Executive Summary This report aims to analyse the property development process undertaken for the Advocate’s Close mega-redevelopment and conclude with an evaluation of its successes and failures using a scoring system of 0-10. This development is a unique example of a mega-project as it is defined as one through it’s complexities, not it’s value. How these complexities are handled will be analysed throughout the report using a critical evaluation framework, created through peer-reviewed literature. The framework predominantly revolves around the importance of the main actors, frontend planning (FEP), project impact & risk management. The employed evaluation framework has highlighted the importance of a thorough FEP phase in ensuring a successful project. With the principle developers extensive knowledge and prior experience in the site area, some of the initial challenges were quickly over-come. Paired with excellent networking to secure occupiers, made for a financially viable project. The impact this finished project has had, has been profound, with the Local Development Plan using the project as a precedent for all future developments in the world heritage zone and numerous local & global awards being received by developer & architect involved. However, the project is not without it’s imperfections. Securing the land was not planned well with an initial low offer losing them the bidding, risking a non-start to the project. After evaluating all factors highlighted in the framework, the project has been identified as a successful example of property development process.
1.0 Introduction
1.1 Project Summary 1.2 Defining a mega-project 1.3 Does Advocate’s Close fit the criteria? 1.4 Development Timeline
2.0 Developing Framework
10
3.0 Main Actors
12
4.0 Front End Planning (FEP)
20
5.0 Project Impact
32
6.0 Risk Management
34
7.0 Residual Valuation
38
8.0 Evaluation
39
9.0 Conclusion
40
10.0 Bibliography
42
2.1 Developing a Critical Framework 2.2 The Framework
3.1 Chris Stewart Group 3.2 Morgan McDonnell 3.3 George Sharkey & Sons 3.4 Interserve 3.5 Riddle PM 3.6 Thomas & Adamson 3.7 Will Rudd Engineering 3.8 Rybka 3.9 AOC Archaeology Group 3.10 Additional Minor Actors 3.11 Roles, Goals and Objectives 3.12 Defining Stakeholders 3.13 Project Governance 3.14 Commitment & Conflict
4.1 Introduction to FEP 4.2 Developing in Edinburgh 4.3 Site Identification 4.4 Securing the land 4.5 Feasibility 4.6 Funding 4.7 Application Structure 4.8 Innovation & Adaptation
5.1 Local Development 5.2 Local Social & Economic Value
6.1 Introduction to Risk Management 6.2 Endogenous Risks 6.3 Exogenous Risks
5
6
1. Introduction
6
1.1 Project Summary
1.2 Defining a mega-project
Advocate’s Close dates to before the 15th Century, its name derived from Sir James Stewart who was Lord Advocate of Scotland at that time. (Advocates Close, Wiki, 2021) It’s prominent location, connecting St Giles Cathedral and Cockburn Street, running perpendicular to Edinburgh’s Royal Mile in the traditional herring bone street style, combined with a framed view of the Scott monument, make it a popular location for tourism, loved by the locals. The redevelopment of the site, with it’s 11 stories, wealth of listed buildings, and historical significance, has understandably been a talking point in Edinburgh. The developer aimed to create a vibrant new quarter within a previously rundown part of the city. The reinstating of historical buildings with the continuation and expansion of the characteristic Edinburgh herringbone street pattern was essential in the vision for the project. The insertion of sensitive contemporary add-ons cleverly knits together previously underwhelming elements to unveil a new lease of life to the heart of the historic World Heritage site.
There are multiple definitions used in the UK to describe a mega-project. They are typically seen as large, complex and expensive projects which span over a long period and impact many people. (Flyvbjerg, 2014) As illuminated in ‘Megaproject Management’ by Virginia A. Greiman: a mega-project is not necessarily defined by the construction cost of over $1 billion as suggested by the FHWA (Federal Highway Administration, 2001). Instead, it is one which includes some of the 25 common characteristics (or more), listed in the book. This is further refined in ‘What you should know about mega-projects and why’ (Flyvbjerg, 2014), who distils these characteristics into 4 primary elements: aesthetical, technological, political and economic. “Recognizing and understanding the dynamics of megaprojects is a critical first step in planning for the uncertainty and ambiguity that make managing megaprojects a tremendous challenge.” (Greiman, V., 2011)
1.3 Does Advocate’s Close fit the criteria?
The project has been recognised as a prime example of redeveloping a historically significant area with a blend of contemporary architecture and preservation. Awards include RICS Project of the year 2015 & RIAS Best Building in Scotland 2014.
Advocate’s Close may not be seen as a mega-project at face value, yet when we delve into the details, it’s space in this category becomes clear. Juggling multiple listed buildings over several stories in one of the worlds most renowned World Heritage Site’s, with a rich history and prominent location, receiving affection from tourists and the public, saw the project win the RICS Project of the year 2015 & RIAS Best Building in Scotland 2014. As such, this project and it’s complexities make it an ideal mega-project to report on and learn from.
“The Advocate’s Close development is a shining example of how a once neglected part of the city can be truly transformed for the better of the surrounding community. Not only has this part of the city been restored in relation to its historic buildings and architecture,it’s been brought right up-to-date with contemporary additions.” Lynn Robinson, RICS Regional Director South
“There are many reasons for writing about megaprojects, but perhaps one of the most significant is to share the important lessons learned for future projects so that the workers, engineers, contractors, government policy makers, project management professionals, and the communities impacted by these large-scale projects will benefit from the challenges that others before them faced.” (Greiman, V., 2011, pp.xiii)
7
fig. 1- Development Timeline
8
9
2.
