Plans to build Manchester's tallest skyscraper have been saved from stalling with a £50m loan from the Greater Manchester Combined Authority (GMCA). The project is phase two of the Viadux development, featuring a 76-storey tower next to a smaller 23-storey building. It was approved by Manchester council last year and hailed as a 'symbol of this city's aspirations and confidence' by development firm Salboy.
However, according to GMCA papers, the project does 'not deliver a sufficient level of investor return and developer profit for it to proceed without support.' The GMCA has agreed to pump a £50.4m loan into the project from the Good Growth Fund.
The taller building, named Nobu Manchester, stands at 246m tall and will create 452 flats for open market sale, along with a 160-bedroom hotel and restaurant. The smaller tower will provide 133 social rent homes. The sites are located between Lower Moseley Street and the Manchester Central convention hall.
More than a year after planning permission was granted, the project faced difficulties. 'Due to rising viability challenges and the ambition to deliver one tower purely for social rent, the overall scheme does not deliver a sufficient level of investor return and developer profit for it to proceed without support,' says a public report by the GMCA. The report added that the social rent tower has a viability gap that would be larger if delivered independently, making a subsidised loan the most efficient financial structure.
Manchester council said it was assured through the planning process that the scheme could be paid for. The GMCA loan is set to be repaid 'at completion of the main tower in 2032' through the sale of open market apartments and refinancing of the retained hotel and restaurant. Additional returns will accrue to GMCA via a profit share structure once an agreed level of investor and developer return is reached.
A Salboy spokesperson said: 'We're pleased to receive funding on Viadux phase 2. The funding demonstrates our strong working relationship with GMCA and MCC councillors, including Bev Craig, as we exceed expectations to deliver Manchester city centre's first purpose built affordable housing tower in over 20 years. Including GMCA funding as part of the wider funding strategy for this scheme has been a longstanding aspiration, as it helps ensure that the affordable housing portion of the scheme will be as extensive as we want it to be. The funding was agreed last week.'
The £50m loan is part of a pot totalling more than £100m spent by the Good Growth Fund in May. It includes a £27.4m loan to the McGoff Group for 153 apartments on Rochdale Road, and a £23.7m loan to Henry Boot Developments for its Colloco development in St John's area. The GMCA report noted that these schemes faced viability gaps due to construction cost pressures and market conditions, preventing them from accessing capital without intervention.
