City council will pay £56m for Edinburgh’s ‘incomplete' St James Quarter development

Edinburgh City Council bosses are set to pay out £56.4m to the develops of the St James Quarter – despite the project being incomplete.
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Nuveen, an American asset management company, has asked to be paid £61.4m for the St James Quarter, even though the cinema within the centre is still not operational, and landscaping works on Leith Street, St James Square, Elder Street and Cathedral Lane/Little King Street have yet to be completed.

The Quarter has been funded via a Growth Accelerator Model Agreement, where the council funds developments and improvement in the city centre, and then recovers the cost from the Scottish Government, based on the achievement of economic targets.

An aerial view of the St James QuarterAn aerial view of the St James Quarter
An aerial view of the St James Quarter
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The Scottish Government funding is generated by the increased amount of non-domestic rates as a result of the increased development.

Nuveen were set to be paid the full £61.4m when they had achieved three objectives: 50 per cent of the retail and leisure element must be open for business; ‘a statement of practical completion’ must be submitted for the retail and leisure sections; and another statement of practical completion must be submitted for the rest of the work.

However, Nuveen has not met the second objective, as the cinema is still not complete, and according to council officers the third objective is ‘open to interpretation’ as there are still outstanding works.

Despite this, a report set to go before councillors at Thursday’s full council meeting urges councillors to approve paying Nuveen £56.4m, with £5m held back as a contingency to make sure the outstanding works are completed.

The St James QuarterThe St James Quarter
The St James Quarter
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The report reads: “The key issue is whether the council is obliged to make a payment now under the terms of the agreement with Nuveen.

“The assessment of this situation, as stated above, is that the council is not obliged to make a payment at this time.

“Requirement 2 makes this clear although this requirement will be met within the next few days and may have been achieved by the time of the council meeting.

“Once this happens the assessment of whether a payment is due or not will rest on requirement 3 alone.

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“As stated above this is not clear cut and the contract does not make provision for this scenario.

“The two interpretations that could be drawn are that either the full payment is either required or that no payment at all is required at this stage.

“This has the potential to lead to a dispute and both parties are keen to avoid such a situation arising”

On Leith Street, a section of the northbound pavement and inside carriageway lane (Calton Road to Greenside Row) is being retained by the contractor to facilitate completion of the retail and leisure element of the project.

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The street lighting and the traffic lights on the junction with Greenside Row will not be completed, fully commissioned and tested until the hoarding is removed.

As a consequence of this the council’s Street Lighting team will not accept the Leith Street system as complete.

The delay to the delivery has been caused by a call-in by Scottish Ministers in relation to listed building consent, although that consent has now been issued.

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