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An Evaluation of the St. James Project Property Development Processes Mark White - 120010261 11.12.17

UP51005


Executive Summary

This report provides an analysis and evaluation of the strengths and weaknesses of the front-end planning process of the St. James Project, Edinburgh; by taking account of front-end planning processes, exogenous and endogenous risk factors, identifying the relationship of the key stakeholders, evaluating the project management and governance; whilst also looking at financial and cost aspects of the project. The 1.7 million sq. ft. Edinburgh St James scheme will provide 850,000 sq. ft. of retail space, a luxury hotel, up to 150 new homes, 30 restaurants and a multi-screen cinema. The new development aims to be the Scottish capital’s prime shopping destination and new heart of the city, linking with and expanding the existing retail pitch of George Street, Princes Street and Multrees Walk (Edinburgh St. James, 2016). In Edinburgh, there are a number of key projects in the recent past, present and future which aims to re invigorate the city centre and city as a whole. The St. James Project is part of the city centre regeneration agenda of the City of Edinburgh Council. The Evaluation outlines the elements of a successful project, describes them and defines what must be done to achieve success within each element. The project is then analysed against the elements to conclude if the project is successful or not.


List of Figures + Tables

List of Figures

Figure

Description

Fig. 1

Historic Aerial Image of the area on which the St. James Centre and New St. Andrews House was built

Fig. 2

Aerial Image of the St. James Centre and New St. Andrews House

Fig. 3

Computer Generated Image of the proposed St. James Development

Fig. 4

Developer company structure

Fig. 5

Aerial image of Edinburgh City Centre (Development site shown in red)

Fig. 6

Planing Policy Structure

Fig. 7

St. James Project - Proposed Masterplan

Fig. 8

St. James Project - Proposed Jestico + Whiles hotel design

Fig. 9

Risk Matrix

List of Tables Table

Description

Table 1

Framework for a Successful Project

Table 2

List of Stakeholders

Table 3

Analysis of Framework

Table 4

Residual Valuation


Contents

Page

1. Introduction 10 1.1. Project Description

1.2. Project Background

1.3. Defining a large project and complexities

1.4. St. James Development as a Large Project

2. Defining a Framework for a Successful Project

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3. Stakeholders and Their Interest 3.1. Developer + Sponsor

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3.2. City of Edinburgh Council + Scottish Government

3.3. Historic Scotland

3.4. End-User

3.5. New Town and Broughton Community Council

3.6. Edinburgh Public

4. Benefits and Need for Development

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5. Front End Planning 22 5.1. Policy Framework

5.2. Masterplanning

5.3 Obtaining Planning Permission

5.3.1. Outline Planning Application and conditions

5.3.2. Planning Application for Hotel

5.3.3. Planning Application for other conditions

5.4. Compulsory Purchase Orders

5.5. Funding


6. Major Risk Factors 30 6.1. Endogenous Risk

6.2. Exogenous Risk

6.3. Managing Risk Effectively

6.4. Time Factor and Cost of Development

7. Analysing the Framework and Conclusion

7.1 Analysing the Framework

7.2 Conclusion

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8. Residual Value Appraisal 36

8.1 Estimations + Assumptions

8.2 Appraisal

9. References 38 Appendix I Heritage Statements Appendix II St. James Design Brief Appendix III

Planning Application 08/03361/OUT

Appendix IV List of Conditions Appendix V

Planning application 15/01858/AMC

Appendix VI Planning application 16/02791/AMC


1 | Introduction

The report provides an analysis and evaluation of the strengths and weaknesses of the front-end planning process of the St. James Project, Edinburgh.

In 2004 the idea of redeveloping the area was first discussed. The components of land ownership were put in place to allow the comprehensive development of the site to be embarked upon and in 2009 plans by developer TH Real Estate to redevelop the St James Shopping Centre were approved by councillors in Edinburgh. The St James Shopping centre closed in October 2016 and construction on site began. Alongside this, the hotel operator W Hotels is announced as are several pre-lets including John Lewis, Next and Everyman Cinema.

The Evaluation will take place through a framework which defines the processes of a successful project, followed by an analysis of the St. James Project, concluding with an evaluation of the project against the framework.

1.1 Project Description The St. James project, currently being developed by TH Real Estate in the centre of Edinburgh, is a large-scale project that will impact greatly on the city.

1.3 Defining a large project and complexities Large, or mega, projects are now a common feature in contemporary cities around the world. Flyvbjerg (2017, p.2) explain “Megaprojects are large-scale, complex ventures that typically cost $1 billion or more, take many years to develop and build, involve multiple public and private stakeholders, are transformational, and impact millions of people”. Megaprojects can also be defined as "initiatives that are physical, very expensive, and public"(Altshuler & Luberoff, 2003, p.2); while Siemiatycki (2013) categorises a mega project as the largest development initiatives carried out in cities. Miller and Lessard (2001, p.205) believe they are developments that come “as the result of a clear strategic vision that the sponsor imposes on the other stakeholders”.

The new development aims to be the Scottish capital’s prime shopping destination. It lies within the New Town Conservation Area and World Heritage Site and occupies a strategic location at which three key routes in the City converge: George Street, North Bridge and Leith Walk. It is expected that upon completion the project will increase the attractiveness of Edinburgh, making it a city where people want to live, work and invest. There is a section of the Public who are opposed to aspects of the project; in particular they oppose the ‘centre-piece’ hotel.

1.2 Project Background

Examples of such projects within the UK, specifically Scotland, include:

In 1969 The final approvals are granted for the construction of New St Andrew’s House and the original St James Centre [Fig. 1&2]. The St James Centre and adjoining New St Andrew’s House have become two of Edinburgh’s most unloved buildings; widely seen as an ugly, brutalist concrete eyesore that was completely unsympathetic to the surrounding architecture of the Edinburgh New Town.

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The Dundee City Waterfront Development; a regeneration project, costing £1bn, set to cover 240 hectares stretching 8km along the River Tay.

