Cabinet members will discuss the sale of the freehold for the entire Dreamland site -including the council car park and cinema building – on August 1.
The aim is to sell the site to lease holder Sands Heritage Limited, which is owned by hedge fund Arrowgrass via holding company, Margate Estates Ltd.
The sale would include the full complex, rides and the TDC restored cinema and Sunshine Café building, containing the ‘Dreamland Bars’, later famous for being the ‘Bali Hai’.
Any agreement would include a restriction prohibiting housing development at the site for 10 years.
A report to Cabinet members highlights that “after disposal to the current lessee, SHL could theoretically submit a planning application for development which is outside of the current planning policy for the site – which is similar to its planning designation at the time of the CPO (leisure and ancillary activities). This may or may not succeed, and SHL have indicated that they have no plans to do so, but it represents a risk.”
To protect against this TDC says: “The council will require a restriction in the sale agreement to disallow the opportunity for the new owner to develop the site for housing, for a period of ten years.”
The report says SHL has stated that it has no plans to develop housing and that it also plans to enter an agreement with the National Lottery Heritage Fund – which provided grant money for the original reopening in 2015 – to maintain the heritage aspects of the park.
Council ownership
The council has owned Dreamland since September 2013 following a successful Compulsory Purchase Order against Margate Town Centre Regeneration -later renamed DreamlandLive- which had proposed an amusement park with up to 500 homes at the site.
The CPO was served in June 2011 but a lengthy court battle followed when the then-land owners lodged an appeal which was dismissed by the High Court in May 2013.
However, compensation for the land is yet to be paid and will likely come from the proceeds of the sell-off to SHL, Council documents say the CPO compensation amount will be based on a date applicable at the time of the CPO, not the current valuation.
The report adds: “Even if there is a risk that a CPO valuation starting point is today’s value, to arrive at the 2012 value, very substantial deductions would apply because of the many millions of pounds spent on the site in the intervening years.”
However, it is also noted there is a risk the council may not achieve the market value of the site although the report adds: “The market value of the site will be established by an up-to-date, independent valuation. The disposal will not take place unless this valuation is equalled or exceeded.”
Reopening, debt and rescue
The park initially reopened, with Sands Heritage at the helm, in 2015 following £19.4 million funding from the Department for Culture Media and Sport’s Sea Change programme, the Heritage Lottery Fund and Thanet District Council.
It went into administration in May 2016 after SHL suffered financial difficulty at the end of 2015 and entered a voluntary debt plan. The company had been hit with a net loss of £5 million and owed bills of £2,893,128.
Arrowgrass bought SHL, secured payment of debts to bring the park out of administration and invested some £25million in re-landscaping, vintage rides restoration and the introduction of contemporary street food, eclectic bars, and a main stage.
The cash was secured by placing legal charges on SHL’s 99 year lease of the Dreamland site, and by placing charges on other, non-TDC, properties leased by SHL.
The properties include land at 43-47 Marine Terrace; land at 45-55 Eaton Road: Cinque Ports pub; Ziggy’s; fish and chip shop at 48 Marine Terrace and land at Dreamland amusement centre.
The firm also has an option to purchase Arlington House.
The investment resulted in a second ‘reopening’ with a greater mix of music and events running alongside the amusement rides.
The report to Cabinet members says: “By 2017 the council had borrowed £8m to invest in the site, added to the £11.4m grants from external funders. It owned the listed, undeveloped cinema site, which required regular repairs; and a hugely complicated, specialist and expensive-to maintain Scenic Railway.
“The council also had ongoing legal costs relating to the CPO which were soaking up the net income derived from the car park.”
Sale benefits
The council report says the sale will mean a loss of income from the authority-run car park and a possible loss of a public amenity but adds: “The loss of car park revenue will need to be replaced. A freehold disposal typically generates a one-off capital receipt, rather than recurrent annual income. However, the receipt can be used to repay debt, and so the annual cost of debt repayments will be eliminated – which will offset the loss of income.”
The sale will include a restrictive covenant to guarantee the same number of public parking spaces in future as
exist now.
The recommendation states: “We agree terms with SHL to sell the whole site, including rides and intellectual property. We sell for a consideration equal to or greater than the independent valuation we have obtained.
“The council already has advice that the best value can be obtained by disposing to the lessee, SHL, rather than any other buyer, because there is enhanced value in the site being unencumbered by the lease (held by SHL) “
The council says SHL has wide plans, including establishing the new seafront hotel and conference facilities, which would boost chances of the park continuing to thrive.
The report adds: “Although the heritage amusement park alone has always struggled commercially, the new vision for Dreamland offers a critical mass that makes the most of the history, whilst supplements it with commercially sustainable activities.
“This current and potential approach demonstrates that Dreamland can succeed without the need for crosssubsidisation from mass housing development. It incorporates modern rides, possible hotels and conference facilities which are ancillary to the core Dreamland experience.”
However, risks could include damaging relationships with the Dreamland Trust and external funders who provided the original grants to reopen the park. The council has continued obligations to funders, as a condition of the
grants.
Removing costs
But Thanet council says a sale will remove authority costs for estate management, maintenance and repairs – and significantly reduce staffing resource dedicated to Dreamland.
The report adds: “The loss of car park income will be offset by cost savings and the reduction in debt repayments. The final objective is to generate a capital receipt to help repay related debt. A receipt will be achieved in excess of the council’s independent market valuation; its scale will be sufficient to repay enough Dreamland-related debt to offset the loss of car park income.”
Agreement of the sale is being recommended with the report adding: “Cabinet could choose to retain the property and land, but should be aware that this will result in risk, liabilities and costs.”
