Q9. Do you have any further comments on the PDCS?

Showing comments and forms 1 to 24 of 24

Comment

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21669

Received: 25/09/2014

Respondent: Mr Nigel Jennings

Representation:

There is no indication at present on prioritisation of the CIL funds

Full text:

There is no indication at present on prioritisation of the CIL funds

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21685

Received: 25/09/2014

Respondent: MichaelDHall Building Design Services Ltd

Representation:

CIL evidently poorly thought out. Unrealistic wish list without regard for what may be practical and equitable. CIL in this form will exclude and prohibit many competent housebuilders from housebuilding. Those able to build under these restraints will be limited to national housebuilders and housing associations.CIL in this form, with figures or rates near those proposed will more or less bring housebuilding to a standstill. Whilst profits may outwardly appear good they are not as good as presumed and they are achieved at considerable risk. Progress in housebuilding will cease. This proposes taking assumed profit before it has been earned.

Full text:

CIL evidently poorly thought out. Unrealistic wish list without regard for what may be practical and equitable. CIL in this form will exclude and prohibit many competent housebuilders from housebuilding. Those able to build under these restraints will be largely limited to a few national housebuilders and housing associations. Is that what is wanted? This should most certainly not be the case. CIL in this form, with figures or rates near those proposed will more or less bring housebuilding to a standstill. Where do legislators think the costs will come from? Profits? Whilst profits may outwardly appear good they are not as good as presumed and they are achieved at considerable risk. Ass the cost of CIL to house prices and thus mortgages? Will land prices fall? Unlikely for some long while and stalemate will ensue. Progress in housebuilding, providing homes, will cease. Again, the authors and local authorities propose taking assumed profit before it has been earned, and if it is not realised what price to the local authority. Nil, the loss falls to the developer, the housebuilder.

Comment

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21688

Received: 26/09/2014

Respondent: East Sussex County Council

Representation:

County Council officers have provided frequent updates to Rother District Council on County Council infrastructure requirements these are reflected in the Infrastructure Delivery Plan. It however should be noted that the Funding Gap Analysis document contains some inaccuracies particularly in para 1.8 and Table 2 on transport infrastructure. County Council officers are happy to continue to work with Rother District Council to correct these and to provide further infrastructure updates as necessary.

Full text:

County Council officers have provided frequent updates to Rother District Council on County Council infrastructure requirements these are reflected in the Infrastructure Delivery Plan. It however should be noted that the Funding Gap Analysis document contains some inaccuracies particularly in para 1.8 and Table 2 on transport infrastructure. County Council officers are happy to continue to work with Rother District Council to correct these and to provide further infrastructure updates as necessary.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21697

Received: 22/09/2014

Respondent: ASDA Stores Ltd

Agent: Thomas Eggar LLP

Representation:

As the Council are aware, the CIL (Amendment) Regulations 2014/385 came into effect in February.These regulations have made a number of changes to the CIL regime.

We ask the Council to acknowledge the enhanced scrutiny these regulations require and urge the Council to undertake further, more detailed, viability appraisals providing sufficient evidence to support CIL.

We ask the Council to alter its Charging Schedule by:

*Revisiting its viability assessments for retail development;
*Adopting a realistic instalments policy;
*Consider allowing developers to pay their CIL Liability through the provision of infrastructure; and
*Adopting a single flat rate levy across all development.

Full text:

Under Regulation 14 of the Community Infrastructure Levy Regulations 2010 ("CIL Regulations") the Council's primary duty when setting the level of Community Infrastructure Levy ("CIL") charge is to strike an appropriate balance between the desirability of funding the cost of infrastructure required to support development from CIL and its potential effects on the economic viability of development.

In our view, the approach taken to assessing the Preliminary Draft Charging Schedule does not achieve an appropriate balance between these two objectives.

We wish to object to the approach taken to assessing the Preliminary Draft Charging Schedule on the following grounds:

1. The Viability Study fails to adequately take account of major changes introduced by the Community Infrastructure Levy (Amendment) Regulations 2014/385

2. the impact on policies enhancing economic performance;

3. the financial assumptions and viability assessments contained in the Council's Viability Study;

4. the proposal to split convenience and comparison retail development;

5. issues relating to State Aid; and

6. concerns about the Council's approach to setting CIL charges generally.



Asda example 2
Asda stores regularly rejuvenate and regenerate existing centres, and the surrounding areas, and draw new shoppers to them, which benefits the existing retailers, and those who open stores in Asda-anchored centres in their wake. For example in 2006, Asda opened a store in Romford, transforming a derelict brownfield site through an extension of an existing retail mall and creating 347 jobs. This helped to propel Romford into the top 50 UK retailing cities. Indeed, due to the success of the store in attracting more footfall to that part of the town's Primary Shopping Area, the local authority redrew the town centre boundary to include the edge of centre Asda store into the heart of the Romford town centre.



Name or Organisation : Thomas Eggar LLP

3. To which question in the PDCS consultation document does this representation relate to?
Question 9: Do you have any further comments on the PDCS?
Impact of Community Infrastructure Levy (Amendment) Regulations 2014/385
As the Council will be aware, the Community Infrastructure Levy (Amendment) Regulations 2014/385 came into effect in February.

These regulations have made a number of wide-reaching changes to the CIL regime, the most important of which, for the purposes of this email, are summarised below:

* Regulation 14 has been amended so as to strengthen the obligations on the Council to objectively justify the adopted charging rates. Examiners are now being asked to assess whether an appropriate balance has, in fact, been struck;

* The Regulations governing payment in kind have been amended to allow local authorities to accept items of infrastructure as well as the transfer of land;

* Draft Regulation 123 lists should now be made available much earlier in the rate-setting process and these will be capable of being examined at inquiry;
* There have been significant changes to the various CIL exemptions; which will significantly affect the Council's expected levels of receipts.
We ask the Council to acknowledge the enhanced scrutiny that these regulations require and we urge the Council to undertake a further, more detailed, viability appraisal providing sufficient evidence to support CIL at examination.
The regulations governing payment in kind to allow local authorities to accept items of infrastructure as well as the transfer of land are not mentioned. We ask the Council to consider the inclusion of this provision.
The financial assumptions and viability assessments contained in the Council's
Viability Study

We also have a number of concerns about the study Peter Brett Associates conducted in July 2014 (the "Viability Study").
The Viability Study appears to contain retail development assumptions that in our view are at risk of being inadequate as may not make sufficient allowance for the costs involved in obtaining planning permission for a development scheme.
By excluding the true cost of residual planning for a commercial development, the Council has underestimated the true cost of retail developments and artificially inflated the residual land values used for the financial viability models. This will, in turn, have inflated the amount of CIL proposed for these uses.
Whilst the Viability Study appears to make allowances for residual section 106 and section 278 agreements, in addition to CIL, it is not clear at what level the allowances have been set. Without this information it is difficult to assess whether the allowances made are adequate for non-residential developments. We urge the Council to publish the allowances made for such retail residual contributions.
Although the Council will not be able to pool section 106 contributions once CIL is adopted, the types of commonly pooled contributions tend not to make up a large proportion of the contributions sought from commercial schemes - which are usually focussed on site specific highways and access works, employment and training contributions, environmental mitigation works and other, site specific, requirements. It is clear from the published Regulation 123 List that these types of contributions will still be sought from commercial developments.
Taking the example of a 2,000 sqm supermarket used in the Viability Report, this 2,000 sqm store, with total building costs of £2,222,000 would be expected to bear a CIL payment of £240,000 (£120 per sqm) and, in addition, potentially fund all of the following potential costs:
* demolition, remediation and on site highways works;
* site specific transport improvements necessary to enable development in transport terms;
* the cost of any off-site highways works required to make the development acceptable in planning terms including junction improvements, road widening schemes, new access roads, diversion orders and other highways works;
* the cost of extending the Council's CCTV or public transport network to include the scheme (including the costs of providing new bus services to serve the site);
* monitoring costs of compliance with employment/apprenticeship schemes and travel plans;
* environmental off-set contributions to mitigate the loss of habitat or greenery caused by the scheme;
* The cost of any remediation and decontamination works to be carried out by the council on the developer's behalf;
* payments for town centre improvements intended to mitigate the impact of the development on the town centre or neighbouring areas; and
* the costs incurred by the Council of maintaining any site specific infrastructure required by the development.

To put this in context:
* the section 106 Contributions incurred in relation to a c.3,000 sqm food store in Ware, Hertfordshire amounted to £871,800. These sums related to bus service contributions; development of a community centre, nursery; education contributions; various highway safety improvements; youth service contribution; residents parking schemes and open space contribution. In addition to these Contributions, green travel plan contributions, monitoring fees and architectural lighting on pedestrian routes between the store and city centre were also incurred.
* the section 106 Contributions incurred in relation to a c.6,700 sqm food store in Newhaven, East Sussex amounted to £1,345,544. These sums related to contributions for improvements to and an extension of the local bus network; economic initiatives; contributions for relocating local habitats; improvement of recreational space; recycling contributions; residential and retail travel plan auditing; transportation and town centre contributions.
With this in mind, we fear that the Council may have significantly underestimated the impact of CIL on the viability of such developments and request that the underlying viability evidence be revisited.


The proposal to split convenience and comparison retail development
Clause 13(1) of the CIL Regulations states that a charging authority may set different rates for different zone in which development would be situated; and/or by reference to different intended uses of development within those zones and/or by reference to the size of those schemes.
While the CIL regulations do not expressly define 'use', they regularly adopt definitions from the planning system and other planning legislation (in particular the Town and Country Planning Act 1990 (as amended) and the Planning Act 2008). As the Use Classes Order is widely accepted to be the starting point for definitions of Use within the planning system, it is reasonable to expect that the CIL Regulations reflects those definitions.
Any distinction as to use or size used to support differential rates needs to be fully supported by the viability study. As the detailed viability assessments for each type of development scheme have not been published it is difficult to see how they can be justified. Therefore we are unable to properly scrutinise the assumptions and inputs of these studies.
It should be noted that Poole, Mid-Devon and Elmbridge Councils have withdrawn their proposals to charge large supermarkets a higher CIL rate than other retail development, on the grounds that this approach is potentially unlawful. Similarly, New Forest District Council has also had its "large supermarket" rate struck out at Inquiry, as the Inspector held that the threshold at which it had been set had not been sufficiently justified by the viability evidence provided.
In addition, the Council's proposal to distinguish 'comparison' and 'convenience' retail also poses practical problems for retail developers and the Council themselves in assessing the charge, as most supermarkets and superstores contain a mix of convenience and comparison floorspace. The Council's current proposals will potentially result in two different CIL rates being charged for floorspace within the same building or development. Such an approach adds undue complexity to the CIL calculations.
State Aid
We wish to bring it to your attention that there will be EU State Aid issues arising out of the setting of differential rates for different types of commercial entity within the same use class. Introducing such differential rates confers a selective economic advantage on certain retailers depending on the size of the shop they operate out of, or their type of business. For example, setting the levy for comparison retail schemes at a lower rate than an equivalent convenience retail scheme provides an economic advantage to comparison retailers. Alternatively, basing rate differentials on the size of a store favours smaller retailers over their larger competitors.
As far as we are aware, the UK government has not applied for a block exemption for CIL. CIL charges do not form part of the UK's taxation system and there does not appear to be an exemption in place to cover any State Aid issues that may arise. With this in mind, we would be grateful if the Council adopted a flat levy rate for comparable sectors of the economy/use classes or, if it is not prepared to do so, providing an explanation as to why State Aid issues are not engaged by the setting of differential rates within use classes to the Inspector at the Inquiry.
Concerns about the Council's approach to setting CIL charges generally
The stated purpose of CIL is to raise revenue for infrastructure necessary to serve development. CIL is intended to address the imbalance of raising funds for infrastructure under the section 106 route, where larger schemes have effectively subsidised minor developments. However, CIL does not replace the section 106 revenue stream - it will simply provide additional revenue for infrastructure.

