Heygate Estate Maths

[Too Good To Be True]

According to Wikipedia, Southwark Council sold the 9 hectare (90,000 sq m) Heygate Estate for ?50m.

At the time my house and garden in Camberwell was worth about ?600k. My plot is 216 sq m.

Let's assume, generously in Southwark Council's favour, that land in E&C is worth the same as Camberwell and that the developer would be forced to build low density housing instead of tower blocks.

Let's assume the cost of constructing my house would be a third of its total value at the time, so ?200k.

Let's allow the developer a 15% profit margin for taking on the risk.

(?600k - ?200k) = ?400k / 216 sq m = ?1,850 per sq m for the land

(?1,850 * 90,000 sq m )/1.15 profit margin = ?145,000,000 value of Heygate Estate.

Have I made a mistake (other than my v generous assumptions about not building tower blocks/value of land in E&C)?

[Too Good To Be True]

Sorry this isn't strictly ED-specific, but Peter John is head of our council.

[Earl Aelfheah]

Southwark council sold the Heygate Estate for ?55m to private developer Lend lease. The cost of evicting tenants from the Heygate is set to be in the region of ?65m - meaning the sale (on our behalf) of a 22 acre site, has actually led to around a ?10m loss.

Lend Lease meanwhile, are expected to make around ?194m profit from the deal.

A number of former council officers involved in the negotiations with developer Lend Lease and are now full-time employees of Lend Lease.

Please join (and share) the campaign for an investigation into allegations of governance failure, poor financial management and potential fraud at the London Borough of Southwark: http://www.change.org/p/heygate-estate-scandal-demand-an-investigation

[Too Good To Be True]

Thanks. I've seen the other thread and I agree with almost everything written on it.

I'm starting this new thread because I'm interested solely in the basis Southwark used when determining the ?50m sale price and why this wasn't flagged up at the time.

[uncleglen]

None of this surprises me- there was massive 'irregularities' when the Docklands were regenerated in the '80s. It seems that anything to do with land and construction attracts the worst examples of fraud etc- and who loses out? The average local person every time.

[PokerTime]

It was flagged up at the time Too Good. New Labour were still in power and Nick Stanton, the then council leader was grilled on the Politics Show over it.

[miga]

.

[Henry_17]

TGBTT,

If you have not done so already, you can visit the developer's website, go to the projects tab, filter for UK, and review the considerable amount of information on this specific project under elephant and castle regeneration, which includes a figure for total project value of ?1.5bn.

If you are highly motivated on this topic, you may also want to review investor presentations and analyst conference call transcripts (which will be on the investor relations tab) from around and since the time of sale, as these may include further financial details on this specific or other comparable UK projects including costs and returns expected to be incurred/made.

At the least this should help you improve the assumptions you have made in your calculations while at best you may find specific disclosure by the company on this project.

Henry

[Too Good To Be True]

TBF I'm not highly motivated. If I were, I wouldn't be posting here! I'd be working for the FT or Private Eye.

?52 per sq ft where flats go for more than 10x that does look a little odd.

The trigger was a guy who sits next to me at work. He was once seconded to a bank working on PFI bids. He quit because he felt they were making the bids as complicated as possible in order to avoid scrutiny. He now works in a role where his job is to communicate complicated transactions in a simple transparent way to lay people. I thought I might have a go myself in the post above.