Appendices
Appendix A – Development Manager Appraisal
Appendix B – BNP Office Market Update
Appendix C – GAP Stage 4a Presentation
Appendix D – Strategic Programme
Appendix E – Outline Specification
Appendix F – Hoare Lea Sustainability Summary and M&G Sustainability Framework Review
Appendix G – Stage 3 Cost Plan
Appendix H – Planning Condition Tracker
Appendix I – DP9 Planning Implementation Report
Appendix J – FHPM Demolition and Implementation Report
Appendix K – Point 2 Right to Light Report and Cutback Reports
Appendix L – Cost Schedule
Appendix M – Project Directory
Appendix N – Appointment Tracker
Appendix O – Stage 3 Design Reports
Appendix P – Risk Register
Appendix Q – S278 Plan
Appendix R– CIL Liability Notice
Appendix S – S106 Agreement
Appendix T– Design Responsibility Matrix
Detailed planning consent has been granted and RIBA Stage 3 design has been completed.
Significant increases in build cost and yield softening has led to viability challenges.
An office pre-let marketing campaign is scheduled to commence Q2 2024.
The client has taken steps to obtain vacant possession of the building by issuing notices to the current tenants.
The current intention is to maintain income from the retail tenants on licences pending redevelopment.
The client is currently considering the possibility of implementing the planning consent through partial or possibly full demolition.
Based on a current Asset Value of £10m, the expected returns for the development are 5.71% IRR (0.21% PoC);
• GDV of completed building will be £195m (against a total spend of £194.5m);
• Securing a pre-let on part or all office space prior to commencement of construction is the principal objective;
• Significant under-supply of prime SW London office space increases the prospects of substantial lettings being secured before PC;
• Retail interest is strong for the three units on Wimbledon Hill Road frontage.
The planning consent was granted on 10.2.23 and the design has been advanced to RIBA Stage 3 which concluded March 2024. The Stage 3 conclusion and consultant reports highlighted the following key issues:
• Currie & Brown Stage 3 cost plan identified a substantial cost increase when compared to the original budget. Current estimate build cost £456 psf GIA.
•. Outward yield movement combined with higher build cost have significantly affected viability.
Next steps include:
• Commence office pre-let marketing campaign
• Place Right of Light insurance and commence negotiations;
• Progress precommencement conditions for discharge in advance of implementation. E.2
Key risks identified:
• Construction cost inflation
• Obtaining VP
• Further outward yield movement
• Discharging planning conditions in advance of implementation
• Satisfactorily implementing planning before consent lapses
•Office market impacting ERV targets and terms.
• Right to Light policy placement and negotiations.
• Demolition contract procurement.
• Main contract procurement
• Constraints and title issues - on going
• Cross Rail 2 - closed currently subject to any new plans
• Network Rail - limited impact
• Second NMA - submitted - possible LPA delay/refusal E.3
E.4 Appendices
1 Project Definition
1.1 Project Definition
1.2 Exit Strategy and Asset Management
1.3 Client & Sector Strategy
2 Product Alignment
Project Execution Plan update
Project Brief
Client exit strategy
Estate Asset Management Plan
Execution of marketing strategy
Marketing and sales plan generated detailing:
– How product will be marketed
– PR and communication
– Space and leasing material
Market research completed
The following key reference documents are attached:
• Development Manager Appraisal
• Agency - BNP office market update
• GAP Stage 4a presentation
• Strategic Programme
• Outline Specification
• Hoare Lea Sustainability Summary
• Stage 3 Cost Plan
• Planning Condition Tracker
• DP9 Planning Implementation report
• FHPM Demolition and Implementation report
• Point2 Right to Light report and Cut Back report
• Cost Schedule
• Project Directory
• Appointment tracker
• Stage 3 Design reports
• Risk Register
• S278 plan and opinion
• CIL Liability Notice
• S106 Agreement
Follo
An updated PEP will be prepared and included as part of the demolition procurement.
The client brief has changed to accommodate office occupancy based upon 1:10 sqm and enhanced sustainability.
Long term hold (Aaron TBC)
Ongoing liaison with CBRE Managing agents. Report at next stage.
Agent advice confirms demand for the retail space is strong for all 3 units. An option agreement is in place with JLP on Unit 1. A pre-let marketing campaign for the office space is to commence Q2 2024.
GCW have been providing retail agency advice but are not officially appointed as leasing agents. BNP have been appointed as leasing agents for the office space.
Blast Design have been instructed to produce the marketing material for the building comprising website, digital brochure, film etc. PR to be coordinated for pre-letting launch.
BNP have advised on the office market.