In light of this, we have some further concerns:




Concerns relating to change of use and conversion projects

The Council appears only to have taken the economics of regeneration projects into account when considering the strategic development areas as otherwise the viability assessments do not appear to have given any weight to this consideration (particularly for retail developments).

As you will be aware, Regulation 40 of the CIL Regulations only permits developers to deduct pre-existing floor space from the CIL calculation if it is 'in lawful use.' Lawful use is defined in Regulation 40 (10) and essentially requires part of a building to have been in use for a six month continuous period in the three years before the date of the planning permission permitting the development.

However, many regeneration projects on brownfield land or town centres involve demolishing, converting or redeveloping buildings that have lain vacant for some time. This is particularly true of schemes which involve changes of use from employment land, where the fact that a unit has been vacant for a considerable time is often a key factor in the Council's decision to grant planning permission for the scheme.

The Viability Study does not acknowledge that the economics of conversion schemes are very different to those of new build schemes. It is difficult to see how the Council can assess whether the imposition of CIL will put the majority of these schemes at risk without having considered its impact on their viability.

Asda's Suggestions

Flat Rate Levy

Accepting for the purpose of this argument the premise that CIL is necessary for the purpose of funding Borough-wide infrastructure, a much fairer solution would be to divide the Council's estimate of total infrastructure costs over the charging period (and in this connection, it is important to remember that the Government's guidance as recorded in the National Planning Policy Framework is that only deliverable infrastructure should be included) by the total expected development floor space and apply a flat rate levy across the Borough and across all forms of development. That will have the least possible adverse effect upon the market for land and for development, and yet the greatest possible opportunity for the economy to prosper and thrive and for jobs to be created.

The potential impact of a flat rate levy on the viability of those types of development which are not currently identified as viable could be balanced by the Council's implementation of Exceptional Circumstances Relief, as mentioned above.

Consequently, reducing the levy proposed per square metre on retail and residential floor space would not result in a proportionate increase in the levy required on other forms of commercial or other development. However, applying the current proposed levy could run the risk of diminishing substantially the number of such retail stores built, with a consequential loss of employment opportunities and investment.

Provision of Infrastructure as Payment in Kind

As stated above, the latest set of amendments to the CIL Regulations have now made it lawful for authorities CIL contributions to be paid by the provision of infrastructure in certain circumstances. Given that the provision of infrastructure is often key to unlocking unimplemented planning permissions and enabling developments, we would urge the Council seriously to consider adopting a policy to allow payment in kind in this manner.

CONCLUSION

For these reasons, we would ask that the Council undertakes a rethink of its position and substantially alters its Charging Schedule in so far as it relates to retail development.

Accordingly, we would request that the Council:

* Revisits its viability assessments for retail development, to address the concerns set out above;


* Adopts a realistic instalments policy;


* Considers the allowing developers to pay their CIL Liability through the provision of infrastructure; and

* Adopts a single flat rate levy across all development within its boundaries.

Comment

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21708

Received: 25/09/2014

Respondent: Rye Town Council

Representation:

National guidance indicates that the CIL will run in tandem with Section 106. However, what is not clear is the precise relationship between these two charges.

Some Charging Authorities have attempted to clarify this with a guidance table. Rye Town Council recommends that Rother District Council does similar.

Rye Town Council notes that there is no local guidance yet on enforcement/appeals. The draft schedule makes it clear that 'CIL is non-negotiable' and that there are significant powers and penalties to deal with failure to pay. Rye Town Council seeks advice on the situations where appeals by developers might be possible.

Full text:

S106 and CIL
National guidance indicates that the CIL will run in tandem with Section 106 obligations. Rye Town Council notes the remarks in the draft schedule about the intention not to 'double dip' (applying both CIL and S106). However, what is not clear is the precise relationship between these two charges.

Some Charging Authorities have attempted to clarify this with a guidance table (typical example below). Rye Town Council recommends that Rother District Council does similar.

Comparing CIL and s.106

Infrastructure funded by CIL -
Provision, improvement, replacement, operation or maintenance of:
Education facilities
Health care facilities
Clearly identified infrastructure projects (eg transport)
Public open space
Public sports & leisure
Community facilities (as identified in the Neighbourhood Plan)

Infrastructure funded by s106:
s106 for affordable housing
s106 for standard site/design mitigation
Development-specific mitigation
Public realm projects or types that are pre-defined
Employment & skills training

Guidance on Enforcement and Appeals
Rye Town Council notes that there is no local guidance yet on enforcement and
appeals. The draft schedule makes it clear that 'CIL is non-negotiable' and that there are significant powers and penalties to deal with failure to pay: Stop Notices, surcharges, late payment interest and prison terms.

Rye Town Council seeks advice on the situations where appeals by developers might be possible, which it understands might be in circumstances where the Council:
*incorrectly calculates the amount of CIL. (Before making the appeal the developer must first request an internal review by the Council).
*incorrectly apportions liability between landowners.
*incorrectly determines Charitable Relief.
*incorrectly applies surcharges.
*deems the development to have commenced when it did not.
*incorrectly issues a Stop Notice for non-payment

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21711

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

The draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21712

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

It is concluded that the PBA viability study lacks detailed information on non-commercial uses.

1.We recommend the report is reviewed to be clearer and more explicit. Assumptions/sources need to be cited and kept up-to-date;
2.Market evidence needs to be provided to support assumptions.
3.The build cost assumptions which are 19% cheaper than the BCIS benchmarks for supermarkets.
4.The finance rates are 7.5% (in report) but 7% (in appraisal).
5.An increased level of developers' profit is needed to reflect the risks involved.
6.There are no commercial appraisals/evidence as to how the CIL rates for convenience stores have been derived.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21714

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.

Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21715

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Report - Land Uses (Para 3.2.2/Para 5.1.3)

We agree with utilising the available evidence as the basis for the study. It is appropriate to review recent patterns of development, and planning policy to provide a broad indication of the future.

However, there is no analyses/information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing/changes in the foodstore market. The study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided.

With regards to the large superstore typology no commercial appraisals have been provided.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21716

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Report - Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21717

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Study - Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores/Supermarkets has been allowed for. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost of £1,524 psm; this equates to a percentage difference of circa 19%.
The viability study was completed in July 2014 and should reflect latest build costs figures.
An allowance of 10% has been included for externals; we would expect this to be in the region of 15% for a large convenience store.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21718

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Study - Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21719

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Study - Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for; within this figure we are assuming costs for a marketing campaign (circa 1%) and sales agents/legal fees (2%). There doesn't
appear to be letting agent/legal fees allowed for; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months within the appraisal.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21720

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Study - Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21721

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Study - Land for Non-Residential Uses (para 5.1.14-5.1.17) - We note the use of £430,000 per hectare up to £800,000 per hectare for non-residential development as the baseline figures (based on employment use). It is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is between £1.0-£1.5m per acre.

Landowners are likely to "hold-out" until they have explored potential returns fully, and may not sell if returns are below expectations. Landowners are likely to hold out for highest values and are unlikely to accept a reduction in value for CIL.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21722

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Study - CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1/Para 5.2.12) - The Tables shows potential CIL Surplus for retail convenience ranging between £151 psm to £158 psm. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience/£120 psm for out-of-centre convenience is recommended. There is no explanation as to how figures are arrived at or whether any sensitivity analysis has been undertaken.
There appears to be no evidence of sampling to support the proposed rates.
We consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates cannot be justified.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21723

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Study - Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21724

Received: 23/09/2014

Respondent: Wm Morrison Supermarkets Plc

Agent: Peacock & Smith Ltd

Representation:

CIL Viability Study - Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Full text:

Peacock and Smith have been instructed by our client, Wm Morrison Supermarkets Plc, to submit an objection to the proposed CIL rate of £100 or £120/sq. m. for Convenience Retail.

In our view, the draft CIL charge will put undue additional risk on the delivery of any such proposals and will be an unrealistic financial burden on new retail development. This, in turn, poses a significant threat to potential new investment and job creation in the local area at a time of economic recession and low levels of development activity. Our client is concerned that a balance has not been found between infrastructure funding requirements and viability and subsequently the suggested charge will have a significant adverse impact on the overall viability of future retail development in the district.

As part of this objection, Morrisons have also instructed Aspinall Verdi to review the CIL evidence base. Aspinall Verdi's comments are attached, which conclude that the PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. They conclude that the key elements to be reconsidered are:

1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derivedand given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge

This representation has been prepared in the context of the consultation that Rother District Council have launched in respect of their Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List (August 2014). We are instructed by W.M. Morrison Supermarkets
Plc. to make representations on their behalf.

Introduction
Aspinall Verdi Limited, Chartered Surveyors are property regeneration and development consultants with direct experience of advising both public and private sector clients with respect to development viability, S106 and planning gain matters. The firm has a thorough understanding of property markets,
valuation and development economics and delivery.

This representation has been prepared by Parm Dosanjh, BSc (Hons), DipTP, MSc, MRICS, MRTPI. Parm is a Director of AspinallVerdi and has over 15 years' experience in the planning and development consultancy sector. He is head of AspinallVerdi's London office and has advised on projects throughout
England. Parm also attended the Rother District Council's developer's workshop which was held on the 8th November 2013 and we subsequently submitted written comments to Peter Brett Associates (PBA) on the viability assumptions they had presented in respect of commercial developments. We note that a
couple of these comments/suggestions have been adopted; however, there a number which have been excluded; we address these in our response below.
This submission has been prepared with the support of Peacock & Smith town planning consultants to W.M. Morrison Plc.

For the purposes of these representations we have reviewed the following documents, prepared by or Rother District Council;

1. Community Infrastructure Levy - Economic Viability Assessment, Peter Brett Associate, Final Report July 2014
2. Community Infrastructure Levy - Preliminary Draft Charging Schedule and Regulation 123 List, Rother District Council, August 2014
3. Infrastructure Delivery Plan, Rother District Council, June 2014

General Comments
Prior to making specific comments in response to the consultation questions that have been raised we draw attention to the following:
1. Regulations and guidance for Local Authorities preparing their CIL Charging Schedules should be based on appropriate evidence. There is a lack of information/detail (e.g. the actual retail/commercial development appraisals are missing) provided in respect of the retail (and commercial) typologies making it difficult for us to understand how the CIL Charges have been derived, analysis all the assumptions (e.g. development timescales or contingency etc.) and
provide you with detailed comments. We strongly recommend that the development appraisals for the commercial typologies are made available for consultation.
2. The interrelationship of CIL and site specific S106 is critical to the commercial viability of development and regeneration projects such as foodstores. In many cases the foodstore is linked to a wider development scheme or masterplan involving other uses and infrastructure such as roads. Therefore the preparation and inclusion of infrastructure elements to the Regulation 123 List needs to be clearly defined and understood to avoid double counting. Typical 'site specific' S106/S278 costs that will be outwith the Regulation 123 List should be factored into the CIL Viability Modelling. We note that the PBA viability assessment refers to this issue; however, as mentioned in point 1 above we do not know what figures have actual been adopted in their viability models and whether these are sufficient/appropriate.
3. We note that a relatively significant amount of retail development is proposed within the plan and therefore, should the evidence base and viability work undertaken not support the level of CIL being proposed, then this would affect the delivery of the plan.
4. Request to be heard. Should any changes be made to the CIL Charging Schedule in relation to Use Class 'A' across the Authority boundary, then we would reserve the right to make representations and be heard.

