TABLE OF CONTENTS
- Qualifications and experience
- Introduction
- Scope of evidence
- Commercial justification for the Southgate scheme
- Conclusions
1 Qualifications and experience
1 .l My name is Christopher Paterson.
1.2 I hold a Bachelor of Science degree with Honours in Estate
Management and a Diploma in Property Investment. I am a Fellow of
the Royal Institution of Chartered Surveyors.
1.3 I am employed as a Fund Manager by Morley Fund Management
Limited ("Morley"), a UK institutional asset management business
which is owned by Aviva plc, the largest insurance group in the UK.
I am responsible for the Life Funds Shopping Centre and High Street
Shops portfolio with a value of approximately £2.4bn.
1.4 I have approximately 10 years' experience of investment, on
behalf of policy holders, including the acquisition and development
of shopping centres and high street retail provision. I started
work with General Accident 24 years ago and during my time there I
was involved with major occupational development schemes in
Belfast, St Albans, Reading, Stoke, Carlisle and York. Whilst at
Morley, I have had responsibility for successful major shopping
centre investment, development and management in Peterborough,
Bristol, Leamington Spa, Bromley, Carlisle, Middlesbrough and
Kingston.
1.5 I am very familiar with the Southgate area of Bath, the City
Centre and the surrounding area.
1.6 In my evidence, I have adopted the abbreviations and
definitions set out in the Glossary of Key Terms submitted as CD
10.9.
2 Introduction
2.1 In 1995, General Accident purchased the long leasehold
interest in the Southgate Centre, Churchill House, the Bus Station
and land at Kingston Road from Prudential Assurance Company
Limited.
2.2 In 1998, General Accident and Commercial Union merged to
form CGU and, subsequently, in May 2000, CGU and Norwich Union
merged to become CGNU Life Assurance Limited ("CGNU"). The group's
history can be traced back over 300 years.
2.3 Together with Commercial Union Life and Norwich Union Life,
CGNU is a wholly-owned subsidiary company of Aviva. Likewise,
Morley is a wholly-owned subsidiary company of Aviva and manages
the property fund interests of CGNU, Commercial Union Life and
Norwich Union Life.
2.4 Aviva is the world's fifth-largest insurance group and the
biggest in the UK. It is one of the leading providers of life and
pensions products to Europe and has substantial businesses around
the world. Its main activities are long term savings, fund
management and general insurance. It has premium income and
investment sales from continuing operations of about £30 billion
and over £240 billion worth of assets under management. The group
has 51,000 employees serving 30 million customers worldwide.
2.5 Morley is one of the leading institutional investors based
in the UK, with global assets under management of £128 billion.
Morley manages in excess of £18bn of UK property assets, with a
large property team complemented by a dedicated in-house property
strategy and research team. Morley covers all the major asset
classes and specialises in actively managed funds, with strong
positions in the UK fixed income market, European equities and UK
property. Morley has staff based in London, Dublin, Boston,
Melbourne, Singapore, Tokyo and Warsaw, and a presence in Milan and
Madrid. This includes the integration of Portfolio Partners in
Australia. Morley has one of the world's largest and most
experienced teams of socially responsible investment fund managers
and researchers. Morley also recognises its responsibility as a
major shareholder in the UK stock market and is actively involved
in issues of corporate governance with the companies in which it
invests, to protect the rights of shareholders. Morley won a number
of external accolades in 2003 and 2004, including: the Norwich
European Equity Fund being placed first in two sectors over five
years by Standard & Poors; best property fund manager at the
Pensions Management Provider Awards (2003); and property fund
manager of the year at the Property Week Awards (2004).
2.6 Details of the corporate position as between Aviva,
CGNU and Morley are set out in the letter dated 15 April 2005 from
CGNU Life Assurance Limited. A copy of that letter is attached as
Appendix 1.
2.7 I assumed full responsibility for the Southgate
redevelopment scheme ("the Scheme") approximately three years ago.
Since then, I have directly overseen the applications for
planning permission, listed building consent and conservation
area consent for the Scheme. as well as the negotiation of the
associated Planning Agreement. Currently, I am negotiating the
final terms of the Building Agreement and headlease with Bath &
North East Somerset Council ("the Council"). It is
anticipated that the Building Agreement will be completed before
the start of the inquiry. Once this has happened, a summary of the
main provisions of the Building Agreement will be provided to the
Inspector.
