full business case stranraer waterfront redevelopment...

Full Business Case

Stranraer Waterfront Redevelopment

EXECUTIVE SUMMARY

December 2016

issue 01

Full Business Case Executive Summary: Stranraer Waterfront Redevelopment

2

CONTENTS

1 The Strategic Case ......................................................................................................... 3

1.1 Introduction ............................................................................................................................ 3

2 The Economic Case ........................................................................................................ 5

2.1 Economic impacts ................................................................................................................... 5

2.2 Additional Benefits .................................................................................................................. 5

2.3 Stranraer Tourism and Economic Background ........................................................................ 6

3 The Commercial Case .................................................................................................... 7

3.1 Procurement Strategy ............................................................................................................. 7

3.2 Risks to successful delivery and Opportunities for savings ..................................................... 7

4 The Financial Case ......................................................................................................... 9

4.1 Financial Projections for the Marina Operations .................................................................... 9

5 Management ................................................................................................................. 10

5.1 Options for Marina Management ......................................................................................... 10

6 Review of Option Selection ........................................................................................... 12

6.1 Objectives of the Waterside Redevelopment ....................................................................... 12

6.2 Range of Marina Options Considered ................................................................................... 12

6.3 Identified Option 3B-2 ........................................................................................................... 14

6.4 Budget costs .......................................................................................................................... 17


3

1 The Strategic Case

1.1 Introduction

1.1.1 The relocation of the ferry terminal from Stranraer to Cairnryan in 2011 and the absence of

passing traffic has had a major negative economic impact on the town which further

highlighted the need for regeneration and the creation of a robust tourism economy.

Dumfries and Galloway is recognised as a major destination for tourism, but Stranraer has

not been regarded to date as a major element in the region’s tourism economy. Investment

in the waterfront has the potential to revitalise the entire town, attract business, create

employment and give the town focus and purpose.

1.1.2 Dumfries and Galloway Council published a Masterplan in 2009 which acknowledged the

likelihood of Stena Line vacating the East Pier site. The Masterplan had at its core an

intention to focus on the waterfront and connect the heart of the town to the water with a

marina being a “key driver” by making Stranraer the home port for 200+ boat owners and

attracting visitors to establish Stranraer as a marine leisure destination.

1.1.3 In order to become a “magnet” for tourists the Council are seeking to create a development of

scale for Stranraer and one that can connect the waterfront to George Street and Charlotte

Street and Agnew Park to the East Pier and train station. The town has for some time been

disconnected from the waterfront and the coastal pathway was somewhat disjointed. The

2009 master plan sets out to make the town foot print more cohesive and attempts to connect

the assets of the town together.

1.1.4 Marinas are proven vehicles for regeneration across the UK bringing increased property

values and vibrant waterfronts and changing the perception of previously low priority

destinations. An expanded marina is not just for boating activities but is a catalyst for change

and an investment in the town. The power of change resulting from waterfront regeneration

with embedded marinas can be seen in towns such as Bangor (NI) and Hull where the towns

were transformed by such developments. More recently Greenock and Ardrossan have

invested heavily in marina led regeneration with some early success.

1.1.5 In recent reports the Council’s vison for Stranraer Waterfront has been stated as: “To make

the waterfront a place where people choose to live, work, play and visit and create

opportunities for new business, retail and leisure developments”

1.1.6 The redevelopment of the Waterfront with a marina is consistent with regional policy and in

line with various policy and strategic documents. The key themes recognised and met by the

waterfront development

1.1.7 The ‘Dumfries and Galloway Regional Tourism Strategy; 2011-2016’ is the main policy

documentation for the region. The expansion of Stranraer’s Marina will play a vital role in

helping to meet the four key objectives below, along with developing the town as a leading

marine leisure destination:

To grow the value of tourism from £300 million (2014 levels), to £330 million by 2020;

To increase the volume, length of stay and extend the season, from 2.43 million tourist

visitors to 2.6 million visitors;


4

Increase direct and indirect jobs from 6,969 to 7,300;

Build our reputation as a place to return to and be recommended.