Specific Comments

The following specific comments have been made referring to the paragraph numbers in the CIL: Viability Study Report.
Item (Paragraph Number)
Study Context & Viability (Para 2.1.1 to 2.1.4) -
We agree with the residual value approach adopted by PBA in their viability assessment and the references to the relationship with planning obligations and the need for those onsite (non S123 List) costs to be included within the appraisals. However, no information has been provided as what S106 assumptions have been adopted for the retail typologies and therefore we cannot comment as to whether these are appropriate or not.

Land Uses (Para 3.2.2 and Para 5.1.3) - We agree with utilising the available evidence as the basis for focussing the CIL study. We consider it appropriate to review recent patterns of development, and planning policy objectives to provide a broad indication of what may happen in the future. CIL after all is to be focussed on areas expecting development.
However, there appears to be no analyses or information provided of recent patterns of development, or the planning policy objectives relevant to convenience retailing, or changes in the foodstore market. In fact the study only refers to Large and Local Convenience Use (Para 5.1.3) and no floorspace figures are provided, therefore it is difficult to determine whether the proposed unit sizes for the convenience units are appropriate.
With regards to the large superstore typology we would expect this to be a
store of circa 5,000 sq m plus; given no commercial appraisals have been
provided we do not know what floorspace assumptions have been adopted.

Profit on Cost (Para 5.5.5) - We would suggest that the developers profit level for the retail foodstore option is increased to 25% on cost based on:
* Developer's site assembly risk;
* Holding costs and timescales to complete a development and secure returns can be very long;
* The complexity and timescales for developing significant mixed use development;
* Planning costs and risks (some of which could be abortive)

Build Costs (Para 5.1.6) - A build costs allowance of £1,265 psm for Superstores /Supermarkets has been allowed for; the costs have been derived from BCIS median. We have reviewed the latest BCIS build costs and for foodstore developments of between 1,000 and 7,000 sqm a build cost (median and rebased to the Rother area) of £1,524 psm; this equates to a percentage difference of circa 19% - which on a 5,000 sqm foodstore equates to an additional
£1,295,000 on the build cost alone; the other costs e.g. contingency., external and professionals fees which are linked to build costs would also increase; thus impacting on the surplus available for CIL. The same issue applies to the Local Convenience build costs, which is included at a figure of £1,100 psm compared to latest figures of £1,251 psm.
Given the viability study was only completed in July 2014, we would expect
the study to reflect the latest build costs figures.
An allowance of 10% has been included for externals; we would expect
this to be in the region of 15% for a large convenience store given the
significant investment into the provision of car parking and landscaping.

Finance (Para 5.1.10) - A finance rate of 7.5% is has been adopted; however, the appraisal summary for residential typology at Appendix B refers to a figure of 7% - which is the correct figure? Furthermore, reference is made to the fact that
the finance rate is applied to the total development costs; however, it is not clear where this includes land costs. A developer/operator would acquire the site, undertake design planning work and then construct the building. The holding costs of land therefore can themselves be critical.

Sales Costs (Para 5.1.11) - A marketing cost of 3% of GDV has been allowed for in the appraisals; within this figure we are assuming costs for an actual marketing campaign (circa 1%) and also sales agents and legal fees (2%). There doesn't
appear to be any letting agent or legal fees allowed for commercial uses; we would expect agency fees to be included at 10% of the first years rent and legal fees at 5% of the first years rents.
In addition, no allowance has been made for tenant inducements - we would expect a rent free period of at least 12 months to be allowed for within the appraisal.

Stamp Duty (Para 5.1.13) - Reference is made to Stamp Duty rates of between 0% and 4%; however, in reality the land costs associated with large convenience stores is likely to be in excess of £1m and therefore the variable rate of either 5% or more likely 7% (land value above £2m) should be adopted.

Land for Non- Residential Uses (para 5.1.14 to 5.1.17) - We note the use of £430,000 per hectare (£174,000 per acre) up to £800,000 per hectare (£324,000 per acre) for non-residential development as the baseline figures; these figures are based on employment use. However, it is not clear whether these figures have been adjusted for convenience retail uses; where the benchmark land value is more likely to be between £1.0 to £1.5m per acre. However no evidence has been provided to support the land value assumptions nor whether the appropriate adjustments have been made for convenience retail land values.
It is important to note that landowners are likely to "hold out" until they have
explored their potential returns fully, and may not sell the site if the proposed returns are below their expectations. In many cases landowners have not fully discounted the value of their land following the credit crunch and the land market correction is still taking place. This is particularly relevant for sites that have the potential for the delivery of convenience retail schemes. In the case of retail developments, landowners are likely to hold out for the highest value and are unlike to accept a reduction in their land value for CIL and therefore if values in the range referred to in para 5.1.16 have been adopted then these do not reflect market sentiment and need to be changed.

CIL Surplus & Proposed Rate (Tables 5.5,5.6,6.1 and Para 5.2.12) - The Tables shows the potential CIL Surplus for retail convenience developments ranging between £151 psm (Town Centre) to £158 psm for out of centre supermarket; these figures represent the maximum CIL surplus available. In paragraph 5.2.12 a CIL rate of £100 psm for town centre convenience and £120 psm for out of centre convenience is recommended and these are the rates that the local authority has put forward. There is no explanation as to how the figures are arrived at; for example the difference between the surpluses for town centre and out of centre convenience stores is only £8.00 psm; yet the difference in the
proposed CIL rate is £20.00psm; with the higher charged levied on the out of centre typology - no justification has been provided for these figures. Also, it is not clear whether any sensitivity analysis has been undertaken to arrive at these figures and therefore we question whether an 'Appropriate Balance' has been achieved.
CIL Guidance recommends that 'charging authority should directly sample
an appropriate range of types of sites across its area, in order to supplement existing data.' The guidance goes onto say that 'fine-grained sampling is also likely to be necessary where they wish to differentiate between categories or scales of intended use.' There appears to be no evidence provided of any sampling undertaken by the Council to support the proposed rates.
Given our comments on land values, build costs and other elements of the
development appraisals/evidence we consider that the Council has failed to achieve an 'Appropriate Balance' and that the proposed rates are set cannot be justified based on the evidence provided to date.

Appendix B - Assumptions Summary & Appendix C Sample Appraisal - The appraisal assumptions provided at Appendix B and the sample appraisal at Appendix C both relate to residential schemes, there does not appear to be a similar assumptions or appraisals provided for commercial schemes and therefore it is difficult for us to comment on the appropriateness of the proposed CIL Charge when we don't have all the information required to make an informed comment.

Appendix D - Sensitivity Analysis - The results of the sensitivity analysis illustrated in Figure D1 show that a 10% decrease in values would render convenience retail uses unviable; it is not clear as to whether the findings of this sensitivity analysis have been reflected in achieving the appropriate balance. Furthermore, only one variable has been tested and therefore build costs should also be factored into the sensitivity analysis in order to provide a more rounded view.

Summary and Conclusions
We are pleased to have been given this opportunity to comment on the Rother District Council CIL Preliminary Draft Charging Schedule. We would hope to be consulted further once the issues in this representation have been addressed.
The PBA viability study lacks detailed information on non-commercial uses making it difficult to provide a considered response. Further work and revisions are needed in order to reflect the observations above. We note the key elements to be reconsidered below:
1. We would recommend that the report is reviewed to be made clearer and more explicit. Assumptions and sources need to be cited and kept up to date;
2. Market evidence needs to be provided to support the assumptions used to develop the CIL rate.
3. The build cost assumptions which are approximately 19% cheaper than the BCIS benchmarks we have identified for supermarkets.
4. The finance rates set out in the report as 7.5% but have been included in the appraisal as 7%. Also it is not clear whether finance has been applied to land acquisition costs.
5. We would suggest an increased level of developers' profit to reflect the risks involved in retail development.
6. There are no commercial appraisals or evidence as to how the CIL rates of £100 psm and £120 psm for convenience stores have been derived and given the results of the sensitivity analysis it is clear that changes in values/costs could render schemes unviable and therefore we question whether a sufficient buffer has been allowed for in setting the CIL Charge.

Comment

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21731

Received: 25/09/2014

Respondent: Gladman Developments

Representation:

Gladman urge the Council to adopt an instalments policy for CIL payments as this will give developers the flexibility to pay contributions in line with development phasing and facilitate cash flow and therefore viability.

Gladman also remind the Council of the need to review CIL tariffs once these have been set.

Gladman believe that the Council need to have a clear understanding of the level of development to be brought forward in the plan when preparing the charging schedule as this will directly influence the scale of CIL. Without this the charging schedule will not reflect the relevant/true infrastructure needs.

Full text:

Introduction
Gladman Developments has considerable experience in the development industry in a number of sectors including residential and employment land. Gladman are aware that Rother Council have a Local Plan which has recently been found sound (subject to modifications) and that alongside this the Council are in the process of preparing a Community Infrastructure Levy for the area. This Consultation is for the PDCS stage of the CIL.

CIL is intended to have a positive effect on development. The latest CLG guidance notes that "The levy is expected to have a positive economic effect on development across a local plan area. When deciding the levy rates, an appropriate balance must be struck between additional investment for infrastructure to support development and the potential economic effect on the viability of developments...This balance is at the centre of the charge setting process" (Section 2.2, CLG Guidance, 2014).

In accordance with the latest CIL Regulations, the Council is required to strike an appropriate balance between the desirability of funding from CIL and the potential effects (taken as a whole) of the imposition of CIL on the economic viability of development across the local authority area. The Council must consider the impact of CIL together with the policies contained in the Local Plan on
developments within the borough when deciding an appropriate CIL rate.

Setting the levy at the appropriate rate will be key to ensuring that development comes forward in your local authority area and subsequently that the Local Plan is implemented. These representations address some key areas that local planning authorities must consider when preparing their CIL charging schedule, drawing on recent guidance produced by the CLG.

Funding gap / evidence base
Local planning authorities need to be able to demonstrate the infrastructure need and subsequent funding gap and must ensure that the level of total CIL receipts that could be generated through the levy reflects these true needs and the proposals in the Local Plan. The CIL should not be used by Council's as a mechanism for creating an unrealistic 'wish list' of infrastructure projects in their area.

When establishing a funding gap that CIL receipts are intended to contribute towards filling, it is vital that the Council take account of every possible income stream. This has to include an accurate assessment of future New Homes Bonus and council tax and business rates receipts generated as a result of new developments allocated in the Local Plan, as well as central government funding streams. This should also include an assessment of statutory undertakers' asset management plans, as these companies will at some stage be upgrading their systems/facilities. This also needs to be taken account of when assessing the infrastructure requirements of the authority.

The Council need to have an up to date, robust evidence base that fully justifies the infrastructure needs based on the amount of development that is required. Information on these infrastructure needs should, wherever possible, be drawn directly from the infrastructure planning that underpins the Development Plan, as this should identify the quantum and type of infrastructure required to realise their local development needs. If the authority's infrastructure planning is weak or out of date then the Council should undertake an exercise to refresh this. If the evidence base is not complete, robust and up to date the charging schedule will be unsound and the local planning authority will have difficulty adequately demonstrating their funding gap and subsequent CIL requirements.

