A glimpse of Project Alchemy: disaster all round

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GeraldEve: Wye Park won’t work even with a £220m subsidy partly from the public

Peter RaineImperial College may be hoping it can extract £100 million in instant profits from the sale of Wye’s countryside to housing developers, but its scheme as a whole would be a financial disaster, and its proponents know this only too well. They were told by their own surveyors and property consultants, GeraldEve, only last May that Wye Park is essentially unviable, even if Kent County Council throws in up to £50 million of your money as a sweetener, and another third party gifts the project a further £200 million.

These gloomy verdicts are contained in a secret report on the scheme’s finance from GeraldEve partner Graham Bates, one that throws a damning light on the entire Wye Park planning process. Not only is Imperial trying to breathe life into the failing scheme against the advice of its own professional consultants, but the missive reveals that the college was talking specifically about a plan for 386 acres of housing in Wye more than a year ago — in May 2005 — at a time when supposedly this was all just blue sky thinking.

This document proves once and for all that hard numbers about the size of Wye countryside to be devoured by Imperial have been around for more than a year, and hidden in ways that some council officials may find deeply embarrassing.

The GE report — entitled ‘Wye – Second Stage Financial Analysis & Review’, so there was a first we still don’t know about — is dated May 11 this year but refers back to the original Ernst & Young report on Wye, codenamed Project Alchemy, and contains, for the first time, public proof that the size of the development has been in its perpetrators’ minds for a very long time. Read the extract yourself.

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Consider some interesting points which arise from this revelation…

  • Project Alchemy, written by Ernst & Young, was working on a forecast of 386 acres of housing in May 2005. This is a pretty precise figure so one may assume that detailed work must have been carried out some time beforehand to come up with this number. One would also have thought it would involve maps, although the existence of these has always been denied (which we now know, from last week’s revelations here, to be simply untrue).
  • Kent County Council’s first formal meeting with Imperial about Wye was on November 25, 2004. There then followed meetings between senior councillors, officials and representatives from both sides the following year on January 11, February 7 (at which Paul Clokie from Ashford was brought in), March 4, April 13, June 16, September 13, and November 4.
  • We know that a document on Project Alchemy from Ernst & Young and a 31-page report from GeraldEve on ‘the key policy criteria and issues which we must satisfy to justify development in the AONB for the research and commercial enterprise (also dated 20th January 2006)’ were supplied to KCC by Imperial. This is beyond debate because both were included in documents listed for release to save-wye by KCC under the Freedom of Information Act in February this year, then hastily withdrawn on the orders of Imperial who insisted they should be kept secret, a demand which the council instantly obeyed. This is now the subject of an appeal to the Information Commissioner.
  • On April 7 this year Pete Raine, KCC’ strategic planning director, and a key figure in Wye Park, wrote to a Wye resident who contacted him about the controversy, and said, ‘On the area of land to be developed, I should say that at no point have I seen a firm proposal, and nor do I believe that one exists at this stage.’
  • Consider, too, the ‘confidential’ letter sent to David Brooks Wilson by the chief executive of KCC Michael Pitt on February 21 last year (a copy of which you will find at the foot of this article). In it he says, in advance of that March 4 meeting, ‘…we need to understand the mix of use that might be proposed, in broad terms, the nature of the buildings, footprints, height of elevations etc. Critical factors such as density, and the relationship between the principal development and residential elements within Phase 1 and beyond need to be addressed before the impact upon the AONB can be assessed. Could you have an urgent word with Mike Bodkin… to see what can be done within the next week or so.’

Peter RaineWhat can explain the fact that Pete Raine, KCC’s strategic planner, right, and others at KCC seemingly didn’t know that Imperial was working on a ‘model’ of 386 acres of housing as far back as May 2005? The college was happily telling GeraldEve about this when these same consultants were writing a 31-page report which was shared with the council. Until both these blocked reports are revealed it’s difficult to know. But you wonder why the council went to the trouble of having all those meetings with Imperial if such a crucial statistic — how much land was to be developed in circumstances of great controversy — was never mentioned. What did they talk about? The weather? An independent inquiry, with full sight of these mysterious documents, would answer these puzzling questions, of course, though if anyone else, including those involved, has some publishable suggestions to explain these lacunae please add them as comments below.

Mind you, these lapses of communication are not confined to our local authorities. They even seem to have taken place within Imperial College itself. What else can explain the following exchange which took place between the chairman of Wye Parish Council and Professor Sir Leszek Borysiewicz, the very man in charge of Wye Park, which occurred only last April 4 and is recorded in the private and confidential draft minutes. This occurred in the presence of Ashford’s MP, Wye’s own councillor Ian Cooling (whose comments are included in the full copy of the notes found at the end of this article) and the presence of the village county councillor Charles Findlay (who is not recorded as having said a word).