The Queensferry Crossing has created a much needed additional link across the River Forth north of Edinburgh, costing £1.35bn


Fig. 1 | Historic Aerial Image of the area on which the St. James Centre and New St. Andrews House was built Source: EdinPhoto, 2017

Fig. 2 | Aerial Image of the St. James Centre and New St. Andrews House Source: Bing maps, 2016


The St. James Project estimated to cost £1bn, is set to transform the east end of Princes Street in the capital city.

There are a number of common factors with the above large projects (and indeed all large/mega projects) including the size in terms of the amount of land required for the development, the huge amount of money required to complete them, and the complexity of the design and ownership structure.

1.4 St. James Development as a Large Project As discussed there are a number of factors contributing to the definition of a large/mega project. These factors can include an expensive construction cost, large areas of land involved, complex relationship of stakeholders, innovative funding models and the time taken for the projects to come to fruition. The St. James Project can be defined as a large project, with an estimated cost of £1bn (St James Centre, 2016) and a site area of a 5.2 Hectare with 850,000 sq. ft. of retail space, a luxury hotel, up to 150 new homes, 30 restaurants and a multi-screen cinema it is clearly a large scale and complex development. It involves a number of different public and private stakeholders with contrasting and wide-ranging agendas. The project also features an innovative funding model between the Scottish Government and the developer TH Real Estate (Gilbert, 2014). The project has an estimated completion date of 2021, with the first mention of developing the St. James Project back in 2004 (DSA, 2017), the project will take around 17 years to be completed. This adds to defining the St. James Development [Fig. 3] as a large project.

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Fig. 3 | Computer Generated Image of the proposed St. James Development Source: BBC, 2016


2 | Defining a Framework for a Successful Large Project

In-order to evaluate if the St. James Project has been successful a framework has to be established [Table 1]. The framework outlines key elements that must be evaluated to understand if a Large project was successful or not. The table over the page defines eight key elements, and a number of sub-elements: 1. Developer/ Sponsors 2. Funding 3. Other stakeholders 4. Project Management (Iron Triangle) •

Schedule

Cost

Scope + Quality

5. Business Sense 6. Purpose + Need 7. Front-end Planning •

Policy Framework

Masterplanning

Planning Process, Agreements + Permission

Land Acquisition

8. Risk Analysis •

Endogenous Risk

Exogenous Risk

These elements are then described and defined. The elements will then be evaluated later in the report after the project has been analysed. 14


Element

Description

Indicator of Success

Developer / Sponsor

The company (or group of companies) in charge of conceiving, managing and executing the project

There will be a clearly identifiable company (or group of companies) who is/are running the project

Funding

A project requires funding (Ratcliffe, et al., 2009)

Funding for the project will be secured in-order for the project to go-ahead, and be completed

Other Stakeholders

Each stakeholder may have very different viewpoints and expectations (Walker, et al., 2004)

Various stakeholders will have been consulted and their views and/or worries will be considered and/or satisfied

Schedule

The time-frame in-which the project is to be completed (Atkinson, 1999)

A successful project will define the time-frame until completion and achieve this

Cost

The budget of the project (Atkinson, 1999)

The budget will not have been exceeded

Scope + Quality

The project scope is the intended extent of the brief. The quality is defined by the standard to which the project has been completed (Atkinson, 1999)

The Scope + level of Quality will be defined and met

Business Sense

The business case/objectives the Developer / Sponsor wanted to achieve from the project (Bannerman, 2008)

The project should have clearly defined business objectives and these will be met

Purpose + Need

There needs to be a purpose and a need for the project (Millington, 2000)

The project will have a clearly defined purpose and need

Policy framework

The site / project should be identified within the Local Development plan, etc.

The site / project will be identified and defined in relevant planning policy

Masterplanning

An overall vision / plan for the area and site

A clear masterplan for the area will be set-out and executed

Planning Process, Agreements + Permission

Planning permission should be sought and granted, otherwise the project is not legally allowed to be built. Without planning permission, the project comes to a stop until approval is given (Millington, 2000)

The project will have to gain full planning approval.

Land acquisition

Land is required to build the proposal (Millington, 2000)

The project will acquire the necessary land to allow the project to be built

Risks that “arise from breakdowns of partnerships or alliances, or from contractual disagreements” (Miller & Lessard, 2001)

These internal risk factors will be outlined within a risk register and possible solutions sought

Risk that “stems from political, macroeconomic and social events” (Miller & Lessard, 2001)

These external risk factors will be outlined within a risk register and possible solutions sought

Project Management (Iron triangle)

Front-end Planning

Endogenous Risk Risk Analysis Exogenous Risk

Table 1 | Framework for a Successful Project


3 | Stakeholders and Their Interest

There are many stakeholders within a mega project. Each stakeholder may have very different viewpoints and expectations; the developer is required to manage these miscellaneous, and possibly contradictory, objectives of all stakeholders. “Although many stakeholders will have financial interest, many do not. External stakeholders, such as visitors to a shopping centre, can also exert significant influence” (Walker, et al., 2004, p.22)

In April 2017 the Scottish Government announced the £61million required to improve local infrastructure and public space at the east end of Princes Street would be facilitated through a new funding agreement known as the ‘Regeneration Accelerator Model’. The venture at this point became a public/private partnership between the Scottish Government and the developer’s TH Real Estate. “Dutch pension asset manager APG agreed a deal with TH Real Estate to take a 75% stake” in the St. James Project in October 2016 (TH Real Estate, 2016). This brings £391m of investment to the project. The Henderson UK Shopping Fund, managed by TH Real Estate, will retain the remaining owner-ship and manage the development (Rolt & Hatcher, 2016).

3.1 Developer + Sponsor The development is ultimately managed, and controlled, by TIAA Henderson Global Real Estate (TH Real Estate) [Fig. 4]. St. James Edinburgh Limited purchased the current St. James Centre, including the vacant New St. Andrews House in 2004 and 2006 respectively. St. James Edinburgh Limited (a company registered in Scotland) is part of a group of companies and unit trusts which is ultimately owned by the Henderson UK Shopping Centre Fund (HSCF), a Jersey Regulated unit trust. HSCF is managed by Nuveen Real Estate Management Limited, a 100% subsidiary of TH Real Estate. TH Real Estate is a joint venture of TIAA, a financial services provider, and Janus Henderson (formerly Henderson Global Investors) (The City of Edinburgh Council, 2016).