The CLG guidance notes that: "Charging authorities should be able to show and
explain how their proposed Community Infrastructure Levy rate or rates will contribute towards the implementation of the relevant Plan, and support development across their area. Charging authorities will need to summarise their economic viability evidence. This evidence should be presented in a document (separate from the charging schedule) that shows the potential effects of the proposed levy rate or rates on the economic viability of development across the authority area" (Section 2:2:2:3, CLG Guidance, 2014).

It is important that in calculating the level of infrastructure the authority needs as a result of development the Council distinguishes between new and existing demands. New houses do not always create new pressure on infrastructure as evidence shows that a large proportion will be occupied by people already living in the borough, attending local schools, and registered with local GP surgeries. They will therefore require less infrastructure provision compared to new residents in the borough.

The available guidance makes it clear that CIL is expected to have a positive economic effect on development across an area in the medium to long term. As outlined in recent Inspector's Letters to East Devon District Council (April 2014), the CIL charging rates should not be set at such a level that would threaten development, and must be based on robust evidence and assumptions. The rate will also need to be appropriate over time, bearing in mind land values, market conditions and the wider economic climate change rapidly. The viability impact of incremental policy obligations, such as stepped Code for Sustainable Homes targets, must be assessed and reflected in the charging schedule.

The Council needs to ensure that they have a full understanding of the potential costs of infrastructure projects needed to meet the infrastructure needs. Gladman believe that it is inappropriate to set the levy based on a partial understanding of these infrastructure costs and in particular if the total money needed for infrastructure is unknown.

Differential charging rates
The CLG guidance notes that the use of differential charging rates can be an appropriate approach where there is clear viability evidence to justify this. The CIL regulations allow charging authorities to apply differential rates in a flexible way, to help ensure the viability of development is not put at risk.

The rules around the use of differential rates in the Charging Schedule are clear: they can only be applied in relation to different geographical zones in which development would be situated, related to different types of development, and/or scales of development. Furthermore as the Government's CIL guidance and inspectors have made clear, differential rates should be set "based on economic viability considerations alone, rather than any planning or any other public policy related choices" (Paragraph 14, Newark and Sherwood EIP report, August 2011), and "CIL is not intended to be a planning policy tool" (Paragraph 23, Huntingdonshire EIP report, April 2012). Charging schedules with differential rates should not have a disproportionate impact on particular sectors or specialist forms of development.

It is integral when setting differential rates for different geographical areas that these differential rates are based on accurate, up to date housing market intelligence forming the evidence base for this decision.

Discretionary Relief
Regulation 55 of the CIL Regulations allows local authorities to grant relief for exceptional circumstances from liability to pay CIL. Such provision should be factored into the Council's CIL and will avoid rendering sites with specific and exceptional cost burdens unviable should exceptional circumstances arise.

Payments in Kind
Regulations 73 and 73A of the CIL Regulations provides a mechanism for local authorities to accept infrastructure payments, or payments in kind, for land or infrastructure to be provided instead of money to satisfy a charge arising the levy. An allowance for infrastructure payments should therefore be made available by the Council, recognising that there may be time, cost and efficiency benefits in accepting land or infrastructure from parties liable for payment of the levy.

Requirement to consult
As with Local Plans, local planning authorities have an obligation to consult at various stages of the CIL preparation process. However, the guidance does not provide details as to the format that this consultation must take or length of the consultation period. Gladman echo the CIL guidance and would urge your local authority to engage with local developers and others in the property industry early and throughout the process. This will help your authority to gain opinions from the market to feed into the preparatory work.

Once the charging schedule is ready for Examination the local authority must publish the draft schedule for a further stage of formal public consultation. In accordance with the CIL Guidance this must be for a period of at least four weeks, although it is considered good practice to allow at least six weeks, and longer if the issues under consideration are particularly complex.

Examination
As outlined in Section 2:2:5:1 of the 2014 CLG guidance the charging authority must appoint the examiner. The examiner must be independent and have the appropriate qualifications and experience. The guidance confirms that a Planning Inspector would fulfil these criteria.

Conformity with the National Planning Policy Framework (NPPF)
The NPPF provides the current central government planning policy and requirements for local planning authorities to meet. The NPPF places emphasis on sustainable development and in particular ensuring that the objectively assessed needs of an area are met through the requirements and policies within the new Local Plan.

It is fundamental that the Council ensures that the proposed levy rates are realistic and not set too high. Arbitrarily high rates may jeopardise the delivery of housing schemes within the area. This would be contrary to the Government's aim outlined in the Framework to "significantly boost the supply of housing", as schemes may not come forward due to viability issues.

The Council's CIL charging rates must not threaten the overall delivery of the Local Plan, by making sites unviable. This point is reiterated in the CLG guidance, which states that "Charging authorities should set a rate which does not threaten the ability to develop viably the sites and scale of development identified in the relevant Plan" (Section 2:2, CLG Guidance, 2014).When testing the impact of CIL it is vital that the assumptions that underlie the standard residual valuation approach used to test the impact on viability of CIL are realistic and accurate.

This should include abnormal costs, contingency costs, preliminary costs, and developer profit, which should reflect the current level of risk perceived in the market.

Gladman would urge the Council to adopt an instalments policy for CIL payments as this will give developers the flexibility to pay contributions in line with development phasing schemes and will facilitate cash flow and therefore development viability. With this in mind, in accordance with Regulation 8(3A) of the CIL Regulations the Council should also accept the phasing of planning permissions, with each phase treated as a separate chargeable development.

Gladman also remind the Council of the need to review CIL tariffs once these have been set. The economic climate will inevitably change over the course of the plan period and as such the levy rates that can be set whilst ensuring development remains viable will also change. In accordance with the CLG guidance "Charging authorities must keep their charging schedules under review and should ensure that levy charges remain appropriate over time. For example charging schedules should take account of changes in market conditions, and remain relevant to the funding gap for the infrastructure needed to support the development of the area" (Section 2:2:6:3, CLG Guidance, 2014).

Gladman believe that the Council need to have a clear understanding of the level of residential development to be brought forward in the plan period when preparing the charging schedule as this will directly influence the scale of CIL that will be generated. Without this the charging schedule will not reflect the relevant and true infrastructure needs of the area.

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21741

Received: 26/09/2014

Respondent: McCarthy and Stone

Agent: The Planning Bureau Limited

Representation:

We consider that it is of vital importance that the emerging CIL does not prohibit the development of specialist accommodation for the elderly at a time when there is an existing and urgent need for this form of development and that by not properly assessing this form of development the proposed CIL rate would threaten the delivery of the relevant Development Plan contravening Government Guidance.

We therefore commend the Council on their decision to provide a Viability Assessment of Sheltered / Retirement housing and Extra Care accommodation.

Full text:

This is a representation on behalf of McCarthy & Stone Retirement Lifestyles Ltd. As the market leaders in the provision of retirement housing for sale to the elderly, McCarthy & Stone Retirement Lifestyles Ltd considers that with its extensive experience and expertise in providing development of this nature it is well placed to provide informed comments on the emerging Rother District Council Community Infrastructure Levy insofar as it affects or relates to housing for the elderly.

The CIL Guidance published in February 2014 by the Department for Communities and Local Government (DCLG) states consistently that 'In proposing a levy rate(s) charging authorities should show that the proposed rate o(or rates) would not threaten delivery of the relevant Plan as a whole' (Paragraph 29).

The CIL Guidance also stresses the importance of this principle to individual market sectors that play an important role in meeting housing need, housing supply and the delivery of the Development Plan, such as specialist accommodation for the elderly. This is relevant in the context of Paragraph 37 of the Guidance:

"... However, resulting charging schedules should not impact disproportionately on particular sectors or specialist forms of accommodation and charging Authorities should consider views of developers at an early stage".

Where the provision of specialist accommodation for the elderly plays a clear role in meeting housing needs in the emerging or extant Development Plan, as it does in the context of the Rother Local Development Framework, by not properly considering the effect of CIL on this form of development the Council would be putting the objective of the Development Plan at risk and thereby contravening Government Guidance.

Growing Elderly Population
The National Planning Policy Framework stipulates that the planning system should be 'supporting strong, vibrant and healthy communities' and highlights the need to 'deliver a wide choice of high quality homes, widen opportunities for home ownership and create sustainable, inclusive and mixed communities. Local planning authorities should plan for a mix of housing based on current and future demographic trends, market trends and the needs of different groups in the community...such as...older people' [emphasis added].

The recently published National Planning Practice Guidance reaffirms this in the guidance for assessing housing need in the plan making process entitled 'How should the needs for all types of housing be addressed?' (Paragraph: 021 Reference ID: 2a-021-20140306) and a separate subsection is provided for 'Housing for older people'. This stipulates that "the need to provide housing for older people is critical given the projected increase in the number of households aged 65 and over accounts for over half of the new households (Department for Communities and Local Government Household Projections 2013). Plan makers will need to consider the size, location and quantity of dwellings needed in the future for older people in order to allow them to move. This could free up houses that are under occupied. The age profile of the population can be drawn from the Census data. Projections of population and households by age group should also be used. The future needs of older persons housing broken down by tenure and type (e.g. Sheltered, enhanced sheltered, extra care, registered care) should be assessed and can be obtained from a number of online tool kits provided by the sector. The assessment should set out the level of need for residential institutions (use class C2). But identifying the need for particular types of general housing, such as bungalows, is equally important."

The "What Homes Where Toolkit" developed by the Home Builders Federation uses statistical data and projections from the Office of National Statistics (ONS) and the Department for Communities and Local Government (DCLG) to provide useful data on current and future housing needs. The table below has been replicated from the toolkit and shows the projected change to the demographic profile of Rother between 2008 and 2033

In line with the rest of the country, this toolkit demonstrates that the demographic profile of the Authority is projected to age. The proportion of the population aged 60 and over is projected to increase from 36.7% to 47.5% between 2008 and 2033. It should be taken into account that this is a significantly higher proportion of people over the age of 60 compared to average trends across the UK (27.8%). The largest proportional increases in the older population are expected to be of the 'frail' elderly, those aged 75 and over, who are more likely to require specialist care and accommodation provided by Extra Care accommodation.

The emerging Rother Core Strategy (20014) reflects this by identifying the demographic profile of the area is ageing, raising concerns over the future provision of adequate support and accommodation for the growing elderly population. The provision of suitable housing to meet the diverse needs of the population is addressed in Policy CO5: Supporting Older People which states that 'Initiative and developments will be supported which... Increases the range of available housing options with care and support services in accessible locations.' It is therefore clear that the development of specialist accommodation for the elderly is a priority for the Council.

In light of the above, we consider that it is of vital importance that the emerging CIL does not prohibit the development of specialist accommodation for the elderly at a time when there is an existing and urgent need for this form of development and that by not properly assessing this form of development the proposed CIL rate would threaten the delivery of the relevant Development Plan contravening Government Guidance.

We therefore commend the Council on their decision to provide a Viability Assessment of Sheltered / Retirement housing and Extra Care accommodation.

