The Perils of Property Development

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Brian Gowthorpe BA FRICS (retired) : Chairman of the Civic Society Planning & Development Committee

We were pleased to have Brian Gowthorpe give a fascinating insight into the Perils of Property Development. Perhaps his opening image of Bruegel’s Tower of Babel should have given us a clue about the difficulties of negotiating ways through the labyrinth of factors and issues that we would be hearing about and, most significantly, the importance of good communication skills needed to do this.

Brian reminded us that despite people’s concerns about living in a crowded land, Kevin Cahill has estimated that UK and Ireland are 70% agricultural land and another 20% is moor, bog or mountains; only perhaps 10% of the land is built on and of that only 5% as housing. Green belt restrictions have an impact on this land too. Many non-residential buildings have a natural life cycle after which they are often demolished and the land recycled for new buildings. An example of downtown Boston Massachusetts illustrated this point showing how the city’s buildings had been redeveloped over 120 years, many as skyscrapers but still on the same plots clustered in the central business district..

This led to Brian explaining the ‘economic cycle’ that can be applied particularly to many commercial properties. He described this as upwards of 50 years between when the building is new, in top condition and fully occupied earning maximum income, to when it depreciates in stages to the point where it is no longer viable to refurbish. The needs of tenants and the locality have changed so demolition and redevelopment make sense. The housing market tends not to follow the same pattern because of the value tied up in multiple private ownerships.

Brian gave a list of the innumerable legal documents that must be entered into before initiating a new scheme, from local authority rules and regulations to implications relating to heritage and archaeology.
‘Prediction is very difficult especially about the future!’ is a quote from Nils Bohr which we will all remember.

Reducing risks to maximise the chance of a successful outcome – a safe commercially successful building without unnecessary financial outlay in advance – is of prime importance. Using a spreadsheet of a financial appraisal, Brian demonstrated how an apparently ‘good’ return can in reality plummet over the life of the scheme as a result of the many problems and issues that arise, turning from a predicted healthy profit to a disatrous loss..

All these facts and figures were brought to life when Brian presented us with five fascinating case studies of infamous developers or developments. We heard about ruthless Crassus, a Roman who was always on the lookout for a deal and became the richest man in Rome.

We could all recognise the characteristics of Donald Trump, well known as a brilliant self-publicist but not a successful businessman. Trump Tower made a loss and ended up in the hands of the banks who had financed the project. It was his father who was a ruthlessly successful property developer and who gave his son his opportunities in the business world.

Harry Hyams of Centrepoint fame was of particular interest to those of us who had wondered why such a large building should have remained empty for so long. Brian explained the story of how it eventually became a site for an exceptionally tall office building.. However, when it was completed in 1966 Hyams rightly predicted a boom in the office market. He decided to keep the building vacant whilst rents rose and he could let all the offices to a single tenant.

The study of Brockhall Hospital in Lancashire was an example of how social policies affected the life and success of a building. Originally built 1904 as The Lancashire Inebriates Reformatory, it changed its name several times party as a result of growth in political awareness, eventually becoming a hospital for people with learning disabilities. The ‘Care in the Community Act 1990’ led to its closure in 1992. The closure contravened a key term of the original 999-year lease and by default, the land returned to property tycoon Gerald Hitman who had bought the freehold for £750 in 1982 when it was generally considered worthless. After some renegotiations, he reached agreement with the NHS and built the 400
home Brockhall village development, a training ground for Blackburn Rovers and a mansion for himself, reflecting his huge financial success as a property developer.

Finally, Brian told us of a development with which he had project managed. ‘No 1 Marsden Street’ was an example of replacing a dated 1960s office building. He described the difficulties in managing a development on a tight city centre site when erecting a larger, much taller building with far more stringent fire safety regulations. Several significant problems arose but were resolved along the way by
careful negotiation with the contractor and the design team.

This stimulating talk raised strong opinions leading to much discussion and questions which proved Brian’s point – Property is not just about Buildings – but People!

Sandra Gann