Developing Framework
10
2.1 Developing a Critical Framework In order to evaluate the success of Chris Stewart Group’s Advocate’s Close development, an analytical framework has been devised. Individual aspects of this project have been evaluated and given a score from 0-10, with 10 being the most successful potential outcome. The outcome of these evaluations should highlight the strengths and weaknesses, which will additionally aid in concluding whether the project was a successful one. The critical analytical framework below was developed by reading reference texts on what the key aspects of a mega-project are and selecting the particularly interesting and relevant ones for this project.
2.2 The Framework
Main Actors Front End Planning Project Impact Risk Management
(Greiman, V., 2011) (Reed and Sims, 2014) (APM 2019)
(Morgan McDonnell, 2015)
11
3. Main Actors
12
3.1 Chris Stewart Group
3.2 Morgan McDonnell
Chris Stewart founded the development, investment and operations company in the early 2000’s. With more than 200 staff across Scotland, they have become one of the largest companies of their type; predominantly working in Edinburgh with a diverse portfolio of over £300 million. Their main office is now within the Advocate’s Close development. (Chris Stewart Group, 2021) Chris states in an interview with the Scotsman newspaper, “We’re not mainstream investors, we
Morgan McDonnell were formed in 1996 by Guy Morgan & Anthony McDonnell after graduating Architecture together. (Morgan McDonnell Ltd, 2021) The studio is a registered practice with the RIBA and provides a wide array of architectural services including master-planning, interior design and sales suite/show home design. This was (and still is) the largest project Morgan McDonnell had worked on. This project led them to win several highly prestigious awards including RIAS Best Building in Scotland 2014 and winner at the Scottish Property Awards 2014. (Morgan McDonnell,
like multi-sector city centre regeneration sites.” (The Scotsman, 2015).
Who we are, 2021)
3.3 George Sharkey & Sons
3.4 Interserve
George Sharkey & Sons, founded in 1969, are an Edinburgh based contractor. They focus on fit out, refurbishment and new build construction in office, hotel, health, education, and retail sectors. They were involved during phase 1 of the development which seen five buildings, including an old Edinburgh Council office building, combined to create the first Motel One hotel in the UK. Now known simply as Sharkey, they have gone on to become a well-established contractor, working throughout the UK. “Sharkey’s approach is founded
A long-established multinational company, based in the UK and formed in 1884. They have a capable force with over 60,000 employees and a net income of £128m (2018 figures), ready to take on nearly any project from mega-infrastructural to schools. (Who we are, 2021) The contractor was brought on for phase 2 of the development focussed on the mixed-use part of the project; 6 existing buildings turned into a restaurant, apartments, and offices. They went into administration in 2019, being plagued with problem contracts. It was then bought over my Mitie in 2020 and parts sold to Altrad in France. (Interserve - Wikipedia, 2021)
on four core values; Do the right thing, Do it the right way, Do it together, Do it better” (Sharkey, 2021)
13
3.5 Riddell PM
3.6 Thomas & Adamson
Riddell PM is a construction project management company in Dumfermline, Scotland. With 27 years of experience, they have worked with large companies such as Balfour Beatty and Kier Group on a diverse portfolio of projects including Hotels, Education, health, Transport, Leisure and Commercial. Riddell was CDM Advisor & project manage Phase 2 of the development. Also producing building fabric operation and maintenance manuals (O&M manual’s) for the users, including one for Chris Stewart Group and Morgan McDonnell architects who took on an office space in the finished complex. (Riddell, 2021)
Thomas & Adamson are a UK & Dubai based Quantity Surveyor who were chosen to perform Cost Management for the Advocates Close project. They also assisted in project management & CDMC services for Phase 1 of the development. The company has a proven track record with many developments and has continued to work with Chris Stewart Group on a number of projects after the completion of Advocates Close.
3.7 Will Rudd Engineering
3.8 Rybka
Will Russ is a construction consultant with a proven record in structural & civil engineering. They also have extensive knowledge in structural forensics, environmental master planning & legal with a member qualified through ACIArb (Associate of the Chartered Institute of Arbitrators). (Our
Rybka Battle have been established since the 1930’s as a Building Services Engineering consultancy in Scotland & Canada. In 2004, the company left their parent company through a buyout scheme to be a stand-alone consultant. They now pride themselves in offering low carbon solutions in a wide range of projects across Scotland & London. The Advocate’s Close project was their first major project as a the standalone Rybka. They have now become renowned for their commitment to low carbon design. (RYBKA - Low Energy, Building
“Confident, honest, responsible, supportive; we invest in our values... feel part of the team and ensure that trusted, long-term working relationships develop.” (Thomas & Adamson, 2021)
Services - Will Rudd, 2021)
With such an array of knowledge, they were fitting for the role in this complex and mixed project from beginning to end. They have gone on to expand their offices from Edinburgh to cover Glasgow and Ireland.