Several aspects of said appraisals however deeply concerning, these issues this will be covered in the remainder of this letter:

Land Values
A crucial element of such a CIL viability appraisal will be to ensure that the baseline land value against which the viability of the retirement scheme is assessed properly reflects the spatial pattern of land use in the locality

The average age of residents in retirement housing is around 79 years old, they are likely to have abandoned car ownership, be of lower mobility and/or rely on close proximity to public transport. For this reason retirement housing developers will not consider sites that are over a walking distance of approximately half a mile from a town or local centre with a good range of shops and services to meet a resident's daily needs. The result is that retirement housing can only be built on limited range of sites, typically high value, previously developed sites in close proximity to town centres. It is worth noting that the Community Infrastructure Levy Guidance recognises that previously developed sites are those where the CIL charge is likely to have the most effect, stating; The exercise should focus on strategic sites on which the relevant Plan (the Local Plan in England, Local Development Plan in Wales, and the London Plan in London )] relies, and those sites where the impact of the levy on economic viability is likely to be most significant (such as brownfield sites) (Paragraph 5, Chapter 2:2:2:4 How should development be valued for the purposes of the levy?).

A Viability Assessment for specialist accommodation for the elderly should therefore provide a development scenario on a previously developed site within 0.4 miles of a town centre. This is recognised in the Retirement Housing Group's briefing note (attached).

McCarthy and Stone typically develop sheltered /retirement housing schemes of between 40-50 units and Extra Care accommodation schemes at circa50-60 units as a critical mass of units is required to make the communal facilities and care provision feasible. Developments tend to be circa 3 storeys given the urban and suburban locations, surrounding storey heights and the needs of the user. We typically expect to see c40-50dph per floor of development for these schemes.

A 60 unit development as tested in the Peter Brett Associates Viability Assessment would therefore require a site of 0.5 hectares.

We have prepared the following table which compares the land cost of a typical 0.5ha site using the benchmark land values detailed in Viability Assessment.

Bexhill Urban Extension - (Benchmark Land Value per ha) £700,000
Bexhill Urban Extension - (Cost of a 0.5 ha site) £350,000
Bexhill / Hastings Fringe (Greenfield) - (Benchmark Land Value per ha) £725,000 Bexhill / Hastings Fringe (Greenfield) - (Cost of a 0.5 ha site) £362,500
West Bexhill - (Benchmark Land Value per ha) £850,000
West Bexhill - (Cost of a 0.5 ha site) £425,000
East Bexhill - (Benchmark Land Value per ha) £700,000
East Bexhill - (Cost of a 0.5 ha site) £350,000
Battle - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000
Rye - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000

Based on the above, it would appear that the land costs used in this appraisal have been significantly underplayed.

In our experience the land prices proposed significantly underplay the cost of a 0.5 hectare site in close proximity to a town centre. Sites located in these areas would inevitably benefit from an existing use, for example a commercial or residential property that is no longer fit for purpose, and the cost of land proposed would not in most instance meet the existing use value on such a use, let alone provide a reasonable uplift for a developer.

McCarthy and Stone have recently achieved planning permission at Hillborough House, Little Common, Bexhill (Application Ref: RR/2014/687/P) on the 14th July 2014. During viability negotiations for this scheme the DVS agreed that a suitable Benchmark Land Value for the scheme was £1,050,000 for the 0.49hectare site. This is comfortably double the Benchmark Land Values for West Bexhill detailed in the Viability appraisal.

Based on the above, it would appear that the land costs used for previously developed land have been significantly underplayed.

Site Abnormals
Previously developed sites regularly require extensive remediation / demolition works that are provided at an extra cost to developers. These do not appear to have been factored into the viability appraisals.

External costs are usually in the range of 10-15% so it would be appropriate to allow for an additional 5% on previously developed land to factor in abnormals.

Sustainability
We note the PBA viability appraisal utilises residential build costs derived from the Build Cost Information Service (BCIS). We have no objection to the use of this database.

We do dispute however that the BCIS cost are fully inclusive of Code for Sustainable Homes requirement (CfSH). This is because the BCIS figures are based on data collected over a 15 year period. We dispute that the market has been widely building to CfSH Levels 3 and 4 since 2009, in particular CfSH Level 4. It cannot therefore be the case that such costs fall within the BCIS figure.

We consider a 4% uplift on the BCIS costs is required to meet current building regulations. This was accepted by the DVS in the viability discussions on the Little Common site.

We also note that as of April 2014 the Building Regulations have effectively incorporated the enhanced energy requirements equivalent to CfSH Level 4.

Summary
In light of the above McCarthy and Stone are deeply sceptical about the results asserted by PBA in their Viability Assessment. Internal viability appraisals put forward by McCarthy and Stone demonstrate that the level of CIL proposed would render both Extra Care and Sheltered / Retirement housing unviable.

The Viability Appraisal provides scant details on the viability assumptions used for Sheltered / Retirement housing and in particular Extra Care accommodation we would appreciate the opportunity to examine the viability appraisals in greater detail and request that these are made publicly available.

Supporting documents submitted with the representations:
Final Assessment Report: http://www.rother.gov.uk/CHttpHandler.ashx?id=22394&p=0

RHG CIL Briefing Note: http://www.rother.gov.uk/CHttpHandler.ashx?id=22395&p=0

Rother BCIS June 2014: http://www.rother.gov.uk/CHttpHandler.ashx?id=22396&p=0

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21742

Received: 26/09/2014

Respondent: McCarthy and Stone

Agent: The Planning Bureau Limited

Representation:

A crucial element of a CIL viability appraisal is to ensure baseline land values reflect the spatial pattern of land-use in the locality

Retirement housing developers will not consider sites of more than half a mile from a town/local centre with a good range of shops/services to meet a resident's daily needs. The result is that retirement housing can only be built on a limited range of sites.

A Viability Assessment for specialist elderley accommodation should therefore provide a development scenario on a pdl site within 0.4 miles of a town centre.

The land costs used have been significantly underplayed.

Full text:

This is a representation on behalf of McCarthy & Stone Retirement Lifestyles Ltd. As the market leaders in the provision of retirement housing for sale to the elderly, McCarthy & Stone Retirement Lifestyles Ltd considers that with its extensive experience and expertise in providing development of this nature it is well placed to provide informed comments on the emerging Rother District Council Community Infrastructure Levy insofar as it affects or relates to housing for the elderly.

The CIL Guidance published in February 2014 by the Department for Communities and Local Government (DCLG) states consistently that 'In proposing a levy rate(s) charging authorities should show that the proposed rate o(or rates) would not threaten delivery of the relevant Plan as a whole' (Paragraph 29).

The CIL Guidance also stresses the importance of this principle to individual market sectors that play an important role in meeting housing need, housing supply and the delivery of the Development Plan, such as specialist accommodation for the elderly. This is relevant in the context of Paragraph 37 of the Guidance:

"... However, resulting charging schedules should not impact disproportionately on particular sectors or specialist forms of accommodation and charging Authorities should consider views of developers at an early stage".

Where the provision of specialist accommodation for the elderly plays a clear role in meeting housing needs in the emerging or extant Development Plan, as it does in the context of the Rother Local Development Framework, by not properly considering the effect of CIL on this form of development the Council would be putting the objective of the Development Plan at risk and thereby contravening Government Guidance.

Growing Elderly Population
The National Planning Policy Framework stipulates that the planning system should be 'supporting strong, vibrant and healthy communities' and highlights the need to 'deliver a wide choice of high quality homes, widen opportunities for home ownership and create sustainable, inclusive and mixed communities. Local planning authorities should plan for a mix of housing based on current and future demographic trends, market trends and the needs of different groups in the community...such as...older people' [emphasis added].

The recently published National Planning Practice Guidance reaffirms this in the guidance for assessing housing need in the plan making process entitled 'How should the needs for all types of housing be addressed?' (Paragraph: 021 Reference ID: 2a-021-20140306) and a separate subsection is provided for 'Housing for older people'. This stipulates that "the need to provide housing for older people is critical given the projected increase in the number of households aged 65 and over accounts for over half of the new households (Department for Communities and Local Government Household Projections 2013). Plan makers will need to consider the size, location and quantity of dwellings needed in the future for older people in order to allow them to move. This could free up houses that are under occupied. The age profile of the population can be drawn from the Census data. Projections of population and households by age group should also be used. The future needs of older persons housing broken down by tenure and type (e.g. Sheltered, enhanced sheltered, extra care, registered care) should be assessed and can be obtained from a number of online tool kits provided by the sector. The assessment should set out the level of need for residential institutions (use class C2). But identifying the need for particular types of general housing, such as bungalows, is equally important."

The "What Homes Where Toolkit" developed by the Home Builders Federation uses statistical data and projections from the Office of National Statistics (ONS) and the Department for Communities and Local Government (DCLG) to provide useful data on current and future housing needs. The table below has been replicated from the toolkit and shows the projected change to the demographic profile of Rother between 2008 and 2033

In line with the rest of the country, this toolkit demonstrates that the demographic profile of the Authority is projected to age. The proportion of the population aged 60 and over is projected to increase from 36.7% to 47.5% between 2008 and 2033. It should be taken into account that this is a significantly higher proportion of people over the age of 60 compared to average trends across the UK (27.8%). The largest proportional increases in the older population are expected to be of the 'frail' elderly, those aged 75 and over, who are more likely to require specialist care and accommodation provided by Extra Care accommodation.

The emerging Rother Core Strategy (20014) reflects this by identifying the demographic profile of the area is ageing, raising concerns over the future provision of adequate support and accommodation for the growing elderly population. The provision of suitable housing to meet the diverse needs of the population is addressed in Policy CO5: Supporting Older People which states that 'Initiative and developments will be supported which... Increases the range of available housing options with care and support services in accessible locations.' It is therefore clear that the development of specialist accommodation for the elderly is a priority for the Council.

In light of the above, we consider that it is of vital importance that the emerging CIL does not prohibit the development of specialist accommodation for the elderly at a time when there is an existing and urgent need for this form of development and that by not properly assessing this form of development the proposed CIL rate would threaten the delivery of the relevant Development Plan contravening Government Guidance.

We therefore commend the Council on their decision to provide a Viability Assessment of Sheltered / Retirement housing and Extra Care accommodation.

Several aspects of said appraisals however deeply concerning, these issues this will be covered in the remainder of this letter:

Land Values
A crucial element of such a CIL viability appraisal will be to ensure that the baseline land value against which the viability of the retirement scheme is assessed properly reflects the spatial pattern of land use in the locality

The average age of residents in retirement housing is around 79 years old, they are likely to have abandoned car ownership, be of lower mobility and/or rely on close proximity to public transport. For this reason retirement housing developers will not consider sites that are over a walking distance of approximately half a mile from a town or local centre with a good range of shops and services to meet a resident's daily needs. The result is that retirement housing can only be built on limited range of sites, typically high value, previously developed sites in close proximity to town centres. It is worth noting that the Community Infrastructure Levy Guidance recognises that previously developed sites are those where the CIL charge is likely to have the most effect, stating; The exercise should focus on strategic sites on which the relevant Plan (the Local Plan in England, Local Development Plan in Wales, and the London Plan in London )] relies, and those sites where the impact of the levy on economic viability is likely to be most significant (such as brownfield sites) (Paragraph 5, Chapter 2:2:2:4 How should development be valued for the purposes of the levy?).

A Viability Assessment for specialist accommodation for the elderly should therefore provide a development scenario on a previously developed site within 0.4 miles of a town centre. This is recognised in the Retirement Housing Group's briefing note (attached).

McCarthy and Stone typically develop sheltered /retirement housing schemes of between 40-50 units and Extra Care accommodation schemes at circa50-60 units as a critical mass of units is required to make the communal facilities and care provision feasible. Developments tend to be circa 3 storeys given the urban and suburban locations, surrounding storey heights and the needs of the user. We typically expect to see c40-50dph per floor of development for these schemes.

