Thursday, 7 February 2019

Ramsey Marina Thoughts

Such a large investment into the town of Ramsey is sure to bring much comment and speculation. I'm not sure whether the whole idea is a good one or a bad one for the town - everyone will have an opinion about this and each one will be different. I'm sure that, the older the person, the more nostalgic the view will be and users of the beach will surely be more vocal.

In this entry, I'm going to look at the cost of the proposal and whether it's a realistic, practical and financially viable proposition.

So, £100m to build a 400-berth marina and 200 homes by reclaiming an area of the bay about the size of the existing town centre of Ramsey. This will - if it happens - be the biggest single investment in the island ever and one of the biggest capital projects as well. Apparently, £50m is to be funded by selling the 200 properties - an average selling price of £250k which is quite reasonable for a new development.

It could be argued that 200 properties - probably being sold off-plan - is quite a hard sell anywhere. Without knowing the exact proposed mix of properties (the proposal suggests apartments and town houses without further details) it is hard to make any estimate of the viability of such a proposal. Does Ramsey have the infrastructure for several hundred new residents? Parking requirements for the development will obviously require the suggested underground facilities to be substantial. The recent work in Ramsey and the north to upgrade sewerage treatment facilities probably never envisioned a large development in that part of the town either. These increased requirements can, to a moderate extent, be paid for by the rates on the properties once occupied and this does indeed make a positive contribution to the town.

So, the other £50m is to come from private investment for the construction of the Marina, Hotel and Yacht club. This must be assumed to be an investment for profit in the medium to long term - there's no quick killing to be made here.

The Island already has two marina facilities, both restricted by tidal access and both managed by central government. Current charges here are £151 per metre per year for annual payments. Berths include access to electricity and water.

From the vague plans on show on the website, it's not obvious just how many linear metres of berthing space are to be made available. I'm going to assume that 400 berths at 10m (4000m) is about fair, particularly given the limited depth available at low water and the relatively restricted nature of the entrance to the marina.

So, if the government were running this at the same rates as they do for the existing marinas, they would see a maximum income of £604,000 per year from mooring fees. This would be less the running costs and maintenance / dredging expenses that would be ongoing. So, being generous because the proposal is for a 24/7 access marina, let's assume a maximum potential income of £1m per year gross. What this would be net of expenses, I don't know, but the income would be subject to VAT and taxes, so we're already down to £800k or less per year without paying any staff or maintenance.

Now, I'm no financial advisor, but I can wield a spreadsheet fairly well and I hope I do understand money at least a little. These sort of figures (£800K per year on £50M invested) give a return of 1.6%. You can get similar rates at the bank for just a few thousand pounds of capital, never mind what they'd give you for millions.

Is it a risk? Sure - it could silt up so fast the dredgers can't keep up, or simply wash away in an easterly gale. People might not come, too few people may come or they may just find too little to do in Ramsey despite a new hotel, restaurants and the yacht club.

My conclusion, I wouldn't get out of bed for 1.6% if I had £50M to invest and I don't think many other potential third-party investors would either, particularly considering the risks involved.

I would be very concerned about allowing such a venture to be started unless all the funding was in place and guarantees for completion were imposed. There could be nothing worse for Ramsey than to see the promenade and foreshore destroyed then the money dry up and everything be abandoned either to be left in disarray or to allow people to persuade the government to spend tens of millions completing what may be a huge white elephant.