Services & Sustainability Consultancy, 2021)
14
3.9 AOC Archaeology Group
3.10 Additional Minor Actors
AOC Archaeology Group cover a wide array of services including heritage, conservation requirements and archaeological interest. AOC can be described as one of the most established archaeology companies in the UK since its formation in 1991, boasting 5 offices and over 100 employees. (AOC Archaeology Group, 2021) They are registered with CIfA (Chartered Institutre for Archaeologists), NEBOSH and SAFE Contractor accredited. Appointed by Interserve, they have been an important part of the Advocate’s Close project and have assisted the development prior and during construction. (Where There’s Muck There’s Money, 2017)
It is mentioned by Riddle PM that in phase two of the development, there were over 23 subcontractors. (Riddell, 2021) Some notable names are listed; - Legg Steel - (Steel manufacturer & installer) - Curtis Moore - (Roofing & Cladding Installer, ap-
pointed by Interserve) - Dalply - (Cladding specifier & installer) - RMP - (Acoustic Consultant) - SJS - (Bespoke interior joinery, appointed by Interserve)
15
16
fig. 002- Table of Stakeholders & Roles
3.12 Defining Stakeholders “As we proceed with this project, we constantly come up against problems that could not have been anticipated, and these cause delay. In the end, this is good, because it means that we’re allowing some or all of the various constituencies to have input; we’re allowing for compromise. No one is strong-arming. Ultimately, we’re doing what’s best for the community.” (Ted Weigle, Mega Projects, 1993)
A stakeholder in a project, as the name suggests, is anyone with a stake in the project. The term has been developed through the years from 1984 when it was first introduced by Freeman as: an entity which effects or is effected by the project. (Greiman, V., 2011) It is later developed by Cleland to encompass any interest in the project. (Cleland
1986) The PMI (Project Management Institute) takes this definition by Cleland, re-wording it to be more specific and publishing it as, “an individual, group, or organization who may affect, be affected by, or perceive itself to be affected by a decision, activity, or outcome of a project” (PMI 2013, 562).
In the case of Advocate’s close, the stakeholders can be broken down into 6 categories. These are: Developer, Government, Design Team, Contractors, Sub-contractors and Clients. Each of these have unique stake within the project, whether it be financial interest, reputation or genuine interest: - The developer has a direct stake in the project, as they have invested funds into the development in a bid for profitable returns. - The government’s stake is more indirect. The success of the project can, in a convoluted way, benefit the council. Not necessarily benefiting from sales profits like the a developer, but longterm tax benefits from occupiers and creating an attractive place for people to visit and spend in Edinburgh. - A client, especially the public, can often be overlooked in a project as they have little financial involvement. Yet their interest in having a quality usable space makes them an important stakeholder. - The design team’s involvement in design gives them an inherent interest in the project. Their reputations their stake in the development.
fig. 3 - Governance & Communication simplified diagram fig. 4- Stakeholder Framework Cycle (Greiman, V., 2011)
18
3.14 Commitment & Conflict Having an experienced and committed team can be the making of a project. Even armed with such a team, it requires a lot of effort to create a trust network between all stakeholders, balanced with the sense of individual value. Solidifying this trust requires an ethical approach, awareness and meticulous planning. With this trust network comes transparency and communication: more key aspects to a successful project. (Adler, Sage and Woolcock, 2009)
In the case of Advocate’s Close, the traditional setup of the design team sees the developer take the lead on this front, coordinating and directing this team. “Conflicts among stakeholders frequently arise in large, complex projects, and a careful analysis must be made of potential conflicts early in the process.” (Greiman, V., 2011)
Unfortunately, not many projects run entirely without hiccups between stakeholders. There is therefore a requirement for enforcement of commitments. A clear outline must be drawn at the beginning of any stakeholder relationship. This communication and task allocation will adapt throughout the duration of the project. The accountability on each aspect of the development must also be clearly identified. If these commitments are not satisfied then there must be actions taken to rectify and continue the project. Sometimes the cause of an unfulfilled commitment is not due to the allocated stakeholder, it is in-fact down to a poor line of communication and conveying of information from other parties. This takes us back to the importance of a clearly setup line of communication. These delays can ultimately result in the failure of the project if the lack of commitment is extensive enough without adequate enforcement. Chris Stewart Group, with the assistance of Morgan McDonnell where required, manages minor and major conflicts within the stakeholders. This often means managing and opening dialogue between other stakeholders.
4. Front End Planning (FEP)
4.1 Introduction to FEP Front-end planning is defined as arguably the most essential part of any project. It is where the stakeholders create a catalogue of strategic information which is in turn used to aid stakeholders commit to the project’s development (Excellence in Front End Planning, 2021). Front-end planning defines the project; all further actions & decisions within the project after this point will be informed by research and judgements made during frontend planning. It can thus be described as the foundation stone of any mega-project. “Projects with adequate front-end planning do not always succeed, but those with inadequate front-end planning most often fail” (CII, 1995)
Projects must highlight clear benefits for the developer, in this case Chris Stewart group. The highlights would be used to gain their full financial commitment. Many studies can be employed to highlight these potential benefits. In the case of Advocate’s Close, the following would have been employed during the front-end planning phase: site identification; securing the land; feasibility; funding avenues; application structure and required innovation. The following section will analyse and evaluate the execution of the frontend planning phase for the Advocate’s Close with regards to the afore-mentioned studies.