2.8 As part of the overall funding and development strategy for
the Scheme, the existing CGNU assets in Bath were contributed to a
Jersey Property Unit Trust ("the Trust"). The Trustees of the Trust
are BNP Paribas Jersey Trust Corporation Limited and Anley Trustees
Limited based in St. Helier. The Trust is managed by Morley
(Jersey Unit Trusts) Management Ltd and Morley is the Investment
Adviser and Property Manager to the Trust. 99.goh of the issued
units in the Trust are held directly by CGNU.
2.9 References to CGNU in my evidence include, where relevant,
references to: CGNU Life Assurance Limited; Morley Fund Management;
BNP Paribas Jersey Trust Corporation Limited and Anley Trustees
Limited as Trustees of the Southgate Property Unit Trust; and/or
Southgate Limited Partnership acting by its general partner
Southgate General Partner Limited.
3 Scope of evidence
3.1 In the introduction to my evidence, I provide a summary of
the main activities of the Aviva group and CGNU, demonstrating the
high-profile nature of the group's activities and referring to
CGNU's successful record in investment in and development of major
retail-led mixed use town centre regeneration schemes.
3.2 Although, by way of an example, my evidence provides further
details of CGNU's involvement in one of the schemes that I refer to
in my introduction, it will focus mainly on the extent of the work
that CGNU and its consultants have applied to the Scheme to date,
the opportunity that the Scheme presents to CGNU and CGNU's
commitment and confidence in the Scheme going forward. I address
the following issues specifically: the opportunity presented by the
Scheme from an investor's perspective; CGNU's brief to its design
team in formulating the design of the Scheme proposals; the
consultation undertaken by CGNU in developing the Scheme proposals;
the options considered for relocating tenants; the deliverability
of the Scheme and funding.
3.3 I conclude that it is essential for the compulsory
purchase order ("the Order") to be confirmed so that the unique
opportunity presented to CGNU and Bath as a whole can be
realised.
4 Commercial justification for the Southgate
scheme
4.1 The opportunity presented by the Scheme from an
investor's perspective
4.1 .1 In paragraph 5.3 of his proof of evidence, Brian Raggett
sets out the criteria that he believes a retail scheme of the
requisite scale and quality which can become part of the fabric of
Bath must have to be successful. I fully endorse those criteria
and, from CGNU's point of view, the following additional commercial
criteria for a successful scheme are that:
(a) it must be financially viable;
(b) it must be sustainable and environmentally friendly;
(c) in design terms, it must be capable of physical integration
into the existing urban fabric of the City;
(d) It has to be able to demonstrate the highest quality in
terms of design and architecture
(e) it must be capable of physical delivery;
I am confident that the Scheme will meet these criteria.
4.1.2 Bath's retail offer has suffered in the past from a lack
of new space and, as a result, has insufficient provision in terms
of its department store representation and larger space units,
which retailers increasingly seek in order to achieve higher sales
volumes. The existing Southgate Centre is unattractive, both
aesthetically and in terms of its layout. Combined with the
existing Bus Station and Ham Gardens car park, the area does not
represent an attractive gateway to this World Heritage City. When
the shops in the Southgate Centre close, there is little activity
in such an important area.
4.1.3 The comprehensive redevelopment will regenerate the
Southgate area and benefit Bath as a whole, creating an attractive,
mixed-use environment, including retail, leisure and residential
uses, whilst providing a new Transport Interchange and improvements
to the Railway Station.
4.1.4 A new department store will anchor the Scheme and will
attract new retailers to Bath, thereby allowing the City to respond
to the threats of other competing centres such as Bristol.
Following preliminary discussions with a number of major store
operators, negotiations have now commenced with two of the UK's
leading department store groups for a store of approximately
125,000 sq ft over 5 floors. Indicative proposals have been
received and detailed technical and financial analysis is being
undertaken.
4.1.5 When evaluating the likely success of a scheme, it is
clearly essential to consider the likely catchment area and numbers
of potential customers within it. Other factors, such as University
student numbers who may contribute to customer numbers, city centre
working population and tourist influx are also important and
demonstrate the significant opportunities for additional custom if
the correct retail offer and improved environment is provided.
