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The
NSE wants to raise £32Million
A rudimentary glance at the numbers suggests that they are hugely
"over-egged". The £32,000,000 cash injection sought
is equivalent to £210,500 for each of the 152 residents the
NSE want to accommodate in the future. According to figures from BCIS
(the information arm of the Royal Institute of Chartered Surveyors)
this astronomical some is more than enough to build two detached three-bedroom
houses for each and every one of the NSE's care residents. sense
has asked the NSE to justify its figures and we will publish and comment
on its answers when (and if) we get them.
In its 2nd Newsletter, when it said it required £25Million,
£17Million was for its care homes and £8Million for ancillaries.
At the point of actually submitting a planning application these figures
have risen to £18Million and £14Million respectively.
The original scheme was for the NSE to sell land to build 213 homes
- the £32Million scheme keeps this (very nearly) in place, but
adds an 85-person sheltered housing unit and a 70-person nursing home.
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The
Overall Finances of their Scheme
| The
NSE seeks to redevelop its its site. It says the cost is £32Million
and it will raise it in the following manner: |
| (a) |
Sale
of land for 218 dwelling housing estate |
£25.0M
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| (b) |
Sale
of land for elderly persons sheltered/nursing accommodation
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£4.8M
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| (c) |
Loans
from staff for new housing |
£1.5M
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| (d) |
Provided
from internal funds (fundraising) |
£1.0M
|
Part
A - The housing estate development.
From NSE-provided information the expected build cost is £20.5M
and the expected sales proceeds £64.9M. As well as the
cost of land of £25Million there are costs that sense
have estimated for professional fees, administration and interest
etc. to leave the property developer with an expected net profit
of £9.3Million.
From
sense's
calculations, this will provide accommodation for 726 people with
a net area per person of 305 square feet. There is an expectation
of over 400 cars associated with the proposed new population.
Part B - The private elderly persons' accommodation (155 people).
How much might it cost to build these?
-
If they were constructed on the same cost per person basis as
the 218 home housing estate in the costs would be: 155/726 x £20.46M,
i.e. £4.4M. (On the same basis the profit for the developer
would be £2M).
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If they were constructed on the same basis as the NSE's internal
care homes (set to house 152 people) the cost will be: 155/152
x £17.6M, i.e. £17.9M.
Could
these disparate results be financed?
-
In (1) above the total cost to the developer(s) is £9.2M.
At 6% interest per annum this works out at £68 per week
for each occupant. Additionally, depreciation on £4.4M capital
expenditure would need to be supported, and if amortised over
50 years this equates to £11 per resident per week. The
total of £79 per resident per week to be funded out of care
fee income is a little under the £104 suggested by the JRF
report detailed above, which allows for a realistic occupancy
rate under 100 percent. This works.
-
In (2) above the total capital cost to be financed is £22.7M
which, at 6% per annum, equates to £169 per resident per
week. The depreciation on £17.9M of building costs is £44
per resident per week when amortised over 50 years. The total
of £213 per resident per week is not commercially viable.
This
scenario provides an insight into the NSE's costings of £17.6M
in respect of its own 152 care residents.
Part
C - The NSE's Development
SENSE believe the cost of building the NSE's care homes have been
overstated. We note that the £17.6M stated in Appendix 1 of
their financial appraisal in planning application 2004/1030/CH is
not supported by any detailed workings. In fact information in their
application suggested a cost range with a maximum £14.4M. SENSE
considers even this lower sum excessive and we do not believe it can
be financed through normal NSE operations.
The NSE has said it is prepared to finance £1M out of the £32M
total. It proposes to do so by applying a year's fundraising/legacies/donations
(even though its development will take at least 6 years). It will
also seek £1.5Million from its staff. It says it has no
means to finance the remaining £29.5M except by a land sale.
If indeed it needed anywhere near £32M to comply with National
Care Standards (which is not accepted), could sums approaching £29.5M
achieved? With difficulty. Yet to offer nothing above £1Million
appears at odds with Mr Faulkner's comment "We now seek the
minimum sale of land to achieve the finance we believe is essential
to achieve standards demanded of us by Government." published
in his letter to the Bucks Free Press.
As noted above, SENSE believes that even £14.4M is excessive
for new build of the care homes. It will be obvious to most people
looking at the existing care homes that they do need to be replaced
over time. However, the balance of the £32M (i.e. £32M
- £14.4M = £17.6M) incorporates a "wish list"
of items that would be nice to have but are neither mandated by the
Care Standards Act nor affordable by the NSE in its normal day-to-day
operations. It is bizarre that the wish list is of greater value than
the core requirement.
SENSE cannot and do not begrudge the NSE's care residents any of the
items on the wish list, provided the NSE can afford them. Given that
the NSE is closing some of its older care homes, the footprint of
older buildings could be applied in some cases and then even the Green
Belt restrictions circumnavigated. The real issue is the financing.
Normal funding from local authorities does not stretch to items on
the wish list and the NSE appears not to want to apply its own funds
to provide those facilities. It is difficult to see why the local
Chalfont Common community should be asked to suffer direct harm as
a consequence of implementing the wish list that the NSE itself will
not support.
If the NSE's proposed £32M planning application were approved
it would rapidly find itself in the position of receiving residential
fee income that included a substantial contribution for periodic capital
replacement and yet would have no capital items to renew. The sum
involved, per JRF data, is £104 per care resident per week.
That equates to £5.4K p.a. for each care resident, an annual
total of £822K for 152 care residents. There will be negligible
capital expenditure required for at least ten years. This is worth
a minimum of £8.2M to the NSE over the next decade. No account
has been taken of this in the NSE's planning application. This is
a major oversight as it should be used to reduce any capital requirement.
This capital sum of £8.2M applies to the NSE's overall £32M
scheme or just to the rebuilding of the care homes in isolation. In
this latter case, capital replacement at 50 m2 of space per resident
(SENSE costing ranges £7M - £9M) is paid for entirely
out of the capital replacement element of local authority funding
over just ten years. Of course, the NSE could build to a more expansive
and/or higher specification, at a higher cost and still get a substantial
proportion of the redevelopment spend supported through non-disbursement
of residential care fee income.
The NSE also nets approximately £1.2M p.a. from donations, fund-raising
etc. It has included £1M from this source as its contribution
towards the £32M it says it needs, i.e. a single year's worth.
The NSE's scheme is forecast to take at least six years to complete,
so at least a further £7M could be applied, if the NSE so chose. |
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