21
4.2 Developing in Edinburgh Edinburgh has a rich urban fabric, giving it world heritage status for the old and new town areas. The site for Advocate’s Close is in one of the most prominent areas which aided in the Edinburgh’s World Heritage status: the royal mile. The herring-bone urban arrangement which Edinburgh is famous for is prevalent in this area. The project before construction encompassed 2 closes (Warriston’s Close & Roxburgh Close). To aid in gaining the approval of the local heritage authority, a previously lost close was to be re-established, named the Advocate’s Close. The project also involved 9 prominent listed buildings which spanned over 11 floors. (Morgan & McDonnell, 2015) The public are heavily invested in the interest of development in this area due to heavy tourism and a passion for the preservation of character for Edinburgh. It would be essential to gain the public’s trust to make the project run smoothly. In the case of Advocate’s Close, the Chris Stewart Group worked closely with the local community and developed a good relationship with heritage groups such as the Cockburn Association. (The Scotsman, 2015)
The development was subject to stricter planning governance and additional applications such as listed building consent. There was also the need for an archaeology report to be conducted during the construction. The development had to fall within Edinburgh’s World Heritage Site Management Plans which have been created through collaboration by Edinburgh City Council, Historic Environment Scotland, and Edinburgh World Heritage. (Edinburgh Local Development Plan, 2016) These could have extended the timescale for the development and seen it’s chosen use changed. The design and use would have needed to be carefully chosen by the developer, alongside an experienced architect & structural engineer in this field, early within the front-end planning.
22
23
4.3 Site Identification The first consideration for any developer hoping to identify a site is to decide on the parameters the site must achieve in order to meet the aims of the development. (Reed and Sims, 2014) Some developers may only wish to develop in certain areas, this is relevant for Chris Stewart Group who at the time were solely focussed on the improvement of Edinburgh as they have extensive knowledge of the area from previous developments. Other considerations for the developer include; the geographical/topographical area, the predicted market of the area presently & in the future, the availability of development finance for this site, and the results from detailed analysis of market research into supply and demand. (Reed and Sims, 2014) Even minor details such as the distance to travel for the developer to the site could be a make-or-break factor. For Advocate’s Close, the site being so prominent just barely off the Royal Mile makes it one with high market potential. With the tourism industry in Scotland growing and Edinburgh being the most popular tourist city, the site is ideal for locating a hotel, restaurant & bars. (Key Facts on Tourism in Scotland, 2020) It also has a good proximity to transport (bus & train station within 5 mins walk) making it a prime location for offices and apartments. These factors accompanied with the developer’s knowledge of the area aid in CSG’s bid, made it financially interesting for potential financiers.
4.4 Securing the land The site chosen for Advocate’s Close was owned by Edinburgh City Council. The site comprised of over 170,000 square feet with buildings which were currently un-used. One of which was an ex-council economic development department. The site was originally advertised as an office space with potential for accommodation to the rear. The site had a lot of interest when it became available. Chris Stewart Group was out bid initially. “By that time we had worked for two years tracking the development which gave us intimate detail as to the costs, ownership titles and those types of issues, which put us in a very strong position” (Chris Stewart, Business Insider, 2011)
The company who initially won and bought the site went into administration after only 2 years from purchase, due to the financial market crash. This allowed CSG to re-bid. With a number more years of research into the site and a communication dialogue open with Motel One, which occurred after a meeting through the Scottish Development International at the Hotel Investment Conference in Berlin, CSG felt in a better position to offer a high bid. This bid was successful. (Busi-
ness Insider, 2011)
24
25
4.5 Feasibility Having never previously taken on a project as complex or as prominent before, CSG had a lot of ambition in trying to tackle this development. As mentioned in the previous section, the developer had extensive knowledge of the project and site. An interest from Motel One from the get-go also helped to alleviate some of the project risk. There would have been many things to consider when assessing the feasibility. Below is a list created from reading Richard Reed’s book , covering of some of the points the stakeholders would have had to consider: 1. Land Costs – To purchase & maintain the site. Possible increase or decrease of land value over time may come into consideration in unstable market times. CSG did extensive research into this and found it to be of a profitable amount. 2. Construction Costs – Insurance, contractor & material fees; construction in such a protected area can be costly for insurance and specialist contractors would have been required for the conservation work which could be costly. Materials would also have to be of high standard to tie in with the surrounding buildings and achieve planning permission. 3. Professional Fees – Design team fees. This could be expensive as many specialists would be required. 4. Site Investigation Fees – Ground and land investigation fees. This would be higher than normal as an archaeologist would be required on site and a full report produced. The typology is also difficult to survey with the site being so steep with narrow closes and tall buildings. 5. Planning Fees – Costs related to local planning authority approval. This is a standard fee scale dependant on budget & size. 6. Building Standards Fees – Local building standards fees. This is a standard fee scale dependant on budget & size. 7. Finance costs/interest – Fees incurred from borrowing money. Interest rates in 2006 were quite high but if a deal was secured with the additional financer before the 2007 market turmoil, CSG would have avoided the spike in 2007/8. 8. Promotional Costs – Advertising the available new development. This could be costly in Edinburgh, however the area is popular and growing so finding a occupant should not have been difficult. 9. Rental Value – The rental rates in Edinburgh are the highest in Scotland by far. The royal mile is a very prominent tourist and business destination, giving the apartments, offices, bars & restaurants a chance to make large profits, making demand high and with it, rent prices. As CSG wishes to rent out all completed buildings, therefore there is potential for significant income. 10. Contingency allowance – Being in such an un-explored and historically significant site, with old, listed buildings, there should be a significant contingency allowance. 11. Developer’s Profits – As the developer hopes to rent the properties, the profits will not come until significantly after the project’s completion. This has the potential for large long-term gains. The developer will also benefit in reputation from successfully developing such a prominent project.
