8,000-home Edinburgh plan hit by funding crisis

The company behind an 8,000-home plan to regenerate 120 acres of Edinburgh’s waterfront is in danger of breaching banking covenants unless new financial backers are found.

Colin Hunter, chief executive of Edinburgh Waterfront, said he was in talks with sovereign wealth funds over forming a joint venture to take the regeneration forward.

Speaking at Building’s Phase One event in Edinburgh last Thursday, Hunter said the value of Edinburgh Waterfront had plummeted since recent falls in house prices. This had left the firm’s balance sheet “shot to pieces”. A spokesperson for the company later confirmed that the firm had begun a search for a long-term joint-venture partner.

Recent housing market research by the Royal Bank of Scotland showed that development land values could drop as much as 70% if house prices fell by as little as 15%. This is because construction costs cannot be reduced, meaning all of the fall in price of a home has to come off the value of the land.

Edinburgh Waterfront is a private company formed from land holdings of Edinburgh council and £16m in grants from Scottish Enterprise, set up to deliver the 30-year regeneration of the Granton district of Edinburgh.

Hunter said: “The Edinburgh market is very tough, the UK market is even tougher, but the Granton market, the flats market, has completely stalled. That has a major impact on our banking covenants.”

Edinburgh Waterfront’s spokesperson admitted that it was possible the firm would breach banking covenants if no investor was found. However, Hunter said the current market also provided a massive opportunity for a long-term investor.

For more on Phase One, visit www.building.co.uk/phaseone