A 60 unit development as tested in the Peter Brett Associates Viability Assessment would therefore require a site of 0.5 hectares.

We have prepared the following table which compares the land cost of a typical 0.5ha site using the benchmark land values detailed in Viability Assessment.

Bexhill Urban Extension - (Benchmark Land Value per ha) £700,000
Bexhill Urban Extension - (Cost of a 0.5 ha site) £350,000
Bexhill / Hastings Fringe (Greenfield) - (Benchmark Land Value per ha) £725,000 Bexhill / Hastings Fringe (Greenfield) - (Cost of a 0.5 ha site) £362,500
West Bexhill - (Benchmark Land Value per ha) £850,000
West Bexhill - (Cost of a 0.5 ha site) £425,000
East Bexhill - (Benchmark Land Value per ha) £700,000
East Bexhill - (Cost of a 0.5 ha site) £350,000
Battle - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000
Rye - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000

Based on the above, it would appear that the land costs used in this appraisal have been significantly underplayed.

In our experience the land prices proposed significantly underplay the cost of a 0.5 hectare site in close proximity to a town centre. Sites located in these areas would inevitably benefit from an existing use, for example a commercial or residential property that is no longer fit for purpose, and the cost of land proposed would not in most instance meet the existing use value on such a use, let alone provide a reasonable uplift for a developer.

McCarthy and Stone have recently achieved planning permission at Hillborough House, Little Common, Bexhill (Application Ref: RR/2014/687/P) on the 14th July 2014. During viability negotiations for this scheme the DVS agreed that a suitable Benchmark Land Value for the scheme was £1,050,000 for the 0.49hectare site. This is comfortably double the Benchmark Land Values for West Bexhill detailed in the Viability appraisal.

Based on the above, it would appear that the land costs used for previously developed land have been significantly underplayed.

Site Abnormals
Previously developed sites regularly require extensive remediation / demolition works that are provided at an extra cost to developers. These do not appear to have been factored into the viability appraisals.

External costs are usually in the range of 10-15% so it would be appropriate to allow for an additional 5% on previously developed land to factor in abnormals.

Sustainability
We note the PBA viability appraisal utilises residential build costs derived from the Build Cost Information Service (BCIS). We have no objection to the use of this database.

We do dispute however that the BCIS cost are fully inclusive of Code for Sustainable Homes requirement (CfSH). This is because the BCIS figures are based on data collected over a 15 year period. We dispute that the market has been widely building to CfSH Levels 3 and 4 since 2009, in particular CfSH Level 4. It cannot therefore be the case that such costs fall within the BCIS figure.

We consider a 4% uplift on the BCIS costs is required to meet current building regulations. This was accepted by the DVS in the viability discussions on the Little Common site.

We also note that as of April 2014 the Building Regulations have effectively incorporated the enhanced energy requirements equivalent to CfSH Level 4.

Summary
In light of the above McCarthy and Stone are deeply sceptical about the results asserted by PBA in their Viability Assessment. Internal viability appraisals put forward by McCarthy and Stone demonstrate that the level of CIL proposed would render both Extra Care and Sheltered / Retirement housing unviable.

The Viability Appraisal provides scant details on the viability assumptions used for Sheltered / Retirement housing and in particular Extra Care accommodation we would appreciate the opportunity to examine the viability appraisals in greater detail and request that these are made publicly available.

Supporting documents submitted with the representations:
Final Assessment Report: http://www.rother.gov.uk/CHttpHandler.ashx?id=22394&p=0

RHG CIL Briefing Note: http://www.rother.gov.uk/CHttpHandler.ashx?id=22395&p=0

Rother BCIS June 2014: http://www.rother.gov.uk/CHttpHandler.ashx?id=22396&p=0

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21743

Received: 26/09/2014

Respondent: McCarthy and Stone

Agent: The Planning Bureau Limited

Representation:

Site Abnormals
Previously developed sites regularly require extensive remediation / demolition works that are provided at an extra cost to developers. These do not appear to have been factored into the viability appraisals.

External costs are usually in the range of 10-15% so it would be appropriate to allow for an additional 5% on previously developed land to factor in abnormals.

Full text:

This is a representation on behalf of McCarthy & Stone Retirement Lifestyles Ltd. As the market leaders in the provision of retirement housing for sale to the elderly, McCarthy & Stone Retirement Lifestyles Ltd considers that with its extensive experience and expertise in providing development of this nature it is well placed to provide informed comments on the emerging Rother District Council Community Infrastructure Levy insofar as it affects or relates to housing for the elderly.

The CIL Guidance published in February 2014 by the Department for Communities and Local Government (DCLG) states consistently that 'In proposing a levy rate(s) charging authorities should show that the proposed rate o(or rates) would not threaten delivery of the relevant Plan as a whole' (Paragraph 29).

The CIL Guidance also stresses the importance of this principle to individual market sectors that play an important role in meeting housing need, housing supply and the delivery of the Development Plan, such as specialist accommodation for the elderly. This is relevant in the context of Paragraph 37 of the Guidance:

"... However, resulting charging schedules should not impact disproportionately on particular sectors or specialist forms of accommodation and charging Authorities should consider views of developers at an early stage".

Where the provision of specialist accommodation for the elderly plays a clear role in meeting housing needs in the emerging or extant Development Plan, as it does in the context of the Rother Local Development Framework, by not properly considering the effect of CIL on this form of development the Council would be putting the objective of the Development Plan at risk and thereby contravening Government Guidance.

Growing Elderly Population
The National Planning Policy Framework stipulates that the planning system should be 'supporting strong, vibrant and healthy communities' and highlights the need to 'deliver a wide choice of high quality homes, widen opportunities for home ownership and create sustainable, inclusive and mixed communities. Local planning authorities should plan for a mix of housing based on current and future demographic trends, market trends and the needs of different groups in the community...such as...older people' [emphasis added].

The recently published National Planning Practice Guidance reaffirms this in the guidance for assessing housing need in the plan making process entitled 'How should the needs for all types of housing be addressed?' (Paragraph: 021 Reference ID: 2a-021-20140306) and a separate subsection is provided for 'Housing for older people'. This stipulates that "the need to provide housing for older people is critical given the projected increase in the number of households aged 65 and over accounts for over half of the new households (Department for Communities and Local Government Household Projections 2013). Plan makers will need to consider the size, location and quantity of dwellings needed in the future for older people in order to allow them to move. This could free up houses that are under occupied. The age profile of the population can be drawn from the Census data. Projections of population and households by age group should also be used. The future needs of older persons housing broken down by tenure and type (e.g. Sheltered, enhanced sheltered, extra care, registered care) should be assessed and can be obtained from a number of online tool kits provided by the sector. The assessment should set out the level of need for residential institutions (use class C2). But identifying the need for particular types of general housing, such as bungalows, is equally important."

The "What Homes Where Toolkit" developed by the Home Builders Federation uses statistical data and projections from the Office of National Statistics (ONS) and the Department for Communities and Local Government (DCLG) to provide useful data on current and future housing needs. The table below has been replicated from the toolkit and shows the projected change to the demographic profile of Rother between 2008 and 2033

In line with the rest of the country, this toolkit demonstrates that the demographic profile of the Authority is projected to age. The proportion of the population aged 60 and over is projected to increase from 36.7% to 47.5% between 2008 and 2033. It should be taken into account that this is a significantly higher proportion of people over the age of 60 compared to average trends across the UK (27.8%). The largest proportional increases in the older population are expected to be of the 'frail' elderly, those aged 75 and over, who are more likely to require specialist care and accommodation provided by Extra Care accommodation.

The emerging Rother Core Strategy (20014) reflects this by identifying the demographic profile of the area is ageing, raising concerns over the future provision of adequate support and accommodation for the growing elderly population. The provision of suitable housing to meet the diverse needs of the population is addressed in Policy CO5: Supporting Older People which states that 'Initiative and developments will be supported which... Increases the range of available housing options with care and support services in accessible locations.' It is therefore clear that the development of specialist accommodation for the elderly is a priority for the Council.

In light of the above, we consider that it is of vital importance that the emerging CIL does not prohibit the development of specialist accommodation for the elderly at a time when there is an existing and urgent need for this form of development and that by not properly assessing this form of development the proposed CIL rate would threaten the delivery of the relevant Development Plan contravening Government Guidance.

We therefore commend the Council on their decision to provide a Viability Assessment of Sheltered / Retirement housing and Extra Care accommodation.

Several aspects of said appraisals however deeply concerning, these issues this will be covered in the remainder of this letter:

Land Values
A crucial element of such a CIL viability appraisal will be to ensure that the baseline land value against which the viability of the retirement scheme is assessed properly reflects the spatial pattern of land use in the locality

The average age of residents in retirement housing is around 79 years old, they are likely to have abandoned car ownership, be of lower mobility and/or rely on close proximity to public transport. For this reason retirement housing developers will not consider sites that are over a walking distance of approximately half a mile from a town or local centre with a good range of shops and services to meet a resident's daily needs. The result is that retirement housing can only be built on limited range of sites, typically high value, previously developed sites in close proximity to town centres. It is worth noting that the Community Infrastructure Levy Guidance recognises that previously developed sites are those where the CIL charge is likely to have the most effect, stating; The exercise should focus on strategic sites on which the relevant Plan (the Local Plan in England, Local Development Plan in Wales, and the London Plan in London )] relies, and those sites where the impact of the levy on economic viability is likely to be most significant (such as brownfield sites) (Paragraph 5, Chapter 2:2:2:4 How should development be valued for the purposes of the levy?).

A Viability Assessment for specialist accommodation for the elderly should therefore provide a development scenario on a previously developed site within 0.4 miles of a town centre. This is recognised in the Retirement Housing Group's briefing note (attached).

McCarthy and Stone typically develop sheltered /retirement housing schemes of between 40-50 units and Extra Care accommodation schemes at circa50-60 units as a critical mass of units is required to make the communal facilities and care provision feasible. Developments tend to be circa 3 storeys given the urban and suburban locations, surrounding storey heights and the needs of the user. We typically expect to see c40-50dph per floor of development for these schemes.

A 60 unit development as tested in the Peter Brett Associates Viability Assessment would therefore require a site of 0.5 hectares.

We have prepared the following table which compares the land cost of a typical 0.5ha site using the benchmark land values detailed in Viability Assessment.

Bexhill Urban Extension - (Benchmark Land Value per ha) £700,000
Bexhill Urban Extension - (Cost of a 0.5 ha site) £350,000
Bexhill / Hastings Fringe (Greenfield) - (Benchmark Land Value per ha) £725,000 Bexhill / Hastings Fringe (Greenfield) - (Cost of a 0.5 ha site) £362,500
West Bexhill - (Benchmark Land Value per ha) £850,000
West Bexhill - (Cost of a 0.5 ha site) £425,000
East Bexhill - (Benchmark Land Value per ha) £700,000
East Bexhill - (Cost of a 0.5 ha site) £350,000
Battle - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000
Rye - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000

Based on the above, it would appear that the land costs used in this appraisal have been significantly underplayed.

In our experience the land prices proposed significantly underplay the cost of a 0.5 hectare site in close proximity to a town centre. Sites located in these areas would inevitably benefit from an existing use, for example a commercial or residential property that is no longer fit for purpose, and the cost of land proposed would not in most instance meet the existing use value on such a use, let alone provide a reasonable uplift for a developer.

