin will shortly be
available for PIN magazine subscribers to learn
more about the complexities of the planning and
initial development process at this Derby site. Go
to: www.property-investor-news.com and log in
using your unique subscriber password.