English Partnerships set to make £200m profit on hospital sites

English Partnerships is set to generate at least £200m profit on the disposal of 96 former hospital sites that it bought from NHS Estates for £320m in April 2005.

The bulk of this windfall will be returned to NHS Estates, with the public purse set to be swelled further by an “overage” agreement that has been struck with developers on the first 22 sites to be sold by the end of this financial year (see table).

EP expects 14,000 homes to be built on the 96 sites across England – a total of 1,600ha – and the overage deal means any profit on sales above an agreed level will be split between the developer, EP and NHS Estates.

The 96 sites are expected tp fetch £520m. The overage figure is not included in this figure due to government accounting rules. But EP is confident that the deal will net the public sector a “significant sum over time”.

David Hughes, EP’s director for the hospital sites programme, said: “The programme so far has been a phenomenal success in terms of the speed we have brought these sites to market.

“Two things have exceeded our expectations: the level of receipts and our ability to secure planning permission as quickly as we did. We've done far better than I think the private sector would have,” he added.

Of the 22 sites that EP has sold to developers to date, it expects to receive at least £272m and the developers have agreed to build 4,977 homes – 1,583 of which will be affordable. The figure of £272m will rise even further as it does not include the 1000-home St Francis site in Haywards Heath, Sussex, which EP has just agreed to sell to an undisclosed buyer.

To date 32% of the homes on the 22 sites will be affordable. Although this is less than the 50% affordable target that EP initially set itself for the sites, Hughes is confident the 50% figure will be reached once the remainder of the 96 sites are sold to developers and homes are added under EP’s first-time buyers initiative.

On receipts and planning, we've done far better than I think the private sector would have

David Hughes, EP

This will include 34 sites which are “small or have limited development potential”. These are likely to be sold off in the manner of sites in Derby and Grimsby without the masterplanning and design requirements attached to the majority of other schemes.

Hughes added that this ability to press design standards on developers interested in buying sites was “the real gain”.

He cited projects at three sites collectively known as the Epsom Cluster which cover 162 hectares where a total of 710 homes will be built, all to four stars under the new code for sustainable homes.

Ben Derbyshire is managing director of architect HTA which is working with housebuilders Crest Nicholson and Galliford Try on the Epsom Cluster. He said: “I think that developers being forced to think in place-making terms by EP’s design standards proves the point that high design standards drive up value.”

Yolande Barnes, head of research for property consultant Savills, said: “The uplift in value EP has achieved for the land is above what the market has been achieving over the last two years.”

She added: “There is a real shortage of land just now and these sites are often in much more attractive locations than most other brownfield sites.”. As a result, Barnes said, she was “not at all surprised that EP is getting these receipts. I think it is a good thing that it is involved and is making this happen. It has always been the case that money is made in development not by building houses but by bringing sites to market. The fact that much of this uplift is going back to the public sector can only be a good thing”.

Hughes said that once EP took control of the sites from NHS Estates, it worked out which were the top 20 for rapid disposal. “These 20 sites contained 80% of the value of the 96 sites, so we ensured that we set high standards for their development,” she said.