2.2 Target M&G RE Standards Aligned to Design
2.3
2.1 Market Research and Fit to Market Design Deliverables
3 Financial
Market changes and impacts on development articulated
Design in accordance to the M&G RE sector specific design guidelines
Design review completed
RIBA Stage 3/4 RIBA Plan of Work 2013
Value Engineering Undertaken
3.1 Financial Appraisal Financial appraisal
Office market being monitored closely.
Engagement ongoing with operations team, H&S and sustainability.
Hoare Lea have used in developing the design M&G Real Estate Sustainable Development and Refurbishment Framework document. A review has also been undertaken of the latest M&G Standards (March 2024). A summarised report is appended.
Design review undertaken by agency team. Property management team liaison ongoing.
RIBA 3 completed March 2024. RIBA 4 part completed to pre-tender stage
VE exercises concluded. Further VE to be considered prior to and during tender.
Based on Stage 3 reports:
Total cost: £194.5m (incl. Construction Cost: £135.5m)
GDV: £195m
POC %: 0.21%
IRR: 5.71%
Initial Yield: 6.5%
£70/sqft ERV office
£63/sqft ERV affordable work space on 1st floor
3.2 Cost planning and budgeting
Validated detailed cost estimate
Tracking against financial milestones
Income targets
3.3
Market and Sales Milestone plan in place together with function(s) in place
Currie & Brown Stage 3 cost plan comes to £135.5M (inc. £11.65m inflation ) which is £456psf GIA.
Latest construction budget of £135.5m incl. inflation is based on a Currie & Brown cost report issued based on a scheme of;
GIA 27,580 (sqm)
NIA Office 18,107 (sqm)
NIA Retail 1,599 (sqm)
Key budget risk items: -
• Ground works and demolition
• Façade design (ongoing work to standardise elements and give flexibility in terms of fabrication at procurement stage, reducing risk);
• Latent Defects Insurance premium (tbc).
Office ERVs are based on the advice of BNP.
• 2nd to 10th Floor = £70.00 psf
• 1st Floor = £63.00 psf (Affordable Workspace at 10% discount to OMV)
3.4 Cash Flow Project cash flow and drawdown requirements - updated
3.5 Timeline& Deliverables
• Submit Certificate of Existing Lawful Use Sales & Leasing
If a pre-let is achieved prior to PC then lower rents are likley to be achieved but this will be offset by the void cost savings.
Retail total rent £1,050,000 (£350k x 3 units)
12 months average letting void assumed for office space (but due to a constrained development pipeline, there is a good prospect of a pre-let) and 15 months rent free (assuming average 10-year terms).
12 months letting void and 12 months rent free have been assumed for the retail units.
See cost schedule for total budgets and detailed spend to date.
Approved budgets to end of GAP Stage 4a :
Planning: £2,233,913
Detailed Design: £3,170,000
TOTAL APPROVED BUDGET: £5,403,913
Total spend to date: £4,977,017
Total anticipated spend to end Stage 4: £5,404,559
Based on limited implementation and discharge of pre-start conditions, the following key dates and authority will be required to meet programme objectives:
March - September 2024
• Mobilise team
• Clear commencement conditions
• Certificate of Proposed Lawful Development Use
November 2024 - February 2025
• Procure initial demolition and implementation works
February - August 2025
• Pay CIL (2 payments)
• Undertake implementation/demolition works
Estimated Service charges
3.6 Service Charges
CBRE to confirm estimated service charge.
Any tendering contractors should be CIS registered with 'Gross' status. Verification to be requested from M&G RE Corporate Services (provide the contractor UTR no's)
Any potential CIS obligations in legal agreements (e.g. Agreement for Leases) to be reviewed by M&G RE Tax Team with recommendations implemented. Status of any CIS sub contractors to be verified with M&G RE Corporate Services and payments coded as required
Team aware.
All contractors will be subject to M&G Pre Qualification Questionnaire procedure.
Any potential CIS obligations in legal agreements (e.g. Agreement for Leases) to be reviewed by M&G RE Tax Team with recommendations implemented. Status of any CIS sub contractors to be verified with M&G RE Corporate Services and payments coded as required
All contractors to be "Gross Status" CIS.
• Construction insurance allowance = tbc
• Rights to Light insurance premium estimate £280,000
• Latent Defects - tbc
3.8 Project Insurance Changes to project cover identified together with project claims
3.90 Site Acquisition n/a
4 Delivery & Project Risk
Any required land transfers?
Development Agreement executed
Vacant Possession (strategy + budgets)
Right to Light insurance needs to be placed to allow sufficient time to negotiated deeds of release in advance of demolition. Meeting with M&G insurance needed to progress other insurances.
Land value in appraisal at £10m.
S278 requires adoption of small area to front of property adjoining highway - plan appended.
Long lease required for substation.
DM agreement executed.
• Target VP Date = 1.1.25 for office space;
• Client has instructed Hogan Lovells to commence vp strategy.