TH Real Estate and APG interests within the project are a financial one; they as the developer and investor respectively will be aiming to get a return on their invested capital. TH Real estate will remain in ownership of the project after completion so will gain income from leasing units within the mixed-use development. APG will receive repayments from TH Real Estate for their investment. The Scottish government also have a financial interest within the project linked to the aforementioned ‘Regeneration Accelerator Model’. Financial factors are therefore central to the stakes held by these three parties.

TH Real Estate is one of the largest real estate investment managers in the world with more than 530 real estate professionals located across 22 cities throughout the US, Europe and Asia-Pacific (Nuveen Real Estate Limited, 2017). The company has a strong track record in delivering shopping centre developments throughout the UK, including the Bullring in Birmingham and the Buchanan Galleries in Glasgow (St James Centre in Edinburgh, 2012).

3.2 City of Edinburgh Council The City of Edinburgh Council is a major stakeholder in the project; being the authority responsible for approving planning applications. In this case the interests and views of the planning officers were at conflict with those of the councillors on the Planning Committee.

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TIAA

Janus Henderson

Re-branded from TIAA-CREF in February 2016

Company merged with Janus Capital Group in May 2017, formerly Henderson Global Investors

Nuveen

A division of TIAA, purchased in October 2014

TIAA Henderson Global Real Estate

(TH Real Estate) Manages HSCF including all development activities

Nuveen Real Estate Management Limited Re-branded from Henderson Real Estate Asset Management in April 2017

Henderson UK Shopping Centre Fund (HSCF)

St. James Edinburgh, Limited Developer

Fig. 4 | Developer company structure Source: Author Illustration


3.3 Historic Environment Scotland + Others

3.4 End-User

Historic Environment Scotland is another stakeholder in the project, particularly because of concerns regarding the affect the development will have on the New Town Conservation area and nearby Grade-A Listed Buildings. Other conservation groups such as the World Heritage Co-ordinator and the The Cockburn Association must also be satisfied with the development project. The world Heritage Co-ordinator is concerned with the impact any development would have on UNESCO World Heritage Site Status of the historic city centre.

While it is difficult to list all end-users as most of the units have not yet been leased, John Lewis is confirmed to be the developments key anchor store and W Hotels has been confirmed as operator for the hotel. Their interest will be to ensure the development meets their needs. John Lewis will require a sufficiently large enough retail unit as this will be there flagship store within Scotland. While W hotels as a luxury hotel brand require a certain level of quality within the proposal to attract clients.

Both Historic Environment Scotland and the World Heritage Co-ordinator supplied supportive statements for the outline planning application. With regards to the full application for the central hotel both parties noted concerns but agreed that the development was an improvement on the existing building and would not adversely affected the city (See Appendix I).

3.5 New Town & Broughton Community Council The New Town and Broughton Community Council as a stakeholder aims to ascertain, coordinate and express the views of the community to public authorities and developers and promote community well-being. They have concerns with the impact of the development on the city centre and its residents.

The Cockburn Association, is a 140 year old establishment which aims to put forward the views of the public on matters concerning the conservation and enhancement of Edinburgh’s landscape. They have commented that “the design [for the hotel] has no reference to anything that exists in Edinburgh, even the newly designed context in which it is proposed to be placed� (Williams, 2015), they go on to explain the proposal does not in any way meet the aesthetic quality required to justify such an addition to the skyline of the city.

3.6 Edinburgh Public While the community council aims to convey the collective views of the public, the public are also key stakeholders. The public have to use and interact with the completed development in order for it to succeed. They will ultimately have a large say in whether the development will be a success or not.

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Role

Developer + Sponsor

Design Team

Public Bodies

End-user

Public Representation

Stakeholder

Description / Interest

TH Real Estate

Responsible for overseeing the development and requires a return on their investment

APG

Requires a return on their investment

Scottish Government

Through the ‘RAM’ funding they are funding infrastructure around the development

Allan Murray Architects

Architect responsible for the masterplan

Jestico + Whiles Architects

Architect responsible for the centre piece hotel

BDP

Technical Architect

OPEN

Landscape architect

City of Edinburgh Council

Acts as the regulatory body in-charge of planning approval

Scottish Government

Will want the project to be a success in-order to promote Edinbrugh as a successful and prosperous place

Historic Environment Scotland

Concerned with the affect the development will have on the New Town Conservation area and nearby Grade-A Listed Buildings

World Heritage Coordinator

Concerned with the impact any development would have on UNESCO World Heritage Site Status of the historic city centre

John Lewis, W Hotel + Others

Will want to ensure the development meets their needs

The Cockburn Association

Promotes the conservation and enhancement of Edinburgh’s landscape and historic and architectural heritage

The Architectural Heritage Society of Scotland

Dedicated to the protection, preservation of Scotland’s historic buildings in the public interest

New Town & Broughton Community Council

Aims to ascertain and express the views of the community to public authorities and developers

Edinbrugh Public

They will have to use and interact with the completed development in order for it to succeed Table 2 | List of Stakeholders


4 | Benefits and Need for Development

There is a clear need for the development on the site. The existing buildings on site are no longer fit for purpose and have become an eyesore on the skyline of the historic city centre. The site is located within the Central Prime Zone of the city [Fig. 5]. The area is of a high density with good accessibly. The surrounding buildings are mixed use with well established public realm and there is a high demand by retail, business and leisure sectors.

“Despite the existence of the St James Centre and Princes Mall, Edinburgh City Centre lacks a main flagship covered shopping centre and this is perceived by many commentators in the retail industry to undermine the profile of the City in a UK retailing context, Neither of the two existing covered centres on their own is perceived as being of a scale or makeup to be comparable to Buchanan Galleries, Glasgow, or Eastgate, Inverness, or indeed Ocean Terminal in Leith.”