5

2 The Economic Case

2.1 Economic impacts

2.1.1 A Waterfront development with an active, busy marina at its core, will add to economic activity

through the business of the marina itself and the effect that the development will have on the

town. The table below shows the additional expected patronage and potential new jobs based

on year six operations of the marina itself.

Option 3b

Number of additional standard resident berths per annum 70

Number of additional discounted resident berths per annum 35

Number of additional summer berths per annum 90

Number of additional winter afloat berths per annum 25

Number of additional small summer berths per annum 16

Number of additional small boat package berths per annum 9

Number of Additional VBNs per annum 455

Number of direct additional jobs (FTE) 8.25

Table 1 Additional patronage and potential jobs at the Marina only

2.1.2 Based on this patronage and allowing for leakage and displacement, a Net Additional Impact

can be calculated for Stranraer, Dumfries and Galloway and for Scotland.

Average economic impact per annum

Option 3b

Stranraer £872,820

Dumfries and Galloway £788,294

Scotland £533,706

Average employment impact per annum

Option 3b

Stranraer 14.9

Dumfries and Galloway 8.9

Scotland 5.9

Table 2 Additional economic and employment impacts

2.2 Additional Benefits

A stakeholder survey Carr ied out by the Counci l highlighted that the majority of business

owners who responded were likely or highly likely to invest in the town as a result of the Waterfront

Regeneration Project (19 respondents out of 35). Making a simplistic assumption that such levels of

commitment can be realised, this could have


6

the potential to create significant employment in the town. Combining with the additional jobs above

for illustrative purposes, the total employment benefits are tabulated.

Average employment impact per annum*

Option 3b

Stranraer 88.8

Dumfries and Galloway 68.1

Scotland 52.4

Average GVA impact per annum*

Option 3b

Stranraer £1,376,028

Dumfries and Galloway £1,055,910

Scotland £812,239

Table 3 Indicative average GVA impact per annum including additional employment at the marina plus

additional new business

2.3 Stranraer Tourism and Economic Background

2.3.1 The economy in Dumfries and Galloway and Stranraer in particular, is not as strong as

many parts of Scotland or the UK. Gross weekly earnings are 16% lower than average

Scottish and UK levels; the rate of economic growth is lower than Scotland and the UK; the

economic prosperity gap continues to widen and the region suffers from outward migration.

2.3.2 Considering tourism, Dumfries and Galloway has many attractions and is a destination at

regional level. There is the UK’s largest forest park; excellent cycling and mountain biking

facilities; there is a strong arts and cultural product in the area and Wigtown is known as

‘Scotland’s National Book Town’; the Dumfries and Galloway Arts Festival attracts 170 artists

to 60 events in 30 region-wide venues and along the coastline there are a number of holiday

parks. The Mull of Galloway Trail passes through Stranraer en-route to the Mull of Galloway,

the southernmost part of Scotland. Stranraer is home to the medieval Castle of St John, a

ruined four-storey tower house built around 1500, which sits on a green in the town centre.

2.3.3 Sailing Tourism in Dumfries and Galloway is currently limited, although as a sector there is

growth and real potential for Stranraer. The Clyde and the West Coast (incorporating

Dumfries and Galloway) hosts the largest number of resident vessels in Scotland and hosts

almost 50,000 visiting boat nights per year. The majority of this activity is focussed further

North with only 4% of the Clyde’s pontoon stock (103 resident and 16 visitor berths) and 16%

of its mooring stock (323 resident and 3 visitor moorings) in the region. Whilst on the extremity

of the Clyde and the West Coast sailing area, Dumfries and Galloway could become an

important link between other parts of the UK and Scotland’s most significant sailing waters.