(Richard Reed, 2015)
26
(Morgan McDonnell, 2015)
27
4.6 Funding Most mega-projects are financed through a combination of equity and finance. This was also the case for Advocate’s Close. Equity is the sum of money supplied by the developer. In this case Chris Stewart Group holds all the equity for the project. Finance is supplied by a lender. These lenders can come in many forms such as insurance companies, pension funds and property investment companies in long-term scenarios, or in merchant banks for shorter-term cases. In these financial deals, the lender must accept some of the risk associated with the project as they expose their, or more often their customer’s, funds. The risk is somewhat alleviated by interest rates which are charged to the equity stakeholder(s) over the period of the development. These rates can change as the development progresses due to delays, making time-scale a very important factor. (Parsons, 2014) Many mega-projects also require grant assistance from government or charities. However, this was not required for this development. (Premier Construction News, 2015) Chris Stewart Group agreed finance from Barclays Wealth which is a financial management company “serving affluent and high net worth clients“ (Barclays Wealth, Wiki, 2021). Before agreeing to the finance, Barclays would have assessed the risk of the development and deemed it to be within their threshold. At the end of the project, CSG would need to pay off the finance. The easiest and most common way to do this is to sell the finished property. However, CSG wanted to own and rent out as much of the property within the development as possible. Therefore, to gain the funds able to pay off the outstanding finance, CSG sold the hotel to Motel One, then sold the other properties to their own subsidiaries: Old Town Champers, Bon Vivant Group and Lateral City. Each subsidiary company would have their own equity and finance to afford the purchase, allowing CSG to gain the funds to pay-off the Barclay’s Wealth loan and retain the properties, only incurring legal fees for the transfer of ownership. (Premier Construction News, 2015)
28
4.7 Application Structure Due to the nature and complexity of the development, a phased approach was necessary for applications. The design team would have consulted the developer about this and advised accordingly. The first steps to achieving the appropriate governmental permissions was to open a line of communication with the local planning authority to discuss the project with them, gain advice and discuss the ambitions of the project. The next step would be to apply for the appropriate change of uses & listed building consents. This would need carefully considered and evidence produced by the design team to support it. A planning application was then launched for phase 1 of the project. The project was split into phase 1 and 2 to allow some return on investment by selling the completed phase 1 to Motel One which would aid phase 2 financially. This also allows the developer to gauge the spending on phase 2 if the return of phase 1 is not as high as expected. The planning application for both phases would be complex and require attention from all design team members as it’s prominent and highly regarded location would lead to heavy critique by the local planning authority and public. Looking at the short turn-around of planning application to gain approval (only 6 weeks), one can reasonably assume the application was well structured by the design team and the local planning department had communications with them prior to the application. Once planning was achieved, a building warrant application would be lodged for each phase. Approval of this would allow construction to begin on site.
Fig.005 Richard Reed, 2015
29
4.8 Innovation & Adaptation It is evident from drawings & applications that the software used during early stages of the project was very basic. Surveys and the architect’s applications look to be done through a computer aided drawing software. This would cause significant time loss for the overall development seeing as there were so many stakeholders. Especially with the complex site with the number of floors, existing buildings, typology and mix of uses & phases. In 2007 when the design team was developing applications & drawings, the use of BiM (Building Information Modelling) in Scotland was sparse, with less than 5% of architecture offices having adopted it. (Mickovski, 2019) In 2009 there was a clear shift in drawing style to a BiM model when looking at applications. Morgan McDonnell architects, being a young and ambitious architecture practice at the time, would have taken on extensive work to train their staff and entirely adapt their workflow to a BiM orientated one. Riddle PM’s involvement would also significantly aid this transition as one of the UK’s leading BiM project coordinators. The other members also adopted this innovative way of working. In the long run this made for a much more collaborative and productive design team, as can be seen with the acceleration of applications and drawing outputs from the design team after 2010 (fig.001) (PlanRadar, 2019).
30
(Morgan McDonnell, 2015)
31
5. Project Impact
32
5.1 Local Development In 2014 when the development was completed, there were very few large-scale projects in Edinburgh’s old town which were visible from the new town with such an evident modern twist. This would have, under normal circumstances, caused significant controversy. However, the Advocate’s Close had been done tastefully and respectfully. This was down to an ambitious design team with a well structured and convincing planning application. This in turn made an excellent example for developers & architect’s across the world, on how to effectively and tastefully develop within such a prominent historical environment with a modern flair. This has been acknowledged with several awards such as RIAS Best Building in Scotland 2014, International Property Award - World’s Best for commercial redevelopment 2014 and winner at the Scottish Property Awards 2014. (Cision, 2014)
When looking at the updated 2016 local development plan issued by Edinburgh City Council, in the section “design principles for new development”, the council state: “The council encourages innovation and well designed developments that relate sensitively to the existing quality and character of the local and wider environment, generate distinctiveness and a sense of place”. This quote is then accompanied by an image of the completed Advocate’s Close, as an exemplar for the cities future developments to follow (Edinburgh LDP, 2016). It is evident when looking at current submissions and recently completed projects that this development method is being adopted, to the betterment of Edinburgh’s urban realm.