Miller (2017) notes that the “equivalent of one shop per day closes on Scotland’s high streets”. The fashion industry saw the highest number of outlets close in 2016.

(St. James Centre Development Brief, 2004)

From the above statistics, it is clear that traditional high streets and shopping centres around the Scotland have to respond to the threat from the internet if they are to survive in the long term. Some have responded by having less of a focus on pure retailing and offering something that online services will never be able to replicate, and that’s an experience (Miller, 2017).

The St. James Project is tackling the issue discussed above. The current St. James Centre is focused only on retail and footfall therefore is in decline. The proposal seeks to give the consumer these other options to help encourage a prosperous design. It presents an opportunity to create a high quality urban environment that exploits and enhances the city centre location, and establish important connections through the site and beyond. It will allow a development which responds more appropriately to its context, will integrate into the historic environment, reinstate key street frontages and increase areas of high quality public realm.

Developments that incorporate shopping with eating, drinking and enjoy something recreational are becoming increasingly popular solutions to get people away from online retail shopping and back into town and shopping centres. Mixing uses in this way is in line with Scottish Planning Policy and is a Town Centre First approach. Miller (2017) explains that it stands to reason that the more people you have living, working and visiting an area, the more economically prosperous it will likely be.

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Fig. 5 | Aerial image of Edinburgh City Centre (Development site shown in red) Source: Author Illustration adapted from Digimaps, 2017


5 | Front End Planning

Front-end Planning as defined by Cho & Gibson (2001) is “a process that defines a project and is the key to the success of a project”. This involves developing sufficient strategic information with which developers can address risk and make decisions to commit resources in order to maximise the potential for success (Construction Industry Institute, 2012). Cleland and Ireland (2002) further define the Front-end Planning Process as evaluating and defining the goals and strategies that are required to drive the project to a successful completion. Projects with adequate front-end planning do not always succeed, but those with inadequate front-end planning most often fail (CII, 1995).

regeneration within the City Centre is around the retail core of Princes Street and the St James Centre (The City of Edinburgh Council, 2014). As the authority responsible for shaping the City of Edinbrugh must ensure that the St. James Development is in accordance with the principles and objectives set out in the National Planning Framework, Edinbrugh Local Area Development Plan, City Centre Princes Street Development Framework and St. James Quarter Development Brief (See Appendix II). The St. James Development Brief sets out the “main planning and development principles on which redevelopment proposals should be based” (St. James Quarter Development Brief, 2004). This brief was subject to rigorous public consultation and was used as material consideration in determining the planning applications in relation to the area.

Cleland and Ireland (2002) state that decisions made early in the project process will “set the direction and force with which the project moves forward as well as the boundaries within which the work of the project team is carried out.” The St. James Development, as do all large scale development, has undergone the process of Front-end Planning.

The councils planning policies for the centre of Edinbrugh aims to make a diverse, welcoming and prosperous place which enhances the area. The development brief seeks to secure a mix-use development to foster a vibrant city centre.

5.1 Policy Framework The National Planning Framework requires local planning authorities to ensure that their city centres are the heart of the city, and should be developed to promote competitive towns with centres that display high viability and vitality, and ensure they provide choice and diverse retail offers to customers (National Planning Framework, 2012). The Strategic Development Plan (SDP) recognised the City Centre as an area that needs to be prioritised. The continued development of the core, over the next 20 years, is one of the crucial elements of the SDP Strategy. The Edinburgh City Local Plan identifies that the focus of

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Fig. 6 | Planing Policy Structure Source: Author Illustration


5.2 Masterplanning

St James Centre and New St Andrew’s House sit within the New Town Conservation Area and within a UNESCO World Heritage Site. While the designation of the Site does not carry any additional planning powers or controls, the impact of the proposed development on the Site will be a material consideration in the determination of planning applications. (St. James Quarter Development Brief, 2004).

In 2006 Allan Murry Architects was approached by TH Real Estate to produce a masterplan on the site of the St. James Shopping Centre and New St. Andrews House [Fig. 7]. This masterplan uses the relevant policy and documentation discussed above, in particular the St. James Quarter Development Brief which set out the aspirational requirements of the masterplan: •

To establish a retail-led mixed use urban quarter

To enhance movement and access to and within the St James Quarter

To place sustainability at the core of future redevelopment proposals

To respect and enhance the skyline and key views

To create a clearly recognisable sense of place and a strong identity for the Quarter that links to the surrounding areas

5.3.1. Outline Planning Application and conditions Outline planning applications can be used to find out whether a proposed development is likely to be approved by the planning authority, before substantial costs are incurred by the developer to develop a detailed design. Outline planning applications allow the submission of outline proposals, the details of which may be agreed as a set of conditions at a later stage. On 4th June 2009 the Council approved planning permission in principle (See Appendix III for planning application 08/03361/OUT) for the redevelopment, refurbishment and demolition works to provide a major mixed use scheme on the site of the existing St James Centre.

5.3 Obtaining Planning Permission All large developments go through a process of gaining planning permission from the local authority. Identifying and preparing for issues in advance, through effective front-end planning and allowing planning officers to engage with the proposed development at an early stage will mitigate potential issues and streamline the planning process.

Planning permission was granted in principle for almost double the retail capacity of the current St James Centre it will replace. The application also sets out provision of new public realm areas, detailed approval of siting and maximum height of building blocks, points of vehicular access and egress and location of pedestrian routes to the development.

The St. James Development will inevitably have a vast impact on the surrounding context; the Local Authorities and the Scottish Government must be made aware of these impacts, in order to mitigate or help control them as far as possible.

This outline planning application set a number of conditions that must be met before any development can go ahead (See Appendix IV for full list). A main feature of these conditions was condition 23 which highlights that

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Fig. 7 | St. James Project - Proposed Masterplan Source: Planning Application 08/03361/OUT, 2009


“before development starts, further applications shall be submitted to and approved in writing by the Planning Authority” (Bury, 2009). These future applications were to cover matters such as the design of the central hotel building, design of external features & materials, number of units, roads & footways, and a number of other matters.