7

3 The Commercial Case

3.1 Procurement Strategy

3.1.1 The delivery vehicle for the next stages of the waterfront redevelopment have not been part of

the brief for this study, this aspect being considered by Dumfries and Galloway Council. A

number of options are being explored and the selected option will be consistent with other

stakeholders in the Waterfront, particularly Stena Line UK ltd who own the East Pier and are

currently the Harbour Authority.

3.2 Risks to successful delivery and Opportunities for savings

3.2.1 A number of risks are identified and discussed in this document. For reference, the cost

£21.5m sited includes a 15% contingency on base cost.

Item Risk or

Opportunity

Description

Absence of

Ground

Investigation

(GI)

Risk A detailed ground investigation is required to inform the

licencing process and to understand the risks of the

project. There is known on shore contamination from the

former gas works site but the effect of this into the

sediments within the harbour is not known. The

practicality of extensive dredging will be confirmed once

the GI is undertaken.

Extent of

Breakwaters

Opportunity The layout of breakwaters included at present has been

tested by analysis to provide the required level of

protection from all wind directions. The extent considered

provides additional protection around the East Pier that

would allow berthing for larger vessels and super-yachts to

be included that would enhance the development

potential of the east pier. If this were not required, the

breakwaters could be brought closer to the pontoons with

an associated cost saving.

Option 2, a

cheaper but

less attractive

alternative

Risk and

Opportunity

The preferred Option 3B-2 provides the best fit against the

original objectives, but it is not the cheapest option.

Option 2 would require lower dredging cost initially and

could provide extra capacity over the existing marina at

lower cost. As the marina develops, further capital

investment could be made to extend the dredged area and

works towards a layout similar to 3B-2. The initial


8

breakwater layout should be cheaper than 3B-2 as the

depths are shallower. The risk is that ongoing dredging

would be more expensive as the bed is less secure; the

ultimate layout is less functional. The opportunity is a

lower initial capital cost.

Consents Risk Pre-consultations have not yet been carried out and so

there is a risk that all required consents cannot be

obtained without changes to the design assumed.

Requirement of an EIA

Risk An EIA may be required. The need for this would

be established through a screen of opinion as soon

as practical.

Planning

Consents and

reports

Risk Addition impact assessments may be required, planning

consents may not be given for suggested scheme. Dialogue

with the Planning department will mitigate this risk to

understand and currently unknown requirements and to

obtain an opinion on the proposals in advance of formal

submission.

East Pier Opportunity The development of the east Pier could be integrated with

the Waterfront Redevelopment to the mutual benefit of

both schemes.

Reliability of

cost and

financial

models

Risk and

Opportunity

The current models are being tested and validated to

confirm their validity. The capital cost estimate includes a

15% contingency on cost and includes professional fees for

design and construction phases.

Do not remove

Ross pier

Opportunity

(with

residual

risk)

£950,000 has been included in the estimate for the

removal of the Ross Pier. If this were not removed, there

would be an immediate capital cost saving, although the

maintenance liability of the pier would be retained. One

benefit of its removal is the improved aesthetic of the

harbour that would be lost if retained.

Table 4 Risks and Opportunities


9

4 The Financial Case

4.1 Financial Projections for the Marina Operations

4.1.1 Projected estimated budget accounts, based on operational experience of current marinas

using the proposed berth pricing structure, have been prepared to arrive at Sales Projections,

Operating Statements and Capital Expenditure (CAPEX) Estimates.

4.1.2 The marina has trading and CAPEX extended to 6 years to a point at which the capital

developments for the marina are complete, the marina should be full and operating to capacity

by year 7 at the projected fill rate for 316 berths. With capital expenditure, high dredging costs

and extensive breakwater structures the marina will struggle to give a full return on capital

when depreciation and finance costs are fully accounted for. The marina development and

plant costs of circa £11.5m are excessive for this size of marina and the overall Waterfront

Regeneration project costs amounting to £21.5m including the marina, however when one

considers the overall economic benefits of the entire development and the alternatives of the

status quo the project has to be seen as a desirable and important one for the future of

Stranraer and the locality.

