Redevelopment of Folkestone Racecourse Process for the assessment of reasonable costs Development expertise in Arena Leisure Plc (Arena)

Arena employs two in-house property development executives with extensive experience in the design, development, construction and refurbishment of Racecourse properties. These are Robin Longstaff Tyrell, Property Executive, and Christian Mitchell, Special Projects Manager. Projects recently undertaken by Arena include: 35m redevelopment of Doncaster Racecourse, including completely new grandstand, stables, racing surface, overnight accommodation and the refurbishment of 3 other stands; 30m development at Lingfield Park Racecourse, including a 116 bed 4-star hotel, new entrance building, stables, horsebox park and Stable Lads accommodation block; and 6m redevelopment of Southwell Racecourse.

Other relevant projects in which these executives have been involved include the design and construction of a new grandstand at Wolverhampton Racecourse and a 10m redevelopment of the July Racecourse at Newmarket Racecourse. Origination of the costing process In the spring of 2010, the Property Executive produced a schedule of buildings and corresponding floor areas which reflected Arenas vision and outline brief for a redeveloped racecourse at Folkestone. This schedule of areas was drawn from the Property Executives extensive experience of Racecourse projects across the Arena portfolio. The Arena executives have the knowledge and skills to undertake a desk-top valuation of the redevelopment. However, in order to increase the credibility of the cost assessment, it was decided to augment this skill set by obtaining professional, independent advice from two appropriately skilled firms of quantity surveyors (QS). The schedule of areas produced by the Property Executive formed the basis for the brief that was given to them to inform each QS in the preparation of costs for delivering that brief. The first QS was DBK Goyne Adams. DBK has been involved in a considerable number of racecourse developments in previous years, including new grandstands at Epsom, Exeter and Huntingdon Racecourses, weighing rooms at Carlisle and Huntingdon and a total racecourse redevelopment at Newmarket Racecourse. This meant that DBK has a significant database of actual costs of similar projects over the previous 3-4 years which it was able to draw upon when preparing its cost estimates for a redevelopment of Folkestone Racecourse. The second QS was Quantem who had just completed the 30m development at Lingfield Park Racecourse. This provided very current cost data that was then applied to the brief for Folkestone Racecourse. Under normal circumstances, before asking a QS to provide a cost estimate for a redevelopment, a series of indicative sketches would have been produced by an architect giving an indication of intended scale, quality, and finish of the proposed buildings which could then be used by the cost consultant to establish indicative construction costs. At the time of this costing exercise however, no such drawings existed. Each QS therefore made a number of assumptions in the preparation of their figures.

Production of cost estimate Stage 1 standardisation of QS output As a consequence of the assumptions that each QS had been required to make, the initial returns from each QS were assessed by the Arena team as not being standardised in all areas. The Arena in-house experts evaluated each return, addressing and correcting clear anomalies. The attached schedule identifies the headings and amounts provided by each QS and also clearly shows where the Arena team has addressed any anomalies. The corrected cost estimates were 24.6m and 28.4m; both excluding fees and contingency. Stage 2 detailed review of construction costs Based on the two standardised cost estimates, the Arena experts undertook a detailed review of the two sets of figures drawing upon their considerable experience of racecourse-related construction projects, and therefore access to a wide range of relevant cost data for various specialised building types, such as grandstands, stables and weighing rooms. The review produced three separate cost estimates: 1. Highest This approach took the highest figure from each of the QS cost estimates for each cost heading and produced a cost of 29.7m (excluding fees and contingency); Average This approach took the average of the QS cost estimates for each cost heading and produced a cost of 26.5m (excluding fees and contingency); and Arena hybrid This approach took the figures provided by each QS and applied the combined expertise of the Arena executives. This resulted in a hybrid cost estimate which took account of both QS cost estimates and adjusted them based on a detailed understanding of the intended end-product. The result was a cost figure of 24.2m (excluding fees and contingency).

2.

3.

The figures within each of these approaches are set out in full in the attached schedule. Stage 3 summary of construction cost estimates Quantem DBK Goyne Adams Highest Average Arena hybrid 28.4m 24.6m 29.7m 26.5m 24.2m

Stage 4 determination of final cost estimate To the Arena hybrid estimate of the pure construction cost of 24.2m was added the cost of professional fees at 15%, and a development contingency at 7%. Both of these are based on recent experience and costs incurred on similar major projects. This resulted in a total development cost estimate of 29,987,820.

The key cost items are summarised as follows:

Enabling Works Construction Works Track Realignment External Works & Miscellaneous Infrastructure Works Sundries Sub-Total (see attached schedule) Fees @ 15% Environmental Impact Studies Sub-Total Development Contingency @ 7% TOTAL COST ESTIMATE

1,075,000 13,525,000 1,935,000 4,055,000 3,050,000 600,000

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24,240,000 3,636,000 150,000

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28,026,000 1,961,820
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29,987,820
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The detailed components of each of these summary headings are set out in the attached schedule.