Town from many important points in the city centre and beyond.” Planning officers (cited in Marrs, 2015) believe that “the proposed hotel would adversely affect the character and appearance of the New Town Conservation Area and would have a detrimental impact on the Outstanding Universal Value of the World Heritage Site.”

5.3.2. Planning Application for Hotel However not everyone opposed the controversial hotel design, the developer, TH Real Estate, comment that they “are thrilled that the City of Edinburgh Council has supported the vision for the hotel” (Marrs, 2015). They note that the hotel’s ‘iconic’ design has generated interest from global hotel operators.

On 14th August 2015 Councillors approved a planning application (See Appendix V for planning application 15/01858/AMC) relating to matters specified in Condition 23 of Outline Planning Permission 08/03361/ OUT relating to design of the central hotel building and associated landscaping and external lighting. Councillors ignored the recommendation of Planning Officers to refuse the application for the Jestico + Whiles designed central hotel.

5.3.3. Planning Application for other conditions There is also an additional application requited for the approval of matters specified in condition 23 (see appendix VI for planning application 16/02791/AMC) of outline planning permission 08/03361/OUT that were not covered in the application relating to the hotel. These points are not as contentious as application 15/01858/ AMC. However the condition relating to the design of external features and materials has raised concerns from some stakeholders. Issues were raised over the use of limestone, instead of the traditional sandstone, on the project’s façades, which was described by planners as being ‘alien’ and ‘detrimental’ to the character of the New Town.

Planning officers had concluded that the design was higher and bulkier than the dimensions approved in an Outline Planning Application (Mark, 2015). The ten storey egg-shaped building will be wrapped in a bronze cladding which curl into a raised swirl at the top [Fig. 8]. Macfadyen (cited in Mark, 2015), explained that “this design does not fit in with Edinburgh’s historical and beautiful look and would be better suited elsewhere.” The scheme has also received criticism from the Architectural Heritage Society of Scotland which said the building would dominate the St James quarter and key views of the New Town. Architectural Heritage Society (cited in Mark, 2015) note that “a scheme that lifted the architectural aspirations of the redevelopment might well have been welcome”, however “unfortunately the scheme as now detailed would not only dominate the St James quarter but would dominate key views of the New

TH Real Estate contested that the use of sandstone cladding was impossible, with no quarries in Europe able to supply the quantity of stone necessary within the yearlong time frame required for construction. The developers also explained that its plans would have to be redrawn, wasting time and money (Gourtsoyannis, 2015).

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Fig. 8 | St. James Project - Proposed Jestico + Whiles hotel design Source: Planning application 15/01858/AMC, 2015


Speaking on behalf of Edinburgh World Heritage, the body that advises the city on its UNESCO World Heritage status, McDonald (cited in Gourtsoyannis, 2015) warned that the use of limestone would “detract from the outstanding universal value” of Edinburgh’s New Town.

In this case, the Council disposed of the land acquired to TH Real Estate to secure the best use of the land through the development of the St James Project. The area covered by the CPO is required to secure the development of the St James Quarter in accordance with the provisions of the SDP; the planning permission and the proposed Local Development Plan which is a key material consideration and will allow the reintegration of this fragmented part of the City Centre into the core area.

Edinburgh’s planning committee, made up of local councillors, decided that limestone would be an acceptable material for the façades of the St James development; going against the advice of Historic Scotland, the World Heritage Trust, the planning officers and the Cockburn Association. Gourtsoyannis (2015) notes that “all are concerned that the World Heritage status will be affected by the use of this alien stone in such a sensitive location and a development of this enormity”.

5.5. Funding The vast majority of the he £1bn required to undertake the St. James Project is being funded by the developer, TH Real Estate, through a number of affiliate companies and funds.

5.4. Compulsory Purchase Orders

Dutch pension asset manager APG agreed a deal with TH Real Estate to take a 75% stake” in the St. James Project in October 2016 (TH Real Estate, 2016). This brought £391billion of investment to the project. (Rolt & Hatcher, 2016).

In order for the development to take place TH Real Estate had to take ownership of a large area of land that was in multiple ownerships. A COP is when statutory bodies can take land or property without the consent of the owner by means of a compulsory purchase. This usually takes place to allow a public infrastructure project to go ahead for the common good (Compulsory purchase of property, 2015).

The Scottish Government announced it would fund the £61.4 million required to improve local infrastructure and public space at the St. James Project. Due to the current fiscal constraints, the Council is unable to shoulder the cost of required borrowing within existing resources. A collaboration with the Scottish Government and Scottish Futures Trust. Gilbert (2014) goes on to explain that this “would be facilitated through a new funding agreement known as the ‘Regeneration Accelerator Model’. The mechanism combines public and private sector investment in local infrastructure and public space that can then be offset by business rates and overall gains to the economy.”

The use of a Compulsory Purchase Order for the St James project is in accordance with Section 189 of the Town and Country Planning (Scotland) Act 1997 for the purpose of acquiring land and property (The City of Edinburgh Council, 2014). Section 191 of the 1997 Act allows the local authority which has compulsorily acquired land for planning purposes to dispose of it to a third party, subject to conditions (The City of Edinburgh Council, 2014).

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6 | Major Risk Factors

Risk in project management as explained by Miller & Lessard (2001) is the possibility that events, their resulting impact and dynamic interactions may turn out differently than expected. Risk are usually multi-dimensional in nature, making the chance of forecasting them effectively difficult, that in itself present a high-level risk (Miller & Lessard, 2001).

the project; as discussed in Section 3 of this report APG agreed a deal with TH Real Estate to take a 75% stake in the St. James Project in October 2016 bringing £391m of investment to the project. This was just months before the demolition work began on site. An unexpected collapse happened during demolition work, two floors collapsed during the demolition process. In order to mitigate risk of injury or death to staff and the public safety exclusion zones were implemented by the contractor. A spokesman for the contractor explains “an exclusion zone is further protected by a safety zone where only trained personnel are permitted. These measures are put in place to keep members of the public and site personnel safe at all times and allow for the unpredictable nature of demolishing buildings of this age and condition” (Collapse during demolition at St James Centre site, 2017). The contractor through front endplanning was able to reduce the risk of injury or death to the public around the site and construction workers on site.