• Client has served notice on tenants.
• Retail compensation budget £1.4m in appraisal (client advised).
• Offices to be vacated and possibly de-rated and retail tenancies to continue on licences.
Rating Altus have advised the client that empty rates payable on the existing office space will be £633,920 p.a..
De-rating measures estimated at £400k.
• Planning - Satisfactory consent received
• NMA 1 - Approved
• NMA 2 - Under consideration
• S106 - Agreed and completed
Regulatory Checklist Gateway 3
Planning Consents in place
Planning Legal documentation in place
4.3 Phasing & Delivery Programme Construction/ logistics strategy
• CIL Liability Notice received
• S278 - Design and technical approved
• Building Regulations - Design stage approved
• BAPA with Network Rail - agreed in principle
• Planning consent granted on 10 February 2023;
• S106 executed 18 November 2022
• NMA 1 consent granted 17 November 2023. NMA 2 application submitted March 2024.
• CIL Liability Notice dated 5 May 2023
• Section 106 in place.
• CIL Liability Notice received.
• Start of procurement process - tbc
• Target VP Date = 1.1.25 for offices and retail continue on rolling licences
• Start on Site (demolition) = tbc
• Completion of demolition (6 months)
• Completion of main build (24 months)
• Leasing completion (12 months)
See Strategic Programme
4.4 Scheduling Validated design and construction milestone programme
4.5 Sustainability Management Review of Sustainability Management Plan and Accreditations
• 'WELL Core - Gold rating as a minimum' with route to Platinum
• EPC rating of 'A' targeted
• Part L 2021 compliance demonstrated for both office and retail areas.
• London Plan policy targets met via the energy strategy. 63% reduction over Part L 2013.
• Current EUI calculated - 114kWh/msqd (NIA)/year/
• NABERS rating. Target rating of 5* demonstrated at Stage 3.
• BREEAM 'Outstanding' rating demonstrated at Stage 3.
Procurement Strategy including tender list & evaluation criteria agreed & validated by CAP (if construction value is £15m+)
4.6 Construction Procurement Strategy
Procurement options for enabling works.
4.7 Procurement of Consultancy Services Short/Long Form Letters (or Deeds) of Appointment.
See procurement strategy document from Currie & Brown outlining options.
Preliminary main contractor shortlist issued
Depending upon planning consent implementation strategy there may be a requirement to appoint the demolition contractor in advance of appointment of the main contractor.
Appointments executed with:
• Bell Hammer Developments Limited - Development Manager
• FHPM – Project Manager
• Aukett Swanke – Architect & Principle Designer (CDM)
• AKS Ward – Structural Engineer
• Hoare Lea – M&E Engineer (inc. BREEAM, Fire + Energy)
• Currie + Brown – Quantity Surveyor
• Hoare Lea – Vertical Transport
• Stantec - Traffic & Transport
Pre construction surveys required for detailed design completed.
Key surveys to be undertaken in next stage are:
• CCTV of off site adjacent sewer to confirm exact location
Pre construction surveys
4.8 Due Diligence & Site Investigation Report
Due diligence: detailed risk review against legal obligation, technical and commercial risks. Report constraints and plan to manage.
Legal and technical due diligence conducted with constraints and risks highlighted
• Vibration sturdy for final CR2 approval
• lntrusive boreholes following access to all areas
• Destructive R&D asbestos following Vacant Possession
• Hoare Lea have invested and checked available incoming and outgoing utilities (power, water, telecoms and drainage). Currently local infrastructure has enough availability, however at this time nothing can be secured without significant commitment and ongoing cost liability.
Hogan Lovell provided constraints report.
Key legal matters in progress are:
• VP negotiations
• Right to Light
• Network Rail BAPA
• London Borough Merton and Travel for London highways
• UKPN - new lease and access agreement to suit reorganised incoming power.
4.9
6.2
GAP Stage 4a Presentation
Appendix F
Hoare Lea Sustainability Summary
M&G Sustainability Framework Review
Planning Conditions Tracker
DP9 Planning Implementation Report
FHPM Demolition and Implementation Report
Appendix O
Stage 3 Design Reports
- Architectural GAP Stage 4a Report and Drawing Pack
- Detailed MEP Reports
- Sustainability Reports (Hoare Lea)
- Structural & Civil Engineering Reports
- Design Reports
- Façade Reports
- Architectural Drawing & Report Pack (Aukett Swanke)
- Landscape Drawings (Turkington Martin)
- Structural & Civils Drawings (AKS Ward)
- MEP Drawings (Hoare Lea)
- Façade Drawings (Maffeis)
- Final Consolidated GAP Stage 4a Report
- Ground Movement Assessment & Site Investigations (CGL)