A DEAL to revive a £300 million development in Edinburgh's Old Town has been scuppered, The Scotsman can reveal.
• The gap site in the Old Town is likely to lie empty for the foreseeable future. Picture: Ian Georgeson
Council leaders admitted last night that attempts to rescue the Caltongate scheme, which triggered an international inquiry into Edinburgh's world heritage status, had come to nothing following the collapse of talks with a new developer.
The local authority — which had agreed to sell various plots of land to help create a five-star hotel and conference centre, 200 new homes, a new culture quarter and a public square — confirmed it had withdrawn its assets from the development.
The council's surprise move has signalled the final death knell for plans to knock down two listed buildings to make way for the hotel and conference centre. The site is now expected to lie derelict for the foreseeable future. The amount of red tape involved in buying up the vast site, near Waverley Station, which was earmarked for the controversial project is understood to have put off the new developer, Allied London.
The firm emerged earlier this year as preferred bidder for the assets of the scheme, which floundered last year after developer Mountgrange went into administration.
Lloyds Banking Group, which was left 75m out of pocket after the Mountgrange collapse, had failed to attract interest from developers amid claims from property industry experts that the firm's old scheme was no longer commercially viable.
The council had been banking on raising about 2.5m by insisting that the previously agreed scheme was pursued by any developer, but that price was agreed at the height of the property market. It emerged in April that the European Commission was investigating claims that the council had broken the law with its sell-off deal.
Allied London later revealed that it wanted to make major changes to the Mountgrange scheme, with plans for a "commercial and government quarter" on the site.
Council officials are understood to have conceded defeat on any hope of the previous scheme being delivered, even though it is likely to take several years for a new developer to secure planning permission.
A spokesman for the council said it had become clear that "protracted" negotiations between the bank and potential developers "were unlikely to be successful" and said the authority would now be looking at other options for its land.
Its economic development leader Tom Buchanan said: "The council has worked for some time with the bank's administrator in order to assist it in realising the potential of the site, but it is now apparent that the proposed development will not go ahead.
"As a result, we feel it is in the council's best interest to draw a line under this matter and exercise our right to formally terminate the sale agreement."
A spokesman for Lloyds Banking Group said it was not prepared to comment on the current situation.
No-one at Allied London was available for comment.
One source at the City Chambers said: "We have done everything possible to try to rescue the Caltongate scheme, but the economic climate has been extremely challenging over the last 18 months.
"The decision to withdraw our assets means any new developer is free to strike a deal with the bank and come back to us with any proposals that include the land we own in the area."