In mega projects, “risk can be almost any uncertain event associated with the work. Not all risks are equally important, though. Project leaders must focus on risk that can materially affect project objectives, or ‘uncertainty that matters’” (Kendrick, 2015, p.5). Types of risk can generally be put into two categories; endogenous (internal) and exogenous (external). The challenge for those involved in project implementation is to accept and understand the risks, managing the consequences as opposed to trying to avoid them all together.

6.1. Endogenous Risk

Another risk would have been the inability to find an anchor store for the shopping centre. However the developer has secured John Lewis as the anchor of the centre.

Endogenous turbulence are risks that “arise from breakdowns of partnerships or alliances, or from contractual disagreements” (Miller & Lessard, 2001, p.22) that have to be accounted for; along with potential market, financial and completion risks.

6.2. Exogenous Risk

While no contractual partnerships or alliances have been reported it must be noted that the possibility of this is a major risk to the project and would have had to have been considered by the developer during the Front-end Planning of the project, measures should have been put in place to deal with any breakdown in relationships.

Exogenous turbulences are risk that “stems from political, macro-economic and social events” (Miller & Lessard, 2001, p.22). From the project inception in 2004 to construction beginning in 2016 there have been a number of exogenous risks.

A key endogenous risk associated with the project would be a lack of finance to complete the development. The Developer TH Real Estate most-likely recognised this and therefore partnered with another party to help fund

The likely-hood of a government continuing in power can be classified as a risk. “From a developer’s point of view nothing can be done to remove uncertainty from the development process, although the developer should

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Fig. 9 | Risk Matrix Source: Smartsheet, 2017


6.3. Time Factor and Cost of Development

always be conscious of the problems they may create” (Millington, 2000, p.5). During the front-end planning process there have been changes in power in both the Scottish and British Parliaments. When the project was first considered Labour held power in both parliaments until 2010 when power switched to Conservative within the UK Parliament and SNP within the Scottish Parliament (Prime Ministers and Politics Timeline, 2014).

Since the development was first conceived in 2004 it has gone through several stages of approval and assessments before the commencement of work on site in 2016. There are associated costs with these delays, while it is difficult to ascertain exact figures due to these delays the cost of the project had risen around £200m from 2009 to 2016 (St James Centre in Edinburgh, 2012).

The next major exogenous factor that the developer would have had to deal with was the possibility of Scottish Independence. Darling (cited in Fitzpartick, 2014) notes that “[Scottish] independence [was] a significant economic risk”.

Between 2004 and 2016 is 12 years of uncertainty and risk arising from the inflation of the cost of construction, materials and labour. This is a major risk that could have led to the change in the cost of the development. The time period involved in the mega projects can be very large, this normally increases the uncertainty that was present at the date the scheme was first conceived and “it must be noted that the longer the development period the greater the unknown factors and the greater the risk to a developer” (Millington, 2000)

Another, and potentially more significant, turbulence has been Brexit. As TH Real Estate is a joint venture of TIAA and Janus Henderson with TIAA HQ being outwith the UK. It can be speculated that the developer, to try to mitigate against this risk, when purchasing the site did so through a company registered in Scotland that has the sole purpose of holding ownership of the site. This should help with the isolation that will potentially be suffered through leaving the EU. It is not possible to fully understand the impact Brexit will have as may issues are still unclear, however it’s significance as an exogenous factor should not be diminished.

6.4. Managing Risk Effectively Uncertainty is intrinsic to mega projects; it is impossible to completely remove all risk and uncertainty from projects. However, it can be managed by “understanding significant sources of risk and taking prudent actions to minimise failure” (Miller & Lessard, 2001).

The condition of the Scottish Economy is also a turbulence that the developer should consider. It is likely that most of the users of the shopping centre and residents of the houses will come from areas around Edinburgh so the health of the local economy will be key to the success of the project.

While it is difficult to be certain what risk strategy TH Real Estate would have used, it could be argued that they used an approach that, as Flyvbjerg et al. (2003) explain, involves the allocation of risk to parties who have an incentive to minimise the negative impacts of said risk. This is highlighted by the fact that each party that joined the project had incentive to minimise the risk whether it be for economic or reputation reasons.

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7 | Analysing the Framework and Conclusion

7.1 Analysing the Framework

As can be seen in the framework [Table 3] it can be assumed that the St. James Project will likely be a successful one. There is strong evidence of successful frontend planning and evidence of consideration of key issues. While areas such as business sense and risk are ‘unknown’ it can be assumed a developer such as TH Real Estate will have considered these factors. Other areas such as Considering other stakeholders and the ‘iron triangle’ can be seen as less successful, however overall most of the factors evaluated can been seen as being a success. This most-likely will lead to a successful project.

In order to understand if the St. James Project has been successful the project will be evaluated against the framework established earlier in the report. Table 3 outlines the eight key elements, and a number of subelements, that must be evaluated against to understand if the St. James Project was successful or not. These elements are evaluated and then it is decided, based on the evidence, if that element has been a success.

7.2 Conclusion As mentioned above projects with adequate frontend planning do not always succeed, but those with inadequate front-end planning most often fail (CII, 1995). Typically projects will not be better than its frontend planning process. There is a stark contrast between the opinions of key stakeholders. The developer and design team are at conflict with the planning department and conservation/ heritage groups, with specific reference to the external cladding material. With regards to the ‘iron triangle’ the schedule slipped by a number of years and the cost increased by 20%. The change of cladding material is also seen as a change to the quality required by the project. It could be noted that if only the ‘iron triangle’ was being used to judge success the project would potentially be deemed a failure. The local councillors overruling the planning officers with regards to the application is a pivotal moment in the development; if they had sided with the planners the development could have been delayed months, possibly years and may not have came to fruition at all.