5.2 Local Social & Economic Value The Advocate’s Close area was previously run down and under used. The development has created usable public space just off of the popular royal mile and provided a much-needed budget hotel, an abundance of award-winning luxury apartments, fantastic restaurants and the Devil’s Advocate’s bar. This has helped Visit Scotland and Edinburgh City Council’s ambitions in making Scotland and Edinburgh a fantastic, vibrant area for tourists. The foot traffic through the 3 effected closes has significantly increased and become a beauty spot for photographers with an 150% increase in photographs taken in the area since the completion of the project, as evidenced by social media research (Instagram statistics, 2021) Looking at ScotLIS statistics (ScotLIS, 2021), property valuation has increased 20% faster than other parts of Edinburgh. I believe this is down to the popularity of the development and the increase in tourism in the area. (Property Asking Price Report for Edinburgh - 2007 to 2021, 2021)
33
6. Risk Management
34
6.1 Introduction to Risk Management All mega-projects characteristically carry some form of risk. There are always bound to be variables, however setting out a plan of action for when the worst inevitably happens is critical to a project’s success. (Greiman, V., 2011) “There are risks and costs to a program of action, but they are far less than the long-range risks and costs of comfortable inaction.” John F. Kennedy
To effectively manage the risk, a risk model should be implemented which all stakeholders should refer to and understand. The book ‘Megaproject Management’ outlines a shared risk management model using 7 key steps (fig.006). 1. Risk Identification – Set up a list of potential risks in the early phases before the design commences, this will allow quick identification of these risks when they do arise. This will continually evolve through analysis as the project progresses. 2. Risk Assessment – To analyse and assess the risk that has been identified. Typically this assessment would result in a risk assessment document. This should cover the frequency of the risk, the potential consequences and what exactly can happen. 3. Develop a Response – In what way will the stakeholders reduce the likelihood of the risks occurrence? How tolerant should the stakeholders be of that risk? This will come down to the severity of the risk. A plan should already be in place from the beginning as a guide on what to do in the situation. 4. Allocate Risk – Who is in charge of overseeing each risk? Someone with the best understanding of the subject should be in charge of identifying the risk and in some cases acting on it before the responsibility it goes to a more senior position in the governance table. 5. Monitor and Control Risk – Keeping track of risks which have been identified and ensuring the implementation of response/mitigation. 6. Record Risk – By recording the risk, lessons can be learned to steer away from these risks through preventative measures in the future of the development and in future developments. (PMI, 2013)
35
Fig.006, Greiman, V., 2011
36
6.2 Endogenous Risks Endogenous risk is defined as the risk that takes place unsystematically & within the project itself. One of these risks identified within the development of Advocate’s Close would have been the chance of uncovering something during excavation. This could be in relation to historical and archaeological interests or finding unknown services due to being a world heritage site with lack of invasive surveying prior to land purchase. The risk associated with excavation would be allocated by CSG to Interserve contractors on phase 2, which had significantly more excavational work that phase 1. Interserve appointed AOC Archaeology as full-time consultants for the project to assist with this. Their job consisted of observing and reporting on findings; aiding in alleviating the risk of fines for damage to anything historically significant.
6.3 Exogenous Risks An exogenous risk is one which is systematical and out with the stakeholder’s control. As CSG wanted to own and rent out the properties developed, price fluctuations in the accommodation market could be detrimental to overall yield. The growth of businesses within Edinburgh would also be important to ensure the office spaces were occupied. In Scotland at the time tourism, and with-it businesses, were growing. Edinburgh was at the epicentre of this growth. This was also a time of high political turmoil.
The contract set up with Interserve would outline that a building is to be produced to the specification of the design team. This means that any delays due to excavation would affect Interserve’s profits and not CSG’s overall yield. In the event of a time delay, there may have been a clause in the contract that CSG would be open to discounts on the construction costs to mitigate any loss of profits on CSG’s side. This would be taken into consideration by Interserve when tendering for the contract.