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Except GeraldEve and Ernst & Young seem to have had acreages in mind for as much as year by this stage. It seems a touch remiss of someone if these numbers never made it to the man in charge. In fact the GeraldEve report from around this time is positively stacked with numbers, none of them encouraging from Imperial’s point of view.

The figures, says the very senior Graham Bates, simply don’t add up. First there is the question of the housing land itself, which Imperial, in its report leaked here last week, was valuing at £1 million per acre on June 12 of this year. But why? GeraldEve are surveyors and property consultants. They are people who get paid a lot of money to tell you what something is worth. And what did Graham Bates tell the college in his report, delivered one month before the £1 million figure was put in front of Imperial’s management board? This…

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Most of this long GeraldEve report is spent trying to find ways to make the numbers of Wye Park work… and failing. Graham Bates outlines five options for Wye Park, all of which stumble on the viability test.

  1. An ‘enabling’ case which would comprise 300 acres of housing, a 100-acre science park, academic costs of £200 million, infrastructure costs of £50 million, and an ‘endowment’ (instant profit for Imperial) of £100 million. But this would still require £262 million in third party funding and ‘does not represent a feasible scheme’.
  2. The same scenario but with KCC stumping up £50 million for infrastructure. Bates observes, ‘I am not however, aware of their intention to make this investment’, and goes on to say it would still require £200 million of third party funding, without which it would be £277 million in deficit.
  3. The same scenario as the above, but with donation funding from a guardian angel who, with KCC, would foot the bill for both infrastructure and academic costs. Bates comments, ‘The scheme generates a positive net present value of £47.5m. Whilst this implies a viable scheme, it is predicated on very substantial external funding requirements for the academic and infrastructure elements and, just as importantly, assumes land release at an extremely ambitious level equivalent to 16.6 acres per annum. Despite this net residue I do not regard this as a viable solution.’
  4. An ‘expanded scheme’ with 346 acres of housing, KCC forking out for infrastructure and the same guardian angel footing the rest of the construction bill. Bates remains unimpressed. ‘Whilst this seemingly suggests that the project could be viable, I would re-emphasise my concerns at the level of external funding assumed in this Scenario, the very significant planning obstacles associated with a 346 acres residential proposal and the absence of any allowance within the figures both for additional profit and contingency. I would not consider even this Scenario to represent a viable proposal in market terms.’
  5. A reduced scheme with just 75 acres of housing. But even this won’t return a profit. ‘The intention is to reflect a scheme that is more palatable from a planning perspective, albeit we would not wish to understate the challenges in delivering 75 acres of residential land within an area of AONB. Nevertheless, we have identified that the scheme generates a deficit of £60m under this Scenario assuming that Kent County Council funding of the infrastructure is provided and “Donation Funding” for the academic centre is also forthcoming. This scenario assumes residential land sales at £1m per acre for private accommodation, and £500k per acre for R&D/experimental housing land. The deficit is reduced to £35m under this Scenario if all the residential land is valued at £1m per acre although we would consider this assumption unreliably optimistic, ie no tie or restriction upon the delivery or occupation of the units.’

Businesses pay consultants to tell them the truth, and the unpalatable truth that GeraldEve is trying to impress upon Imperial here is that Wye Park is a potential financial nightmare. It doesn’t work as it stands. It doesn’t work if you make it smaller. It doesn’t even work if you try to make it bigger. In Bates’ words in the report…

Regrettably I conclude that the core scheme does suffer from fundamental flaws and that any attempt to simply rebalance the project by removing costs or projecting values and land take for development, is destined to fail.

In a separate note he also appears to reflect his frustration in trying to meet the impossible targets Imperial demanded. Bates’ only solution would be one that was smaller and entailed a lower instant profit for the college to take away and use as it saw fit in London. As he writes in the penultimate paragraph…

My gut feeling is that this might stand a chance but only on a reduced size with modified aspirations for endowment and substantial investment from your own sources. I also think that any solution along these lines would need a partner to restructure the balance between holding land with future value which cannot easily or reliably produce cash in the short term where it is required… This is of course not a simple task but in view of the time and effort already invested it may be a more realistic or attractive alternative to the impasse which presents itself.

In other words, Imperial would have to take less out and put in more of its own money which given how risky this entire charade is seems deeply unlikely. You can’t help but wonder. Do Imperial’s governors know all this? Do the councils who keep giving succour to Imperial, whatever the circumstances, understand what is happening under their noses? If, as the college’s own property experts say, the scheme is financially unviable why exactly do Richard Sykes and his coterie of property developing pals insist on pursuing it?

Letter from Michael Pitt, KCC , to Imperial Feb 10 2005

Wye Consultation Panel April 4


About David Hewson

Professional novelist, published in more than 20 languages. Creator of the Nic Costa series set in modern Rome, Pieter Vos in Amsterdam, adaptions of the Sarah Lund stories in Copenhagen, and versions of Shakespeare worked for Audible.
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