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Element

Description of Success

Decision

Developer / Sponsor

TH Real Estate is a recognisable and identifiable Developer and Sponsor (Shown in section 3.1)

Achieved

Funding

Funding has been secured through various streams (Discussed in section 5.5)

Achieved

Other Stakeholders

Other stakeholders have been consulted and there pointof-view considered, however their worries / reservations have not always been satisfied (Discussed in section 3.2-3.6)

Partially Achieved

Schedule

The construction process was delayed from 2009 until 2016 (Shown in section 6.3 and discussed in section 5.3)

Not Achieved

Cost

The cost of the development has increased by £200m from £800m to £1bn (Shown in section 6.3)

Not Achieved

Scope + Quality

The scope is set out within the St. James Design Brief (Appendix II). The quality of the materiality is outlined within the planning conditions (Appendix IV), however these were not always met (discussed in section 5.3)

Partially Achieved

Business Sense

It is assumed the developer TH Real Estate has developed a successful business case for the project. They will obviously be seeking to profit from the development

Unknown

Purpose + Need

The project is required within the city (Shown in section 4)

Achieved

Policy framework

There is mentions of the project from 2004 within the Local Area Development Plan and a Design Brief prepared for the site (Shown in section 5.1)

Achieved

Masterplanning

A masterplan for the area was prepared by Allan Murry Architects (Shown in section 5.2)

Achieved

Planning Process, Agreements + Permission

The project has received full planning approval (Shown in section 5.3)

Achieved

Land acquisition

Through negotiations and CPO’s TH Real Estate have acquired the land required to allow the development to be built (Discussed in section 5.4)

Achieved

Endogenous Risk

It is assumed TH Real Estate have considered Endogenous Risk Factors (Possible risks discussed in section 6.1)

Unknown

Exogenous Risk

It is assumed TH Real Estate have considered Exogenous Risk Factors (Possible risks discussed in section 6.2)

Unknown

Project Management (Iron triangle)

Front-end Planning

Risk Analysis

Table 3 | Analysis of Framework


8 | Residual Value

Residual value is the “estimated fair market value an asset” (Business Dictionary, 2015). There is not enough information publicly available to do a precise estimation of the residual value of the land for the St. James Centre. However an attempt is made to provide a residual value of the land from the information gathered about the project and average rates/costs/occupancy within Edinburgh City Centre.

8.1 Estimations + Assumptions Cost of retail space is estimated at £240 per sq. ft. per annum (Colliers International Midsummer Retail Report, 2017). Occupancy is estimated at 95%. Cost of catering space is assumed at £180 per sq. ft. per annum, Occupancy is assumed at 95%. Cost of multi screen cinema is assumed at £100 per sq. ft. per annum Average hotel room rate is estimated at 113.48 (LJ Research, 2017). Occupancy is estimated at 82% Average 2 bed flat price is estimated at £284,061. Average 3 bed terrace price is estimated at £497,354 (Zoopla, 2017) Estate agents fees are assumed to be 4% Land agents fees are assumed to be 3% Average lease length is assumed to be 5 Years

8.2 Appraisal Please see the following page [Table 4] for full appraisal. 36


Residual Valuation of Land A

Gross Value of Development Retail Space

850000 sq. ft.

850000 sq. ft. @ £240 per sq. ft. per anum 95% Occupancy

Catering Units

£256,500,000

£800,000 x5 Years

£4,000,000

£8,863,923 £7,268,417 x5 Years

£36,342,084

£28,406,100 £24,867,700 £2,130,952

£51,142,848

214 Bedrooms

214 Bedrooms @ 113.48 per night (X 365 days) 82% Occupancy

Residential Units

£54,000,000 £51,300,000 x5 Years

8000 sq. ft.

8000 sq. ft. @ £100 per sq. ft. per anum

Luxuary 5* Hotel

£969,000,000

300000 sq. ft.

300000 sq. ft. @ £180 per sq. ft. per anum 95% Occupancy

Multi Screen Cinema

£204,000,000 £193,800,000 x5 Years

150 Units

100 2 Bed Flats @ £284,061 50 3 Bed Terraces @ £497,354 Less Agents fees of 4%

£1,316,984,932

B

Cost of Development Total cost

C

Developers Profit Profit

D

£1,000,000,000

20%

£200,000,000

(B+C)

£1,200,000,000

Cost of Land Cost of Land Less Agents fees Actual Cost of Land

A - (B+C) 3%

£116,984,932 £3,509,548 £113,475,384

Figures in blue italics are assumed Table 4 | Residual Evaluation


9 | References

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Construction Industry Institute (2012), Improving Project Performance, CII Best Practices Guide, 4, pp.17 Edinbrugh St. James (2016), The Vision [online], Available at: http://www.edinburghstjames.com/thevision.html [Accessed 15 Nov. 2017] Gilbert, B. (2014), Revealed: Images of Allan Murray’s Edinburgh mega-scheme [online], Available at: https://www. architectsjournal.co.uk/news/revealed-images-of-allan-murrays-edinburgh-mega-scheme/8661966.article?search=https%3a%2f%2fwww.architectsjournal.co.uk%2fsearcharticles%3fparametrics%3d%26keywords%3dSt.+James%2c+Edinburgh%26cmd%3dSetPageSize%26val%3d50%26SortOrder%3d1[Accessed 29 Sept. 2017] Gourtsoyannis, P. (2015), St James development gets go-ahead from councillors [online], Available at: http://www.edinburghnews.scotsman.com/news/st-james-development-gets-go-ahead-from-councillors-1-3818052 [Accessed 07 Oct. 2017] Fitzpatrick, T. (2014), Scottish independence: how would it affect the construction industry? [online], Available at: https://www.constructionnews.co.uk/companies/scottish-independence-how-would-it-affect-the-construction-industry/8658470.article [Accessed 02 Nov. 2017] Flyvbjerg, B. (2017), The Oxford Handbook of Megaproject Management, Oxford; Oxford University Press. Flyvbjerg, B., Bruzelius, N. & Rothengatter, W (2003), Megaprojects and Risk: An Anatomy of Ambition, Cambridge; Cambridge University Press Kendrick, T. (2015), Identifying and managing project risk: essential tools for failure-proofing your project, New York; AMCOM. LJ Research (2017), Hotel Market Research [online], Available at: http://www.ljresearch.co.uk/continued-occupancy-growth-scottish-hotels/ [Accessed 15 Nov. 2017] Mark, L. (2015), Ministers urged to overrule decision on Jestico + Whiles’ Edinburgh hotel [online], Available online at: https://www.architectsjournal.co.uk/8687622.article?search=https%3a%2f%2fwww.architectsjournal.co.uk%2fsearcharticles%3fparametrics%3dCATEGORYBuilding+type%7c112%26keywords%3dSt.+James%2c+Edinburgh%26PageSize%3d10%26cmd%3dAddPm%26val%3dCATEGORYBuilding+type%7c17198 [Accessed 07 Oct. 2017] Marrs, C. (2015), Jestico + Whiles’ Edinburgh hotel wins go-ahead [online], Available at: https://www.architectsjournal. co.uk/8687573.article?search=https%3a%2f%2fwww.architectsjournal.co.uk%2fsearcharticles%3fparametrics%3dCATEGORYBuilding+type%7c112%26keywords%3dSt.+James%2c+Edinburgh%26PageSize%3d10%26cmd%3dAddPm%26val%3dCATEGORYBuilding+type%7c17198 [Accessed 07 Oct. 2017]


