Planning Director David Brown reflects on the increase in Receiverships and how a sound strategy based on a thorough evaluation of the site and its potential can open up options.
Receiverships and distressed sites, once occasional blips on the development radar, have evolved into commonplace challenges, with more real estate companies than ever entering administration. In 2024 alone a total of 17 ‘real estate’ and ‘construction’ companies have already appointed administrators. In 2023 the number reached in excess of 200. If the current trend continues, 2024 is likely to exceed last year’s figures.
At the coalface a concerning trend has emerged—sites with granted planning permissions, yet no clear path to implementation. The reasons behind this range from uncertain market conditions to financing complexities and tighter profit margins. More recently we’re seeing much fewer unconditional land deals meaning that problematic sites are becoming increasingly difficult to offload and are lying dormant – frequently with no income being generated. These sites demand informed strategies (often involving further planning applications) and transparent communication with the local authorities to deliver viable solutions.
Lenders, facing their own pressures, have grown increasingly anxious with defaulted loans and sites that don’t appear to have an obvious exit. In the context of the shifting dynamics, some developers are proactively seeking solutions, while others are deferring critical decisions – often too late. We are increasingly working with recovery and receivership experts to navigate short-term challenges with tenants, and longer term disposal strategies for the lenders. Understanding the full spectrum of actions is therefore crucial when dealing with distressed sites. Implementing a sound strategy requires a thorough evaluation of the site’s history, critically, its potential and a meticulously crafted plan, which more often than not relies on the receiver and their core team’s judgement. The options (which frequently change!) will be unique for each site, however, may include:-
- Revisiting Planning
There is wisdom in going back to the drawing board. Often, a more viable scheme can be set in motion, aligning with current market needs and financial constraints. This approach demands adaptability and the determination to see it through, particularly when the lender is looking to exit quickly.
While it’s not always the preferred route we’re finding it increasingly more common that local authorities are willing to work with a developer (or receiver) on alternative schemes where it is evident that a permission simply isn’t viable, so long as the conversations are proactive and not protracted. It’s easy to forget that local councils possess substantial leverage through their regulatory powers, which can turn the tide between the preservation of a community’s aspirations or the manifestation of a development’s potential. We are currently working with a number of excellent authorities who genuinely want to bring forward stalled strategic sites and are happy to consider alternative options – including concessions on site allocation deliverables and revised s106 packages via the s106A route (even if they don’t publicise the latter). A big challenge remains however with the political decisionmakers often being less pragmatic, particularly in cases where there are new local plans, and in the lead up to elections. A comms strategy with a clear route to the key decision-makers and local ward councillors is often crucial.
- Taking the Site to Market
Opening the site to ‘fresh’ potential may be the only way forward – even if the market has been keeping a close eye on it for some time. Quite often a site has been bouncing round agents before officially being marketed and the eventual takers are limited. In such cases, revisiting the planning or cementing a permission may be the only way to realise value.
On this point, ‘to implement’ or ‘not to implement’ is frequently discussed. Often a planning permission will enhance the value of a site and whilst the client may not wish to build out the consented scheme, implementation will preserve the value which it represents. If it is decided to implement a permission (which is invariably quicker and cheaper than applying for a different scheme) it is vital that adequate time is factored into the programme to allow for modest scheme changes (for example to accommodate a second stair core), discharging any pre-commencement conditions and putting a spade in the ground. Should time allow, solidifying implementation via a certificate of lawfulness is also incredibly useful. Again, there are some excellent local authorities out there who will work with you as part of this process, so long as you give them adequate time to approve the applications!
- Doing Nothing
While waiting out a storm might seem cautious, it can result in the erosion of the site’s potential and value. Losing a planning permission is one thing, but losing a good planning permission, which sets a precedent for land use within an everchanging policy climate or a particular height precedent can be costly. As we know from our London experience in particular, validation (and determination) requirements are becoming more onerous (particularly at a strategic level), whilst the recent loss of the ‘free go’ coupled with the increase in planning application fees (and the changes to the Planning Guarantee) quite often make new applications even more economically challenging.
Through effective communication and strategic intervention, we can help developers and receivers across the UK make strategic commercial decisions, conduct due diligence, and revisit development consent with developers, lenders and local authorities. At Newsteer, we offer transactional, valuation, development consultancy, occupier and planning advice to support this option.
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