SALES (£) Accumulated

6yr Profits (£) OPTION BERTHS Yr5 Yr6 Yr7

Option

3B-2 316 680,611 892,554 994,343 -205,366.89

Table 5 Accumulated 6yr profits/ losses, sales and total capex for Options 3B-2 (Including

provision for depreciation of marina related assets – but before finance costs and taxation)

4.1.3 Losses for both options reduce with time but due a pricing regime which is between 20% and

40% cheaper than the Clyde Marinas and extensive engineering costs a marina at Stranraer

is likely to have to be subsidised in order to get the regenerative benefits for the wider

development and for the community.

4.1.4 In the Outline Business Case it was hoped that savings in capital expenditure maybe

achieved, however the extent of dredging, contamination, piling for buildings and sea wall

requirements have meant that the project costs have had to be revised upwards and the

marina team have also elected to allow a significant sum for dredging every 5 yrs in the

absence of evidence to the contrary. The FBC more widely considers that the waterfront

regeneration should complement proposals for the East Pier development and provide a

catalyst for more economic activity in Stranraer.

4.1.5 The financial projections assume that the depreciation of the larger capital expenditure

items and the finance costs will not be set solely against the marina project. It is likely that

further profits could be made through the construction of commercial buildings and letting

to marine and other commercial tenants.

4.1.6 The financial case for the marina expansion in isolation is not proven, however as a focus for

regeneration and future development marinas have successfully been the catalyst for

successful regeneration and it is believed that this is very much the case for Stranraer.


10

5 Management

5.1 Options for Marina Management

5.1.1 Achieving the correct management structure for the expanded marina is a major element in

the marina’s long term success. The management structure of the expanded marina needs to

proactively develop the marina business to drive the marina’s growth and hence associated

economic activity. Several options exist and the long term solution may be to start with a low

commercial risk option and consider leasing or sale once the marina is full.

5.1.2 Outright Sale of a Marina Development Opportunity would pass all responsibility to the private

sector. However, the low initial profits make it unlikely that a purchaser could make a

commercial return for some time. It is likely that the marina would command a higher market

value once it has established the level of profits achievable and has proven that the market

is robust and sustainable. The capital cost of providing a safe and protected environment

is particularly excluding the surrounding infrastructure may be a more attractive option.

5.1.3 Lease the Berthing Facility to an Existing Operator who would bring operational experience

but would not be burdened by the same financial pressures as an outright sale. The Council

would maintain ownership and the authority to influence future business and regain control at

lease breaks. There are many marina operators in Scotland, some single site operators and

others with multiple sites. Market engagement suggests a degree of interest in this option.

5.1.4 A variation of the lease is an arrangement where the marina could be leased to an

experienced operator on a lease length that reflects the financial input by the tenant. By

leasing to an existing operator it would be hoped that the Council would get high levels of

service as well as a professionally run operation. The levels of investment for the Council

would still be considerable and the tenant would be likely to look for “soft entry” period at

reduced rent for a reasonably long period.

5.1.5 A Community Run M a r i n a a t Rothesay Harbour has worked successfully on Bute for

a number of years. The model consists of a 5 year management contract whereby Argyll

and Bute Council own the pontoon infrastructure and maintain responsibility for major

marina repairs, dredging, harbour and road repairs and replacements of major capital items

and the Bute Berthing Company (BBC) are responsible for managing the marina, maintaining

navigation and meeting all annual outgoings including rates, sea-bed lease, insurance,

staffing and general repairs. The BBC pays a percentage of its revenue monthly to the Council

by way of rent.

5.1.6 A Fixed Term Management Contract deals only with the management of the marina through a

contractual arrangement. This can bring in a proven commercial team with perhaps less risk

as the performance of the contractor is monitored and controlled but as there is no tenant, the

Council has the flexibility to alter the marina development plan to suit future modifications to

the Masterplan as it progresses.