These factors have been considered in detail by CGNU and I believe
that the opportunities for additional custom in Bath combined with
quality of the proposed Scheme and its mix of tenants will make the
Scheme a great success. Commercially, Southgate is therefore an
ideal location and the Scheme is a fantastic opportunity to
transform an unattractive and declining area into a thriving
destination for the population of, and visitors to, Bath. The
improvement in retail provision and other facilities that the
Scheme will bring about will benefit the city as a whole.
4.1.6 CGNU will continue to undertake active asset and property
management of the redeveloped Southgate centre. This will ensure
asset performance for investors. In addition, a comprehensive and
long term management plan will be adopted to preserve a tenant mix
suitable for the City Centre and will ensure a high quality of
management of buildings, car parking and the public realm.
4.1.7 The Scheme is of the type and scale that forms the basis
of CGNU's day to day investment and development work. As detailed
in my introduction, CGNU has successfully delivered a large number
of retail-led mixed use town centre redevelopment schemes and I
have been personally involved with a number of them. A good example
is Phase Ill of The Lanes, Carlisle, which was completed in October
2003. It comprises a Debenhams department store of 106,000sq ft; 17
standard shop units and 4 kiosks. The extension was undertaken in
partnership with Carlisle City Council, in a sensitive planning
area, adjoining listed frontages. In total, the Centre (all phases)
comprises approximately 350,000sq ft. Being an historic city,
similar issues prevailed such as the need for high quality design
and building materials, integration with the historic surroundings
and the appointment of the correct developer manager to deliver the
scheme.
4.2 The brief to CGNU's design team
4.2.1 The brief given to the design team was to design an
innovative mixed-use development, which would achieve an
outward-looking environment with a sense of place. The development
needed 'to be sympathetic to the vernacular of the City, whilst
providing space of a nature that satisfies the requirements of
modern retailers.
4.2.2 The design team consists of Chapman Taylor and Wilkinson
Eyre (architects) and Livingston Eyre (landscape design
architects), all of whom were selected because of their significant
experience with such development schemes and the range of skills
that they possess in order to meet the challenges posed by such a
significant project in the World Heritage site of Bath.
4.2.3 The brief was to prepare a scheme for the redevelopment of
the Southgate site, having regard to the need to integrate the
proposals into the City Centre so as to improve pedestrian flows
within and through the site.
4.2.4 The architectural style was required to reflect that of
historic Bath to ensure that the Scheme appears as an important and
integral part of the central area of Bath.
4.2.5 The proposals, while being of mixed use, were required to
maximise the retail potential of the area, providing a department
store, a replacement store for Boots and shops of the right size to
accommodate key retailers that need to be attracted to Bath.
Leisure uses were to include a cinema with supporting
restaurants.
4.2.6 Public transport facilities were required to be improved
and adequate car parking spaces provided.
4.2.7 The Scheme needs to be of a very high quality, reflecting
its location within a World Heritage City.
4.3 Consultation undertaken by CGNU in developing the
scheme
4.3.1 Extensive discussions have taken place with the Council
since 1995 to arrive at a scheme that meets the requirements of the
Local Planning Authority. Numerous meetings have also taken place
with and presentations given to, interested parties, including
English Heritage, Friends of the Earth, local societies including
the Bath Preservation Trusts, the Bath Springs Foundation and the
Bath Society, public amenity groups and members of the public. A
number of applications for different scheme proposals were
submitted to the Council as a result, in order to refine and reduce
areas of concern.
4.3.2 The end result is the Scheme for which the Main Scheme
Planning Permission was granted by the Council in September 2003
and in respect of which the Order has been made. The Scheme has
been designed as a series of buildings and streets to reflect the
surrounding form and architecture. Consideration has been given to
roof scape views from Beechen Cliff and attention given to the
detailed form of the various roof structures. The content of the
Scheme reflects its principal purpose to provide modern retailing
facilities within the City Centre, however attention has also been
paid to include local needs uses as well as attractions for evening
use of the buildings and surrounding areas.
4.3.3 A comprehensive consultation process was therefore
undertaken by CGNU in working up the development proposals,
engaging with groups and individuals at all levels. Having done so,
the intention will now be to adopt a collaborative approach with
the same parties to secure their involvement and participation
during development of the Scheme and after it opens.