McCarthy and Stone have recently achieved planning permission at Hillborough House, Little Common, Bexhill (Application Ref: RR/2014/687/P) on the 14th July 2014. During viability negotiations for this scheme the DVS agreed that a suitable Benchmark Land Value for the scheme was £1,050,000 for the 0.49hectare site. This is comfortably double the Benchmark Land Values for West Bexhill detailed in the Viability appraisal.

Based on the above, it would appear that the land costs used for previously developed land have been significantly underplayed.

Site Abnormals
Previously developed sites regularly require extensive remediation / demolition works that are provided at an extra cost to developers. These do not appear to have been factored into the viability appraisals.

External costs are usually in the range of 10-15% so it would be appropriate to allow for an additional 5% on previously developed land to factor in abnormals.

Sustainability
We note the PBA viability appraisal utilises residential build costs derived from the Build Cost Information Service (BCIS). We have no objection to the use of this database.

We do dispute however that the BCIS cost are fully inclusive of Code for Sustainable Homes requirement (CfSH). This is because the BCIS figures are based on data collected over a 15 year period. We dispute that the market has been widely building to CfSH Levels 3 and 4 since 2009, in particular CfSH Level 4. It cannot therefore be the case that such costs fall within the BCIS figure.

We consider a 4% uplift on the BCIS costs is required to meet current building regulations. This was accepted by the DVS in the viability discussions on the Little Common site.

We also note that as of April 2014 the Building Regulations have effectively incorporated the enhanced energy requirements equivalent to CfSH Level 4.

Summary
In light of the above McCarthy and Stone are deeply sceptical about the results asserted by PBA in their Viability Assessment. Internal viability appraisals put forward by McCarthy and Stone demonstrate that the level of CIL proposed would render both Extra Care and Sheltered / Retirement housing unviable.

The Viability Appraisal provides scant details on the viability assumptions used for Sheltered / Retirement housing and in particular Extra Care accommodation we would appreciate the opportunity to examine the viability appraisals in greater detail and request that these are made publicly available.

Supporting documents submitted with the representations:
Final Assessment Report: http://www.rother.gov.uk/CHttpHandler.ashx?id=22394&p=0

RHG CIL Briefing Note: http://www.rother.gov.uk/CHttpHandler.ashx?id=22395&p=0

Rother BCIS June 2014: http://www.rother.gov.uk/CHttpHandler.ashx?id=22396&p=0

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21744

Received: 26/09/2014

Respondent: McCarthy and Stone

Agent: The Planning Bureau Limited

Representation:

We note the viability appraisal utilises residential build costs derived from the Build Cost Information Service (BCIS). We have no objection to the use of this.

We do dispute that the BCIS cost are fully inclusive of Code for Sustainable Homes requirement. This is because BCIS figures are based on data collected over a 15-year period. We dispute the market has been widely building to CfSH Levels 3 and 4 since 2009. It cannot therefore be that such costs fall within the BCIS figure.

We consider a 4% uplift on the BCIS costs is required to meet current building regulations.

Full text:

This is a representation on behalf of McCarthy & Stone Retirement Lifestyles Ltd. As the market leaders in the provision of retirement housing for sale to the elderly, McCarthy & Stone Retirement Lifestyles Ltd considers that with its extensive experience and expertise in providing development of this nature it is well placed to provide informed comments on the emerging Rother District Council Community Infrastructure Levy insofar as it affects or relates to housing for the elderly.

The CIL Guidance published in February 2014 by the Department for Communities and Local Government (DCLG) states consistently that 'In proposing a levy rate(s) charging authorities should show that the proposed rate o(or rates) would not threaten delivery of the relevant Plan as a whole' (Paragraph 29).

The CIL Guidance also stresses the importance of this principle to individual market sectors that play an important role in meeting housing need, housing supply and the delivery of the Development Plan, such as specialist accommodation for the elderly. This is relevant in the context of Paragraph 37 of the Guidance:

"... However, resulting charging schedules should not impact disproportionately on particular sectors or specialist forms of accommodation and charging Authorities should consider views of developers at an early stage".

Where the provision of specialist accommodation for the elderly plays a clear role in meeting housing needs in the emerging or extant Development Plan, as it does in the context of the Rother Local Development Framework, by not properly considering the effect of CIL on this form of development the Council would be putting the objective of the Development Plan at risk and thereby contravening Government Guidance.

Growing Elderly Population
The National Planning Policy Framework stipulates that the planning system should be 'supporting strong, vibrant and healthy communities' and highlights the need to 'deliver a wide choice of high quality homes, widen opportunities for home ownership and create sustainable, inclusive and mixed communities. Local planning authorities should plan for a mix of housing based on current and future demographic trends, market trends and the needs of different groups in the community...such as...older people' [emphasis added].

The recently published National Planning Practice Guidance reaffirms this in the guidance for assessing housing need in the plan making process entitled 'How should the needs for all types of housing be addressed?' (Paragraph: 021 Reference ID: 2a-021-20140306) and a separate subsection is provided for 'Housing for older people'. This stipulates that "the need to provide housing for older people is critical given the projected increase in the number of households aged 65 and over accounts for over half of the new households (Department for Communities and Local Government Household Projections 2013). Plan makers will need to consider the size, location and quantity of dwellings needed in the future for older people in order to allow them to move. This could free up houses that are under occupied. The age profile of the population can be drawn from the Census data. Projections of population and households by age group should also be used. The future needs of older persons housing broken down by tenure and type (e.g. Sheltered, enhanced sheltered, extra care, registered care) should be assessed and can be obtained from a number of online tool kits provided by the sector. The assessment should set out the level of need for residential institutions (use class C2). But identifying the need for particular types of general housing, such as bungalows, is equally important."

The "What Homes Where Toolkit" developed by the Home Builders Federation uses statistical data and projections from the Office of National Statistics (ONS) and the Department for Communities and Local Government (DCLG) to provide useful data on current and future housing needs. The table below has been replicated from the toolkit and shows the projected change to the demographic profile of Rother between 2008 and 2033

In line with the rest of the country, this toolkit demonstrates that the demographic profile of the Authority is projected to age. The proportion of the population aged 60 and over is projected to increase from 36.7% to 47.5% between 2008 and 2033. It should be taken into account that this is a significantly higher proportion of people over the age of 60 compared to average trends across the UK (27.8%). The largest proportional increases in the older population are expected to be of the 'frail' elderly, those aged 75 and over, who are more likely to require specialist care and accommodation provided by Extra Care accommodation.

The emerging Rother Core Strategy (20014) reflects this by identifying the demographic profile of the area is ageing, raising concerns over the future provision of adequate support and accommodation for the growing elderly population. The provision of suitable housing to meet the diverse needs of the population is addressed in Policy CO5: Supporting Older People which states that 'Initiative and developments will be supported which... Increases the range of available housing options with care and support services in accessible locations.' It is therefore clear that the development of specialist accommodation for the elderly is a priority for the Council.

In light of the above, we consider that it is of vital importance that the emerging CIL does not prohibit the development of specialist accommodation for the elderly at a time when there is an existing and urgent need for this form of development and that by not properly assessing this form of development the proposed CIL rate would threaten the delivery of the relevant Development Plan contravening Government Guidance.

We therefore commend the Council on their decision to provide a Viability Assessment of Sheltered / Retirement housing and Extra Care accommodation.

Several aspects of said appraisals however deeply concerning, these issues this will be covered in the remainder of this letter:

Land Values
A crucial element of such a CIL viability appraisal will be to ensure that the baseline land value against which the viability of the retirement scheme is assessed properly reflects the spatial pattern of land use in the locality

The average age of residents in retirement housing is around 79 years old, they are likely to have abandoned car ownership, be of lower mobility and/or rely on close proximity to public transport. For this reason retirement housing developers will not consider sites that are over a walking distance of approximately half a mile from a town or local centre with a good range of shops and services to meet a resident's daily needs. The result is that retirement housing can only be built on limited range of sites, typically high value, previously developed sites in close proximity to town centres. It is worth noting that the Community Infrastructure Levy Guidance recognises that previously developed sites are those where the CIL charge is likely to have the most effect, stating; The exercise should focus on strategic sites on which the relevant Plan (the Local Plan in England, Local Development Plan in Wales, and the London Plan in London )] relies, and those sites where the impact of the levy on economic viability is likely to be most significant (such as brownfield sites) (Paragraph 5, Chapter 2:2:2:4 How should development be valued for the purposes of the levy?).

A Viability Assessment for specialist accommodation for the elderly should therefore provide a development scenario on a previously developed site within 0.4 miles of a town centre. This is recognised in the Retirement Housing Group's briefing note (attached).

McCarthy and Stone typically develop sheltered /retirement housing schemes of between 40-50 units and Extra Care accommodation schemes at circa50-60 units as a critical mass of units is required to make the communal facilities and care provision feasible. Developments tend to be circa 3 storeys given the urban and suburban locations, surrounding storey heights and the needs of the user. We typically expect to see c40-50dph per floor of development for these schemes.

A 60 unit development as tested in the Peter Brett Associates Viability Assessment would therefore require a site of 0.5 hectares.

We have prepared the following table which compares the land cost of a typical 0.5ha site using the benchmark land values detailed in Viability Assessment.

Bexhill Urban Extension - (Benchmark Land Value per ha) £700,000
Bexhill Urban Extension - (Cost of a 0.5 ha site) £350,000
Bexhill / Hastings Fringe (Greenfield) - (Benchmark Land Value per ha) £725,000 Bexhill / Hastings Fringe (Greenfield) - (Cost of a 0.5 ha site) £362,500
West Bexhill - (Benchmark Land Value per ha) £850,000
West Bexhill - (Cost of a 0.5 ha site) £425,000
East Bexhill - (Benchmark Land Value per ha) £700,000
East Bexhill - (Cost of a 0.5 ha site) £350,000
Battle - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000
Rye - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000

Based on the above, it would appear that the land costs used in this appraisal have been significantly underplayed.

In our experience the land prices proposed significantly underplay the cost of a 0.5 hectare site in close proximity to a town centre. Sites located in these areas would inevitably benefit from an existing use, for example a commercial or residential property that is no longer fit for purpose, and the cost of land proposed would not in most instance meet the existing use value on such a use, let alone provide a reasonable uplift for a developer.

McCarthy and Stone have recently achieved planning permission at Hillborough House, Little Common, Bexhill (Application Ref: RR/2014/687/P) on the 14th July 2014. During viability negotiations for this scheme the DVS agreed that a suitable Benchmark Land Value for the scheme was £1,050,000 for the 0.49hectare site. This is comfortably double the Benchmark Land Values for West Bexhill detailed in the Viability appraisal.

Based on the above, it would appear that the land costs used for previously developed land have been significantly underplayed.

Site Abnormals
Previously developed sites regularly require extensive remediation / demolition works that are provided at an extra cost to developers. These do not appear to have been factored into the viability appraisals.

External costs are usually in the range of 10-15% so it would be appropriate to allow for an additional 5% on previously developed land to factor in abnormals.

Sustainability
We note the PBA viability appraisal utilises residential build costs derived from the Build Cost Information Service (BCIS). We have no objection to the use of this database.

We do dispute however that the BCIS cost are fully inclusive of Code for Sustainable Homes requirement (CfSH). This is because the BCIS figures are based on data collected over a 15 year period. We dispute that the market has been widely building to CfSH Levels 3 and 4 since 2009, in particular CfSH Level 4. It cannot therefore be the case that such costs fall within the BCIS figure.

We consider a 4% uplift on the BCIS costs is required to meet current building regulations. This was accepted by the DVS in the viability discussions on the Little Common site.