The Scottish government was to hold a public vote for whether Scotland should be an independent nation and leave the United Kingdom. When the advocate’s close development began (2007), the chances of an independence vote happening were very slim, with only 26% of the population wanting to depart the UK, so the risk of this happening was very low. (“Scottish Social, 2021) However, a political shift occurred during the project development, seeing polling rise to a record 40% in favour of independence. This sparked David Cameron (the then prime minister of the UK) to allow Scotland to hold a vote. Just days before polling opened, the prediction polls for the “Yes” campaign was 2% ahead of the “No” camp. (Poll Tracker - BBC News, 2021)
This poll had a significant risk for unpredictability in the tourism and business markets in Scotland. A plan would have been put in place by CSG for both outcomes of the poll (Economy (2021). This may have been the reason CSG wanted to own and rent the properties long-term with the aim of riding out the market and political turmoil before selling. 37
7.0 Residual Valuation Figures based on data found using Statista (Statista, 2021) & advertised rates. Commercial & Office Rental – 605m2 @ £320/m2/pcm A+ Office Space, less 15% circulation 515m2 @ £325/m2/pcm = £167,375/pcm 120m2 @ £213/m2/pcm Commercial Space, less 10% circulation 112m2 @ £213/m2/pcm = £23,856/pcm Income (Commercial & Office) pcm = £191,231 Capital Value = £2,294,772 less letting & advertising fees (14%) = £1,973,500 Serviced Apartments Leasing – Three Bed Penthouse = £2,717/night One Bed Penthouse = £898/night Deluxe Three Bedroom = £1,150/night Luxury Three Bedroom = £1,006/night Deluxe Two Bedroom = £910/night Luxury Two Bedroom = £850/night Deluxe One Bedroom = £540/night Luxury One Bed 1 = £552/night Royal Mile One Bed = £588/night Luxury One Bed 2 = £492/night Royal Mile Loft = £636/night Deluxe Open Plan = £462/night Luxury Open Plan = £432/night Townhouse Apartment = £850/night Total/night = £12,083 Total/month = £362,490pcm Capital Value = £4,349,880 less advertising, discounts & letting fees (15%) = £3,697,398 Sale of Hotel – 7900m2 @ £200/m2/pcm B+ Hotel Space (208 rooms), less circulation space (12%) = 1,390,400 Capital Value = £16,684,800 less sales fees (3%) = £16,184,256 Net Value = £21,855,154 Cost of Development Development Costs stated = £15,500,000 + Finance @ 2.5% from Barclay Wealth (£15,500,000) = £15,762,500 Profit Developer’s Profit as percentage of cost = 30% Net Proceeds – (Development Cost + Cost of Land) = £4,728,750 Cost of Land/Property GDV-(Development costs + Profit) = £1,363,904 less fees (4%) = £1,315,000 (3% of total development cost)
38
8.0 Evaluation
39
9.0 Conclusion Advocate’s Close was chosen as it is an interesting and unique example of a mega-project. Although not traditionally referred to as a mega-project judging by estimated development costs; it’s status as a mega project is obvious when looking at its complex brief: mixed-use, covering 11 stories, 9 listed buildings, 3 closes, within a world heritage site and a huge public interest. An evaluational framework was developed and employed through this report to highlight how these unique challenges have been dealt with and how successfully. There are clear advantages highlighted in the evaluation which led to the project’s successful completion. The main actor selection & their role allocation was well thought out, with strengths identified and utilised. The project governance saw the design-team having high amounts of influence. This resulted in a smooth application phase and ultimately, positive local feedback. The impact this project has had on the local area has been strong, which is remarkable given the complexities of the development and passionate interest from the public. It has resulted in the project being a precedent for all other developments in Edinburgh’s world heritage zone. A well-considered front-end planning phase was essential. The development was aided by the developer’s extensive knowledge of the area and good networking, securing occupants early and an established financer. However, not all aspects of the development ran smoothly. The evaluation of FEP has highlighted the uncertainty seen when securing the land, which could’ve lead to the project never starting. Risk management also had the potential to let the project down with responsibilities falling solely on the contractor for the excavational stage and no clear plan for exogenous risk factors, other than riding out the turbulent market. It did not let the project down however, with the developer owning most of the resulting development, leading to a long-term income to fund future projects. After this evaluation of the Advocate’s Close mega-project, I can confidently say it has been a successful example of the property development process.
40
10.0 Bibliography Online Resources; 2020. Key Facts on Tourism in Scotland. [online] Available at: <https://www.visitscotland.org/binaries/content/assets/ dot-org/pdf/research-papers-2/key-facts-on-tourism-inscotland-2019.pdf> [Accessed 30 November 2021].
En.wikipedia.org. (2021). Advocates Close - Wikipedia. [online] Available at: https://en.wikipedia.org/wiki/Advocates_Close [Accessed 17 November 2021]. Chrisstewartgroup.com. 2021. Chris Stewart Group. [online] Available at: <https://www.chrisstewartgroup.com/> [Accessed 20 November 2021].
McCulloch, S. (2011) Chris Stewart profile - Always know where your exit will be, Business Insider. Available at: https://www.insider.co.uk/special-reports/chris-stewart-profile-always-know-9875877 (Accessed: 1 December 2021).
Architecturallocations.co.uk. 2021. Morgan McDonnell Ltd in Edinburgh, City Of Edinburgh EH4 3AX. [online] Available at: <https://www.architecturallocations.co.uk/architectural-service/394571/morgan-mcdonnell-ltd> [Accessed 20 November 2021].
RICS top award recognises outstanding regeneration - Premier Construction News (2015). Available at: https://premierconstructionnews.com/2015/06/04/rics-top-award-recognises-outstanding-regeneration/ (Accessed: 1 December 2021).
Morganmcdonnell.co.uk. 2021. Morgan McDonnell | Who we are. [online] Available at: <http://www.morganmcdonnell.co.uk/profile/who-we-are/> [Accessed 20 November 2021].
BIM in the UK: its history and impact on industry- PlanRadar (2019). Available at: https://www.planradar.com/gb/ bim-in-uk-construction-technology-market/ (Accessed: 2 December 2021).
Sharkeyuk.com. 2021. Motel One | Sharkey. [online] Available at: <https://www.sharkeyuk.com/case_study/motel-one/> [Accessed 20 November 2021].
