NLA on Location: Nine Elms on the South Bank

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1 NLA on Location: Nine Elms on the South Bank Deliverability and Viability Richard Garside, Development Director 07 November 2014 glhearn.com

2 What have I been asked to consider? GL Hearn Experience in the Nine Elms Area Brief Background on the VNEBOAPF Delivery of Schemes to Date The challenges Consideration of tall buildings Viability Considerations & Challenges to Delivery Moving Forward Affordable housing alternatives for delivery CIL potential increase Build cost vs value inflation Conclusions

3 GL Hearn Viability Experience in the Nine Elms Area

4 Background on the OAPF Provides a vision for 195 hectares over the period to 2030 High density mixed use development 16,000 new homes circa 900 units per annum 20,000 25,000 new jobs Significant infrastructure improvements to support the new community

5 Schemes Being Delivered Embassy Gardens 541 units sold Battersea Power Station 861 units sold Riverlight 698 units sold Vauxhall Sky Gardens 180 units sold

6 Is Delivery of the OAPF Achievable? Market is currently strong schemes are now viable Current sales rate in excess of 1,000 units per annum Infrastructure improving NLE contract let Iconic status of location established Range of product Varying price points Relative affordability of the location In my opinion Yes!

7 Deliverability of Tall Buildings

8 Viability Considerations & Challenges to Delivery Moving Forward Affordable Housing Two considerations: Affordability Should affordability criteria be relaxed in high value areas so that a range of affordable housing is delivered Onsite vs Offsite Should affordable housing be delivered offsite or in lower value parts of large schemes to maximise affordable housing Risks to Scheme Cost CIL Build cost inflation

9 Affordable Housing Affordability The level a Registered Provider (RP) can pay depends on the affordability criteria set by the local authority: Wandsworth 50% capped rents 50% discounted rents 66% shared ownership capped at household incomes of 38,000 33% shared ownership capped at GLA levels of 66,000 Lambeth Discounted rents circa 60% of OMV Shared ownership capped at GLA levels Criteria in Lambeth allows RP s to pay more for affordable which means more can be delivered The level an RP can pay is crucial to viability

10 Total GDV 74m Base case 15% Affordable on site 15% 1,000 psf 245 psf 85% Costs of Delivery per unit 630,000 Units delivered Private 85 Affordable - 15 Revised affordable criteria 18% 1,000 psf 350 psf 72% Costs of Delivery per unit 543,000 Units delivered Private 82 Affordable - 18 Offsite provision on revised affordable criteria 27% 650 psf 350 psf 63% Costs of Delivery per unit 250,000 Units delivered Private 100 Affordable - 37 Offsite provision on revision criteria in lower value part of Borough 64% 36% 550 psf 350 psf Costs of Delivery per unit 167,000 Units delivered Private 100 Affordable - 56

11 Market Values psf in Wandsworth and Lambeth

12 Total GDV 74m Base case 15% Affordable on site 15% 1,000 psf 245 psf 85% Costs of Delivery per unit 630,000 Units delivered Private 85 Affordable - 15 Revised affordable criteria 18% 1,000 psf 350 psf 72% Costs of Delivery per unit 543,000 Units delivered Private 82 Affordable - 18 Offsite provision on revised affordable criteria 27% 650 psf 350 psf 63% Costs of Delivery per unit 250,000 Units delivered Private 100 Affordable - 37 Offsite provision on revision criteria in lower value part of Borough 64% 36% 550 psf 350 psf Costs of Delivery per unit 167,000 Units delivered Private 100 Affordable - 56

13 Potential risks to viability CIL increase 19% Existing CIL (Wandsworth) 284 per sq m 81% CIL increase 600 per sq m Units delivered Private 100 Affordable - 23 Increase in build cost greater than price inflation 85% 15% Build inflation to 2018 (Based on Gleeds Research) Value inflation to 2018 (based on Savills Research) 28% 10% Units delivered Private 100 Affordable - 18

14 Conclusions The development envisaged in the OAPF for the VNEB area is currently viable and deliverable Towers are deliverable but may take longer than envisaged to come forward dependent on market conditions Affordable housing: Careful consideration of delivery strategies may enhance delivery over the wider Borough areas A variety of levels of affordability and offsite delivery should be considered Viability is currently finely balanced: risks to viability include An increase in CIL An increase in costs which outstrips value inflation

15 Thank you!