5.1.7 A Council Owned and Run Marina could use the existing marina team reinforced as required

to meet the higher demands of a growing marina and boatyard. This option would mean that

the Council maintains ultimate control over the marina throughout its development and


11

operationally. If the Council is confident in running the marina commercially then this could give

the best returns.


12

6 Review of Option Selection

6.1 Objectives of the Waterside Redevelopment

6.1.1 The objectives of regeneration in the town are:

a) To create opportunities and infrastructure for access to the water;

b) To change perceptions of Stranraer from a ferry port to a leisure destination;

c) To substantially increase the number of people who visit Stranraer and the surrounding

area.

d) To reconnect Stranraer town centre with its waterfront;

e) To encourage high quality architectural design; and

f) To create a more pedestrian friendly environment.

6.2 Range of Marina Options Considered

6.2.1 All marina options considered were based on providing a marina between the East and West

Piers with enhanced breakwater designs to provide protection to berthed vessels in all

conditions. All options also required extensive dredging to provide the required depths in all

tidal conditions. This section summarises the more viable options considered, includes a

matrix showing achievement of the objectives for each option and summarises the cost

estimates presented at Outline Business Case and Full Business case.

6.2.2 Option 1, extension to West Pier Marina, extendedind the existing pontoons into a newly

dredged area to the east. The servicing of the marina would be conducted from extensions to

the existing facilities on the East Pier. Option 1 would have less dredging and require less

capital investment than other options, but was not preferred because the marina would be

remote from the town and would not adequately promote economic activity in Stranraer. It

would support a total of 184 berths, less than the 250 usually considered to be sufficient to run

an economically sustainable business and so it would require ongoing subsidy to operate the

marina business in the long term.

Figure 1 Option 1 Layout Plan


6.2.3 Option 2: locates a new marina directly in front of the promenade just to the east of the west

pier. Servicing of the marina would be from new buildings on or near to the waterfront. Whilst

connecting to the waterfront, this option does not link to the East Pier limiting the economic

impact possible from the scheme. The plan shows an area of reclaimed land to the south west

formed from the dredged material. With 130 berths in addition to the existing 60, it would also

be too small to be an economically sustainable business and so would require ongoing

subsidy to operate in the long term and so is not preferred.


6.2.4 Options 3A locates the marina more centrally and provides a direct link to the East Pier by

using the dredge spoil to reclaim a corner of the existing harbour. This area can then be used

for parking, development or landscaped. Option 3A arranges the pontoons off the south side

of the harbour and provides 220 berths overall and so would be challenging to run as a

sustainable business. Much boating activity would be away from the promenade and so there

is less opportunity for passers by to be engaged.

Figure 3 Option 3A Layout Plan

6.2.5 Option 3B uses the same space in the water as 3A but visually roots the pontoons adjacent to

the East Pier, although they are accessed from the main waterfront where the marina

13


14

supporting facilities would be located. This option can be larger accommodating 300 berths in

total. It creates a physical link with the East Pier and the channels direct activity back towards

the waterfront before vessels leave the harbour, creating interest for people ashore.

Figure 4 Option 3B Layout Plan

6.2.6 Option 4 uses the East Pier to accommodate the shore facilities and provides the access to

pontoons. Locating the pontoons at the end of the East Pier minimises the extent of dredging

but does expose the berths to deeper water which makes providing wave protection more

complex and costly. The marina is remote from the town and so does not provide the required

connection and it relies on the availability of land on the East Pier to accommodate the on

shore facilities.


6.3 Identified Option 3B-2

6.3.1 With the overall layout of Option 3B identified as most fully meeting the project objectives,

various sub-options were considered looking at the location of shore based facilities. The

practical locations are along the waterfront and on the reclaimed area of land behind the

causeway.