CHRIS STEWART GROUP’S “ADVOCATE’S CLOSE” REDEVELOPMENT WINS PRESTIGIOUS GLOBAL AWARD (2014). Available at: https://news.cision.com/indigo/r/chris-stewart-group-s-advocate-s-close--redevelopment-wins-prestigious-globalaward,c9698339 (Accessed: 2 December 2021).
Will Rudd. 2021. Our Services - Will Rudd. [online] Available at: <https://www.ruddconsult.com/our-services/#> [Accessed 20 November 2021].
Topic: Instagram (2021). Available at: https://www.statista. com/topics/1882/instagram/AdvocatesClose/ (Accessed: 2 December 2021).
RYBKA - Low Energy, Building Services & Sustainability Consultancy. 2021. RYBKA - Low Energy, Building Services & Sustainability Consultancy - History. [online] Available at: <https://rybka.co.uk/about-us/history/> [Accessed 20 November 2021].
(2021) Scotlis.ros.gov.uk. Available at: https://scotlis.ros. gov.uk/property-summary/MID17477 (Accessed: 2 December 2021).
AOC Archaeology Group. 2021. About — AOC Archaeology Group. [online] Available at: <https://www.aocarchaeology. com/our-staff> [Accessed 20 November 2021].
Home.co.uk: Property Asking Price Report for Edinburgh - October 2007 to November 2021 (2021). Available at: https://www.home.co.uk/guides/asking_prices_report.htm?location=edinburgh&all=1 (Accessed: 2 December 2021).
Definition - Excellence in Front End Planning (2021). Available at: https://fep.engineering.asu.edu/front-end-planning/ (Accessed: 29 November 2021).
Economy (2021). Available at: https://www.parliament. uk/business/publications/research/scotland-the-referendum-and-independence/impact-on-uk-economy/ (Accessed: 2 December 2021).
Barclays Wealth - Wikipedia (2021). Available at: https:// en.wikipedia.org/wiki/Barclays_Wealth (Accessed: 1 December 2021). CII (Construction Industry Institute). 1995. Preproject Planning Handbook (Special Publication 39–2). Austin, Tex.: Construction Industry Institute.
Scottish independence referendum - Poll Tracker - BBC News (2021). Available at: https://www.bbc.co.uk/news/events/ scotland-decides/poll-tracker (Accessed: 2 December 2021).
2016. Edinburgh Local Development Plan. [online] p.p13. Available at: <https://www.gov.scot/binaries/content/ documents/govscot/publications/factsheet/2018/06/ city-edinburgh-council-planning-authority-core-documents/documents/local-development-plan/edinburgh-local-development-plan-2016/edinburgh-local-development-plan-2016/govscot%3Adocument/ Edinburgh_Local_Development_Plan_2016.pdf> [Accessed 30 November 2021].
42
Physical Resources; Greiman, V., (2011), Megaproject Management: Lessons on Risk and Project Management from the Big Dig. Integral Yoga Publications, pp. xiii, 1-3, 12. Morgan McDonnell. 2015. Case Study: Mixed Use Redevelopment of Advocate’s Close, Edinburgh FHWA (Federal Highway Administration), (2001), Big Lessons from the Big Dig. Focus: Accelerating Infrastructure Innovations. Pub. No.FHWARD-01-065. Washington, DC: U.S. Department of Transportation, Federal Highway Administration. Flyvbjerg, Bent, (2014), “What You Should Know about Megaprojects and Why: An Overview,” Project Management Journal, vol. 45, no. 2 The Scotsman, (2015), Monday Interview: Chris Stewart, Chris Stewart Group. Engl, R., Haggarty, G., Roy, M., McLaren, D., Robertson, J., Willmott, H., Harland, J. and Gallagher, D. (2017) “Where There’s Muck There’s Money: The Excavation of Medieval and Post-Medieval Middens and Associated Tenement at Advocate’s Close, Edinburgh”, Scottish Archaeological Internet Reports, 67. Available at: http://journals.socantscot. org/index.php/sair/article/view/3185 (Accessed: 20November2021). Cleland, D. I, (1986), ‘‘Project Stakeholder Management.’’ Project Management Journal 17(4):36–44. PMI (Project Management Institute), (2013), Standard for Program Management. 3rd ed. Newtown Square, PA: Project Management Institute. Adler, D., Sage, C. and Woolcock, M., 2009. Interim Institutions and the Development Process: Opening Spaces for Reform In Cambodia and Indonesia. SSRN Electronic Journal,. Reed, R. and Sims, S., 2014. Property development. Parsons, G. (2014) Estates Gazette Property Handbook, Taylor & Francis. Mickovski, Slobodan & Mckeever, Mark. (2019). BIM awareness, knowledge, and implementation within a multi-disciplinary design consultancy in Scotland. (Project Management Institute). 2013. A Guide to the Project Management, Body of Knowledge (PMBOKR Guide)— Fifth Edition. Newton Square, PA. “Scottish Social Attitudes - The State of nationalism in Scotland” (no date), pp. 2,5. Available at: http://www.ssa. natcen.ac.uk/media/38910/ssa16-2fr8m-1ndyref-2-1ndyr8ftw0-two.pdf (Accessed: 2 December 2021).
Word Count - 5146
43