Council may CPO controversial site after revealing it's owed nearly £1m

Big trouble is brewing in Chinatown over the fate of a £200m project which won the backing of leading councillors as well as the city’s mayor, Joe Anderson.

The high profile scheme is currently at a complete standstill with no clue about when, or if, work will resume.

Now, for the first time, the city council has revealed publicly that it is owed almost £1m from the developers.

It also announced that it may seek to use a Compulsory Purchase Order on the deserted development site behind the Black-E.

Mayor Anderson’s cabinet is scheduled to discuss moves in secret at its meeting next Friday. It is planning to invoke powers to enable the debate to take place behind closed doors, with the media and the public excluded.

That is likely to invoke even more fury among a growing number of people who have demanded a public inquiry into what has gone wrong with the showpiece project as well as several other schemes in the city which have also ground to a halt. Some people have also been demanding a police probe into what has happened.

Liverpool Confidential has seen an avalanche of reports and correspondence relating to New Chinatown and other schemes. The messages demonstrate the level of growing anger, much of it directed at the city council. For legal reasons we cannot reproduce them.

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Sunken street: How the £200m New Chinatown scheme was supposed to look PR handout
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Sunken: How it actually looks two years on

In the report to the cabinet, officers say that in the case of New Chinatown Developments Limited, major fraud cases in Hong Kong, involving its sales agent, have had a massive impact on sales, to the extent that works on site have stalled and the contractor has gone into administration.

“The consequences of the fraud case in Kong Hong, nervousness around the ‘fractional sale’ model and unsubstantiated press allegations against a former adviser to New Chinatown Developments Limited has meant that the New Chinatown site now faces a number of reputational issues that can only be resolved by bringing in a new developer to either build out the consent scheme or seek an amended planning consent,” says the report.

In March 2016, the city council granted a 250-year lease to New Chinatown Developments Limited, which used a funding model based on fractional sales.  

Under this arrangement, units are sold off plan and investors pay a deposit. Ordinarily this would be expected to between 35 percent  and 40 percent, however in the case of the New Chinatown scheme, investors paid between 50 percent and 80 percent.  The council report says it is a well-used sales model, but does come with risk and is reliant upon the ongoing sales of units to fund the build contract.

The cabinet report adds that it wants approval to use CPO if Chinatown Development Company Ltd cannot sell the prominent site to another developer.

The multi-million pound scheme by North Point Global (New Chinatown Developments Ltd) - which had been granted "preferred developer" status by the council - was given planning permission in December 2015. 

It promised to create a new urban quarter with 790 new homes, 11,246 square metres of commercial and retail floor-space and a 140 bed hotel on a long-vacant site overlooked by the Anglican cathedral.

Two months ago, with the site deserted, Liverpool Confidential reported how Brian Wong, co founder of the Liverpool Chinatown Business Association, was urging the mayor to mount an independent inquiry to get to the bottom of the fiasco. 

"As well as being a big blow to Chinatown and Liverpool’s reputation, a lot of investors from China have already paid large sums of money for a stake in the development," he said. "I want to know what protection their investments have in the light of these latest developments.”

He went on: “One of the main aspects used to attract investors from China region, and widely used in publicity, was endorsement for the scheme from Liverpool City Council. It is for that reason I had written to Cllr Gary Millar voicing my concerns. Indeed on one full page advertorial published in Hong Kong and China, seeking investors, the city endorsement and accompanied by a photograph of Gary Millar, was used."

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Advertorials, seeking investors, appeared in media across China using a picture of Gary Millar (top right) and the endorsement of Liverpool Council

In a statement, the city council says: “Failure to deliver the scheme has led the city council to take action. Following negotiations it has now been agreed the site be independently marketed over the summer for a new developer to deliver either the consented scheme or an amended scheme.”

If a commercial sale does not materialise, the report recommends the city council use its CPO powers to assemble the site at Great George Street for redevelopment.

The report adds that the CPO for New Chinatown will be conditional on identifying a new developer prepared to agree to underwrite the city council’s costs in preparing, submitting and processing the order and funding the acquisitions, including a £950,000 debt currently owed to the city council.

Councillor Ann O’Byrne, deputy mayor of Liverpool, said: “Liverpool City Council has been deeply concerned with how events have unravelled with the funding of Chinatown Development Company Ltd’s scheme.

 “This report illustrates how hard we have been working to rectify the situation and the lengths we will go to, if necessary, to ensure the site is developed.

 “It is vital that a new developer is found to get this scheme – or an amended one – back on track for the good of the China Town area, the city and those who have invested in it.”

Holding the debate in private is unlikely to appease people who feel the issue goes much deeper than an alleged fraud case involving a sales agent in Hong Kong.

Whether they will be reassured by what the report describes as the Mayor’s priorities remains to be seen.  

This is described as: “Assembling this site will unlock a site that has remained stalled for many years and support the delivery of a significant new regeneration initiative on a major corridor from the south of the city into the city centre. The successful delivery of the scheme will be transformational and a catalyst to the regeneration of the wider China Town area and will revive the fortunes of the City’s China Town community.”