15

The selected option in the Outline Business Case is Option 3B-2, as shown below: This

positions the harbour reception building and associated toilets and showers (6) near to the

access to the pontoons as 3B-1 and assumes the toilet and shower facility on the ground

floor are designed so that this area could flood in a rare event. The commercial buildings (8)

are located on the area of reclaimed ground. This is so that these buildings can have an

active frontage at ground level, as the reclaimed ground will be built up to a higher level to

guard against flood risk. These buildings will also have a direct relationship with the new

pontoons.

Figure 6 Building locations in Option 3 sub options

6.3.2 In considering a range of options, the overall achievement of the objectives was a factor in

determining the optimum option to carry forward.

Objective 1 2 3 4

a) Facilitate access to the water • • • •

b) Stranraer as leisure destination • • • •

c) Grow visitor numbers • • • •

d) Connect town centre to waterfront • •

e) Encourage high quality architecture • • •

f) Improve pedestrian environment • •


16

Figure 7 Preferred Option 3B-2 layout

6.3.3 Option 3B-2 as part of the Waterfront Development with the expanded marina will deliver:

Circa 300 berths between the West Pier Marina and the new South Quay Marina to include

much improved berths for the fishermen and commercial operators

A Causeway linking the train station, East Pier to the South Quay and Agnew Park.

Comprehensive physical and visual links between the train station, East Pier, South Quay

and West Pier and the town itself

An enhanced vista for the for the potential East Pier development

Events berthing and water space

Potential for a community led Watersports Association to attract activities and events and

provide training and youth development.

New Marina Offices, Toilets, workshops and boat sales plus an expanded 100 space boatyard

Commercial opportunities for a marine hub, offices, leisure, bar restaurant and retail unit

Increased parking and attractive public realm space.

Improved opportunities for business investment, economic growth and job


17

6.4 Budget costs

6.4.1 Cost estimates provided in the Outline Business Case were not inclusive of all costs that

could be associated with the project. As the option has been developed through the full

business case, more detail has been established of the work required to create the

environment that will allow the marina to be established and run. Tabulated below are the

current forecast costs (FBC) along with the two marina development costs that were included

in the Outline Business Case.

Element

FBC

(£000)

OBC1

(£000)

OBC2

(£000)

1. Investigations and EIA 620 - -

2. Associated Works 3,750 - -

3. Marine Based Engineering Works 5,610 4,631 4,585

4. Buildings 3,900 - 775

5. Piling 760 756 756

6. Marina 2,314 - 2,314

16,954 5,387 8,430

7. Allowance for prelims and contingencies (15%)

2,543

-

-

8. Consultants fee (10%, 13%, 8%) 1,950 703 700

21,447 6,090 9,130

Table 6 Capital Cost estimates from Outline and Full Business case

1. Investigations and EIA Ground Investigation and Environmental Impact Assessment

2. Associated Works Remediation of contaminated land; repairs to harbour wall; removal of Ross Pier; car parking and public realm

3. Marine Based Engineering Works Dredging; breakwaters; causeway/cofferdam and land reclamation

4. Buildings Onshore buildings

5. Piling Piling to support pontoons

6. Marina Pontoons, marina equipment, fuel pumps and tanks; services

Table 7 Breakdown of element components

www.fairhurst.co.uk

CIVIL ENGINEERING • STRUCTURAL ENGINEERING • TRANSPORTATION • ROADS & BRIDGES

PORTS & HARBOURS • GEOTECHNICAL & ENVIRONMENTAL ENGINEERING • PLANNING &

DEVELOPMENT • W ATER SERVICES • CDM COORDINATOR SERVICES

Aberdeen Birmingham

Bristol Dundee

Edinburgh Elgin

Glasgow Inverness

Leeds

London Manchester

Newcastle Sevenoaks

Sheffield Taunton

Thurso Watford Westhill

http://www.fairhurst.co.uk/

full business case stranraer waterfront redevelopment...

Documents