Prince Charles' grand design takes a knock as value of Ayrshire land falls

Published on Thursday 9 September 2010 18:26

IT WAS always an ambitious project - even for the heir to the throne.

• The prince set about preservation of Dumfries House, opening the doors to the public in May 2008 Picture: Colin Mearns/PA

To transform 70 acres of waterlogged land in a rundown area of Scotland into a replica of a leafy southern English village was a dream which local residents could hardly believe would come true.

Now, the value of the land at Knockroon, in Ayrshire, has plummeted by as much as 80 per cent, experts believe - wiping up to 12 million off the value of the site and leaving Prince Charles in a negative equity situation on borrowings he took out to fund the 43m purchase of a nearby stately home.

Property experts have also warned that homes which are eventually built as part of the upmarket development - a green town billed as "good for people and good for the planet" - could be hard to sell, while branding the decision a "risky deal".

When the Prince of Wales heard that the 7th Marquess of Bute was to sell up his dilapidated Dumfries House - including its contents - he stepped in to rescue the mansion.

Having successfully blocked a public sale, which would have seen the house's treasures, including a large amount of Chippendale furniture, scattered across the world, the prince set about a massive preservation project, opening the doors to the public in May 2008.

His Prince's Charities Foundation did not have enough cash on its own to fund the deal. He founded a new subsidiary, the Dumfries Farming and Land Ltd, and through that, took out a 20m loan with Bank of Scotland to pay for the acquisition, securing the massive borrowing against the company's only asset, the Knockroon farm land.

He drew up extensive plans for the site, on which he hoped to create a development which has been dubbed the "Scottish Poundbury", in reference to the village he built on Duchy of Cornwall land in Dorset 17 years ago. Proposals for a development of 770 houses, built in the style of a traditional, idyllic village, were put to East Ayrshire Council, which granted conditional approval of the plans, despite having knocked back previous applications for the site, including a number by the Marquess of Bute.

The firm paid 268,000 for Knockroon in November 2007, but a few months later, at the peak of the property boom and after the prince's ambitious scheme was unveiled, had it revalued to a massive 14.9m.

Within less than a year, the value had slumped dramatically. According to accounts lodged with Companies House, the 70-acre site was worth just under 9m in March 2008 - 6m lower than the figure listed in the previous year's accounts. But the last valuation was carried out ahead of the publication of accounts filed to March 2008, six months before the near collapse of HBOS and Royal Bank of Scotland. The subsequent recession sent land prices plummeting.

Land experts have told The Scotsman they believed as much as 12m could have been wiped off the value of the Knockroon site since the peak of the housing market boom in 2007.

"In some areas, we are seeing as much as a 60 per cent to 80 per cent depreciation from the peak," said Jamie Doran, associate director for residential development at property firm CBRE in Glasgow. "It does depend on the location, but certainly for stock in outlying areas, things are at the lower end.

"At the peak of the property boom, in 2007 or so, valuations were inflated. The market was moving so fast and people were looking for the cheapest place to stay. There was demand by the boards of house building companies to keep on buying up land. This is no longer the case."

The Knockroon site, 49 miles from the nearest major town, Kilmarnock, and more than an hour's drive from Glasgow, is not considered to be prime housing land. "This development is a bit idealistic," said Mr Doran.

A property expert based in the west of Scotland added: "The residential market was going off the boil in mid-2008, so the writing was on the wall from then. Sites have dropped as low as 40 per cent of their former value."

A valuation of 40 per cent of the original price would put a 6m price tag on the site - well under half the original valuation on which the loan was based.

Steven Tolson, director at property firm Ogilvie, said: "It is quite a brave proposition. This was one that was put together for a specific reason of retaining Dumfries House for the benefit of the nation. If you looked at it purely as a development in a rural location, then it would be a challenging and risky proposition."

A statement issued by Clarence House said: "The value of the land bought with the property has since declined from what it was worth at the peak of the market - a reflection of a nationwide decline in property and land values which were not foreseen in 2007 - although it is still valued at 9m, well above the original purchase price of 268,000."

But Paddy Harveson, communications secretary to the prince, confirmed that an up-to-date revaluation was set to take place ahead of the publication of this year's accounts for the year to March 2010, which are due to be made public by November.

It is understood abouta quarter of the 20m loan has been repaid - and the borrowing transferred from Bank of Scotland to private bank Coutts, which agreed a refinancing of the deal a year ago.

Mr Harveson said the loan repayments had so far been met through fundraising, but income from the prince's charitable enterprises, such as the Duchy Originals foods brand, would be used to top up the payments if necessary.

He insisted the prince's charities would not be affected.