4.4 Deliverability of the Scheme and funding
4.4.1 Morley manages funds with a value of over f 128bn, of
which £ l 8bn is invested in property. It has historically invested
significant sums in developments by providing funds. Morley and
CGNU are, however, not developers and CGNU will secure a developer
manager who will bring the necessary skills required to deliver the
Scheme. Tender documentation for the contract to develop the Scheme
is currently being prepared and the developer manager will be
selected when the Building Agreement and headlease have been
completed. Both are close to being finalised.
4.4.2 The scheme for which the Main Scheme Planning Permission
has been granted is the scheme that will be implemented. CGNU's
developer manager will be brought in to deliver the Scheme, as
approved, on CGNU's behalf and will not be in a position to require
any changes. The developer manager will be required to adhere to
the development programme, the current version of which is attached
as Appendix 2. This demonstrates that the first phase of the
development has been programmed to commence in August 2005 and it
will then be constructed in phases in accordance with a strict
time-table, with completion due in February 2010.
4.4.3 The design of the Scheme has reached an advanced stage
with CGNU having invested heavily from the outset in employing some
of the Country's leading planning, property and highways
consultants, architects and archaeologists. Buro 4 were appointed
in July 2002 as project managers which introduced a fresh
discipline to the development proposals, providing a development
structure, strategy and co-ordination. The development proposals
are, consequently, extremely advanced and much more so than is
often the case for similar schemes at the same stage. This is
primarily due to Bath's designation as a World Heritage Site and
the result is that there is little scope for further changes to the
Scheme to be made.
4.4.4 A financial appraisal of the Scheme has been carried out.
CGNU are able to fund the entire development internally and,
therefore, all necessary funding approvals are in place. Funding
has been allocated for the Scheme, which will proceed when the
pre-conditions in the Building Agreement have been met. The
Building Agreement will specify the threshold percentage that CGNU
requires to be achieved. This is standard commercial market
practice and CGNU is confident that the threshold percentage will
be met.
4.4.5 The Building Agreement with the Council will oblige CGNU
to build the Scheme when the preconditions in the Building
Agreement are satisfied. The Building Agreement will require that
the Scheme is carried out in accordance with the Main Scheme
Planning Permission and the associated Listed Building Consent and
Conservation Area Consent. The conditions precedent to the Scheme
proceeding in accordance with the Building Agreement include
satisfaction that the development will achieve a minimum threshold
percentage (as I have mentioned above), obtaining the Road Closure
Order and the acquisition of good title to the parts of the
development site that are not owned by CGNU or the Council.
4.4.6 With regard to acquiring good title to all parts of the
Order Land, the proof of evidence of Richard Herbert provides
details of the on-going negotiations and every effort is being
committed to achieving acquisition by agreement. The fact is,
however, that a compulsory purchase order is necessary in order to
acquire any interests that cannot be acquired through negotiation.
As for the Road Closure Order, only one objection has been
submitted and CGNU is hopeful that negotiations with that party
will lead to a withdrawal of that objection.
5 Conclusions
5.1 It is essential that the Scheme proceeds in order to
significantly improve the retail provision in the City Centre and
to transform the Southgate area into a thriving shopping
destination. By increasing the profile of Bath as a shopping
destination, visitor numbers to the City Centre will increase and
this will be to the benefit of the City as a whole. CGNU is
confident that the Scheme, as approved, will achieve this and prove
a commercial success, complementary to the existing retail offer in
the City. The Scheme will also create significant employment, in
terms of both construction work during the building of the Scheme
and retail sales employment when the redeveloped centre is
open.
5.2 The Scheme needs to be implemented as soon as possible to
prevent any further decline in Bath's reputation and status as a
retail centre.
5.3 CGNU fully supports the Council in pursuing the Order, which
is needed to secure implementation of the Scheme in the required
timescale. CGNU wishes to bring forward the development as early as
possible and intends to commence the development in August 2005.
CGNU has the experience, funding and commitment to ensure that the
scheme is delivered.
5.4 Stylo Barratt have objected to the Order on grounds that
include a suggestion that the Scheme is unviable. My evidence in
paragraph 4.4 demonstrates that CGNU intends to proceed with the
Scheme and has funding in place.