We also note that as of April 2014 the Building Regulations have effectively incorporated the enhanced energy requirements equivalent to CfSH Level 4.

Summary
In light of the above McCarthy and Stone are deeply sceptical about the results asserted by PBA in their Viability Assessment. Internal viability appraisals put forward by McCarthy and Stone demonstrate that the level of CIL proposed would render both Extra Care and Sheltered / Retirement housing unviable.

The Viability Appraisal provides scant details on the viability assumptions used for Sheltered / Retirement housing and in particular Extra Care accommodation we would appreciate the opportunity to examine the viability appraisals in greater detail and request that these are made publicly available.

Supporting documents submitted with the representations:
Final Assessment Report: http://www.rother.gov.uk/CHttpHandler.ashx?id=22394&p=0

RHG CIL Briefing Note: http://www.rother.gov.uk/CHttpHandler.ashx?id=22395&p=0

Rother BCIS June 2014: http://www.rother.gov.uk/CHttpHandler.ashx?id=22396&p=0

Object

Community Infrastructure Levy (CIL) Preliminary Draft Charging Schedule and Regulation 123 List

Representation ID: 21745

Received: 26/09/2014

Respondent: McCarthy and Stone

Agent: The Planning Bureau Limited

Representation:

McCarthy and Stone are deeply sceptical about the results asserted by PBA in their Viability Assessment. Internal viability appraisals put forward by McCarthy and Stone demonstrate that the level of CIL proposed would render both Extra Care and Sheltered / Retirement housing unviable.

The Viability Appraisal provides scant details on the viability assumptions used for Sheltered / Retirement housing and in particular Extra Care accommodation we would appreciate the opportunity to examine the viability appraisals in greater detail and request that these are made publicly available.

Full text:

This is a representation on behalf of McCarthy & Stone Retirement Lifestyles Ltd. As the market leaders in the provision of retirement housing for sale to the elderly, McCarthy & Stone Retirement Lifestyles Ltd considers that with its extensive experience and expertise in providing development of this nature it is well placed to provide informed comments on the emerging Rother District Council Community Infrastructure Levy insofar as it affects or relates to housing for the elderly.

The CIL Guidance published in February 2014 by the Department for Communities and Local Government (DCLG) states consistently that 'In proposing a levy rate(s) charging authorities should show that the proposed rate o(or rates) would not threaten delivery of the relevant Plan as a whole' (Paragraph 29).

The CIL Guidance also stresses the importance of this principle to individual market sectors that play an important role in meeting housing need, housing supply and the delivery of the Development Plan, such as specialist accommodation for the elderly. This is relevant in the context of Paragraph 37 of the Guidance:

"... However, resulting charging schedules should not impact disproportionately on particular sectors or specialist forms of accommodation and charging Authorities should consider views of developers at an early stage".

Where the provision of specialist accommodation for the elderly plays a clear role in meeting housing needs in the emerging or extant Development Plan, as it does in the context of the Rother Local Development Framework, by not properly considering the effect of CIL on this form of development the Council would be putting the objective of the Development Plan at risk and thereby contravening Government Guidance.

Growing Elderly Population
The National Planning Policy Framework stipulates that the planning system should be 'supporting strong, vibrant and healthy communities' and highlights the need to 'deliver a wide choice of high quality homes, widen opportunities for home ownership and create sustainable, inclusive and mixed communities. Local planning authorities should plan for a mix of housing based on current and future demographic trends, market trends and the needs of different groups in the community...such as...older people' [emphasis added].

The recently published National Planning Practice Guidance reaffirms this in the guidance for assessing housing need in the plan making process entitled 'How should the needs for all types of housing be addressed?' (Paragraph: 021 Reference ID: 2a-021-20140306) and a separate subsection is provided for 'Housing for older people'. This stipulates that "the need to provide housing for older people is critical given the projected increase in the number of households aged 65 and over accounts for over half of the new households (Department for Communities and Local Government Household Projections 2013). Plan makers will need to consider the size, location and quantity of dwellings needed in the future for older people in order to allow them to move. This could free up houses that are under occupied. The age profile of the population can be drawn from the Census data. Projections of population and households by age group should also be used. The future needs of older persons housing broken down by tenure and type (e.g. Sheltered, enhanced sheltered, extra care, registered care) should be assessed and can be obtained from a number of online tool kits provided by the sector. The assessment should set out the level of need for residential institutions (use class C2). But identifying the need for particular types of general housing, such as bungalows, is equally important."

The "What Homes Where Toolkit" developed by the Home Builders Federation uses statistical data and projections from the Office of National Statistics (ONS) and the Department for Communities and Local Government (DCLG) to provide useful data on current and future housing needs. The table below has been replicated from the toolkit and shows the projected change to the demographic profile of Rother between 2008 and 2033

In line with the rest of the country, this toolkit demonstrates that the demographic profile of the Authority is projected to age. The proportion of the population aged 60 and over is projected to increase from 36.7% to 47.5% between 2008 and 2033. It should be taken into account that this is a significantly higher proportion of people over the age of 60 compared to average trends across the UK (27.8%). The largest proportional increases in the older population are expected to be of the 'frail' elderly, those aged 75 and over, who are more likely to require specialist care and accommodation provided by Extra Care accommodation.

The emerging Rother Core Strategy (20014) reflects this by identifying the demographic profile of the area is ageing, raising concerns over the future provision of adequate support and accommodation for the growing elderly population. The provision of suitable housing to meet the diverse needs of the population is addressed in Policy CO5: Supporting Older People which states that 'Initiative and developments will be supported which... Increases the range of available housing options with care and support services in accessible locations.' It is therefore clear that the development of specialist accommodation for the elderly is a priority for the Council.

In light of the above, we consider that it is of vital importance that the emerging CIL does not prohibit the development of specialist accommodation for the elderly at a time when there is an existing and urgent need for this form of development and that by not properly assessing this form of development the proposed CIL rate would threaten the delivery of the relevant Development Plan contravening Government Guidance.

We therefore commend the Council on their decision to provide a Viability Assessment of Sheltered / Retirement housing and Extra Care accommodation.

Several aspects of said appraisals however deeply concerning, these issues this will be covered in the remainder of this letter:

Land Values
A crucial element of such a CIL viability appraisal will be to ensure that the baseline land value against which the viability of the retirement scheme is assessed properly reflects the spatial pattern of land use in the locality

The average age of residents in retirement housing is around 79 years old, they are likely to have abandoned car ownership, be of lower mobility and/or rely on close proximity to public transport. For this reason retirement housing developers will not consider sites that are over a walking distance of approximately half a mile from a town or local centre with a good range of shops and services to meet a resident's daily needs. The result is that retirement housing can only be built on limited range of sites, typically high value, previously developed sites in close proximity to town centres. It is worth noting that the Community Infrastructure Levy Guidance recognises that previously developed sites are those where the CIL charge is likely to have the most effect, stating; The exercise should focus on strategic sites on which the relevant Plan (the Local Plan in England, Local Development Plan in Wales, and the London Plan in London )] relies, and those sites where the impact of the levy on economic viability is likely to be most significant (such as brownfield sites) (Paragraph 5, Chapter 2:2:2:4 How should development be valued for the purposes of the levy?).

A Viability Assessment for specialist accommodation for the elderly should therefore provide a development scenario on a previously developed site within 0.4 miles of a town centre. This is recognised in the Retirement Housing Group's briefing note (attached).

McCarthy and Stone typically develop sheltered /retirement housing schemes of between 40-50 units and Extra Care accommodation schemes at circa50-60 units as a critical mass of units is required to make the communal facilities and care provision feasible. Developments tend to be circa 3 storeys given the urban and suburban locations, surrounding storey heights and the needs of the user. We typically expect to see c40-50dph per floor of development for these schemes.

A 60 unit development as tested in the Peter Brett Associates Viability Assessment would therefore require a site of 0.5 hectares.

We have prepared the following table which compares the land cost of a typical 0.5ha site using the benchmark land values detailed in Viability Assessment.

Bexhill Urban Extension - (Benchmark Land Value per ha) £700,000
Bexhill Urban Extension - (Cost of a 0.5 ha site) £350,000
Bexhill / Hastings Fringe (Greenfield) - (Benchmark Land Value per ha) £725,000 Bexhill / Hastings Fringe (Greenfield) - (Cost of a 0.5 ha site) £362,500
West Bexhill - (Benchmark Land Value per ha) £850,000
West Bexhill - (Cost of a 0.5 ha site) £425,000
East Bexhill - (Benchmark Land Value per ha) £700,000
East Bexhill - (Cost of a 0.5 ha site) £350,000
Battle - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000
Rye - (Benchmark Land Value per ha) £1,000,000
East Bexhill - (Cost of a 0.5 ha site) £500,000

Based on the above, it would appear that the land costs used in this appraisal have been significantly underplayed.

In our experience the land prices proposed significantly underplay the cost of a 0.5 hectare site in close proximity to a town centre. Sites located in these areas would inevitably benefit from an existing use, for example a commercial or residential property that is no longer fit for purpose, and the cost of land proposed would not in most instance meet the existing use value on such a use, let alone provide a reasonable uplift for a developer.

McCarthy and Stone have recently achieved planning permission at Hillborough House, Little Common, Bexhill (Application Ref: RR/2014/687/P) on the 14th July 2014. During viability negotiations for this scheme the DVS agreed that a suitable Benchmark Land Value for the scheme was £1,050,000 for the 0.49hectare site. This is comfortably double the Benchmark Land Values for West Bexhill detailed in the Viability appraisal.

Based on the above, it would appear that the land costs used for previously developed land have been significantly underplayed.

Site Abnormals
Previously developed sites regularly require extensive remediation / demolition works that are provided at an extra cost to developers. These do not appear to have been factored into the viability appraisals.

External costs are usually in the range of 10-15% so it would be appropriate to allow for an additional 5% on previously developed land to factor in abnormals.

Sustainability
We note the PBA viability appraisal utilises residential build costs derived from the Build Cost Information Service (BCIS). We have no objection to the use of this database.

We do dispute however that the BCIS cost are fully inclusive of Code for Sustainable Homes requirement (CfSH). This is because the BCIS figures are based on data collected over a 15 year period. We dispute that the market has been widely building to CfSH Levels 3 and 4 since 2009, in particular CfSH Level 4. It cannot therefore be the case that such costs fall within the BCIS figure.

We consider a 4% uplift on the BCIS costs is required to meet current building regulations. This was accepted by the DVS in the viability discussions on the Little Common site.

We also note that as of April 2014 the Building Regulations have effectively incorporated the enhanced energy requirements equivalent to CfSH Level 4.

Summary
In light of the above McCarthy and Stone are deeply sceptical about the results asserted by PBA in their Viability Assessment. Internal viability appraisals put forward by McCarthy and Stone demonstrate that the level of CIL proposed would render both Extra Care and Sheltered / Retirement housing unviable.

The Viability Appraisal provides scant details on the viability assumptions used for Sheltered / Retirement housing and in particular Extra Care accommodation we would appreciate the opportunity to examine the viability appraisals in greater detail and request that these are made publicly available.

Supporting documents submitted with the representations:
Final Assessment Report: http://www.rother.gov.uk/CHttpHandler.ashx?id=22394&p=0

RHG CIL Briefing Note: http://www.rother.gov.uk/CHttpHandler.ashx?id=22395&p=0

Rother BCIS June 2014: http://www.rother.gov.uk/CHttpHandler.ashx?id=22396&p=0