Miller, C. (2017), How can in-town shopping centres survive and thrive? [online], Available at: http://www.scottishconstructionnow.com/21067/blog-how-can-in-town-shopping-centres-survive-and-thrive/ [Accessed on 07 Oct. 2017] Miller, R. & Lessard, D. (2001), Understanding and managing risks in large engineering projects. International Journal of Project Management, 19(8), pp.437–443 Millington, A.F. (2000), Property development, London; Estates Gazette Nuveen Real Estate Limited (2017), About Us [online], Available at: https://threalestate.com/about-us [Accessed 29 Sept. 2017] Prime Ministers and Politics Timeline (2014), BBC [online], Available at: http://www.bbc.co.uk/history/british/pm_and_ pol_tl_01.shtml [Accessed 02 Nov. 2017] Siemiatycki, M. (2013) Riding the wave: explaining cycles in urban mega-project development, Journal of Economic Policy Reform, 16(2), pp.160-178. TH Real Estate (2016), APG and TH Real Estate to transform Edinburgh city centre [online], Avaliable at: https://threalestate.com/news-and-views/articles/16-10-18-apg-and-th-real-estate-to-transform-edinburgh-city-centre [Accessed 29 Sept. 2017] The City of Edinburgh Council (2014), St. James Quarter - Compulsory Purchase Order [online], Available at: http:// webcache.googleusercontent.com/search?q=cache:GQgIIFeMco4J:www.edinburgh.gov.uk/download/meetings/ id/43342/item_no_84_-_st_james_quarter_compulsory_purchase_order+&cd=1&hl=en&ct=clnk&gl=uk [Accessed 02 Nov. 2017]. The City of Edinburgh Council (2016), St. James Quarter - Update on Progress [online], Available at: http://www. edinburgh.gov.uk/download/meetings/id/48940/item_86_-_st_james_quarter_-_update_on_progress [Accessed 28 Sept. 2017]. Ratcliffe, J. et al. (2009), Urban planning and real estate development 3rd ed., London; Routledge Rolt, A. & Hatcher, D. (2016), APG unlocks £1bn St James Centre [online], Available at: https://www.estatesgazette. com/apg-unlocks-1bn-st-james-centre/ [Accessed 30 Sept. 2017] St James Centre £1bn revamp gets under way (2016), BBC [online], Available at: http://www.bbc.co.uk/news/uk-scotland-scotland-business-37691842 [Accessed 27 Sept. 2017]

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St James Centre in Edinburgh: ÂŁ850m project delayed by three years (2012), BBC [online], Available at: http://www. bbc.co.uk/news/uk-scotland-edinburgh-east-fife-17989645 [Accessed 07 Oct. 2017] The Town Centre First Principle (2014), Scottish Government [online], Available at: http://www.gov.scot/Topics/ Built-Environment/regeneration/town-centres/TheTownCentreFirstPrinciple [Accessed 09 Oct. 2017] Video shows unexpected collapse during demolition at St James Centre site (2017), Scottish Construction Now [online], Available at: http://www.scottishconstructionnow.com/16862/video-shows-unexpected-collapse-during-demolition-at-st-james-centre-site/ [Accessed 19 Oct. 2017] Walker, A., Sayce, S. & McIntosh, A. (2004), Building Sustainability in the Balance: Promoting Stakeholder Dialogue, London; Estates Gazette Ltd. Zoopla (2017), Property Value [online], Available at: https://www.zoopla.co.uk/market/edinburgh-city-centre/ [Accessed 15 Nov. 2017]


Appendix I | Heritage Statements


Appendix II | St James Development Brief


Appendix III | Planning Application 08/03361/OUT

Link: https://citydev-portal.edinburgh.gov.uk/idoxpa-web/applicationDetails.do?activeTab=summary&keyVal=K7L6P5EWR0000


Appendix IV | List of Conditions

Link: http://citydev-portal.edinburgh.gov.uk/idoxpa-web/files/5D03ABDDC278B76F8227BBCDE132CE7A/ pdf/08_03361_OUT--865487.pdf


Appendix V | Planning application 15/01858/AMC

Link: https://citydev-portal.edinburgh.gov.uk/idoxpa-web/applicationDetails.do?activeTab=documents&keyVal=NN5CP5EW09Z00


Appendix VI | Planning application 16/02791/AMC

Link: https://citydev-portal.edinburgh.gov.uk/idoxpa-web/applicationDetails.do?activeTab=documents&keyVal=O86QJVEWFKJ00


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St. James Project  

An evaluation of the St. James Project, Edinburgh

St. James Project  

An evaluation of the St. James Project, Edinburgh

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