Capital developers claim £300m project is safe despite debts

Published on Wednesday 11 February 2009 00:05

DEVELOPERS behind a hugely controversial project in Edinburgh city centre yesterday insisted they were pressing ahead with the venture – despite reports that the scheme is on the brink of collapse.

London-based Mountgrange has declared it was "actively pursuing" the 300 million Caltongate development in Edinburgh's Old Town, despite the firm reporting a 24.3 million loss last year. Mountgrange has racked up 51 million in debts, including 20 million in bank loans and overdrafts.

The firm's auditors have admitted there is a "material uncertainty that casts doubt about the company's ability to continue as a going concern".

In its latest accounts, the firm admits it is "very disappointed" with its financial results, which it has blamed on the "severe effects" of the credit crunch.

However, a spokesman for the company later insisted it was still fully committed to the Caltongate scheme, which was opposed by all the main heritage groups in Edinburgh.

No work has begun on the site of the proposed scheme, next to Waverley Station, despite the Scottish Government awarding it planning approval in June.

However, large parts of the development, which is planned to include a five-star hotel, conference centre, 200 new homes, office blocks and a new public square, are said to have been shelved until the property market improves.

Mountgrange has seen some 17 million wiped off the value of the land it has bought in the Old Town.

The company started work on the project more than four years ago, but faced a lengthy struggle to secure planning permission. The row over whether the development should get the go-ahead was largely blamed for Unesco opening an inquiry into Edinburgh's world heritage site.

Mountgrange's spokesman said yesterday: "We have been affected by the sharp downturn in the financial markets.

"Our operating position reflects this and as such we have had to write down asset values on the Caltongate site. Our results from last year take into account these revaluations and the operational loss associated with the protracted period of four years it has taken to achieve planning permission on the scheme.

"However, we are continuing to actively pursue our plans for Caltongate and believe strongly that this site is a key opportunity for Edinburgh."

The Mountgrange scheme is the latest in a series of major developments to run into trouble.

A hotel development in the Haymarket area has been delayed for a public inquiry; a new home for the Royal Highland Show at Ingliston has been shelved after expansion plans for Edinburgh Airport were put on hold; and an expansion of the financial district in the Fountainbridge area has been halted by the economic downturn and the takeover of the banking giant HBOS.

Councillor Tom Buchanan, the council's economic development leader, said: "Edinburgh remains a very attractive location for investment and I am confident that we will continue to see development across the city over coming years."