Owners of London building Admiralty Arch face hitch in redevelopment

The owners of Admiralty Arch, gateway to Buckingham Palace, are facing a hitch in their bid to redevelop the building after council officials warned that the project would fail to meet the minimum social housing contribution.

The Grade I-listed arch, which curtains St James's Park from the hubbub of Trafalgar Square, was bought last year for £60m by a private equity group that planned to convert it into a luxury hotel and private members club.

But according to documents seen by the Financial Times, planning officials at Westminster City Council are concerned about the provision of social housing and, separately, the size of the members club in the dumbbell-shaped building.

"The scheme does not fully comply with the council's policy on affordable housing or planning obligations for viability reasons," the document says.

Prime Investors Capital (PIC), the arch owner, has proposed paying £600,000 towards low-cost housing in the central London borough and a further £100,000 for public art. "This compares to a policy-compliant sum of £1m for affordable housing and £824,563 for other [public spending] obligations."

The document, which will form the template for a planning debate next week, goes on to question possible overcrowding and resulting strain on local residents, who include Prince Charles. PIC, a property-focused private equity firm, has proposed having 400 private members - with flexibility for 800 on special occasions - and a 100-room hotel. The group has consulted with 119 local residents and received no objections.

"The cumulative impact of these entertainment uses could be harmful to residential amenity, local environmental quality and the character and function of the area," said the report. "A condition is therefore recommended to limit the capacity of the club to 300 persons."

PIC, which recently built the Bulgari Hotel in Knightsbridge, acquired Admiralty Arch on a 99-year lease with an explicit condition that it cannot be converted into apartments or a single house.

The five-storey building, a ceremonial entrance to The Mall pierced by three lofty arches, was commissioned by Edward VII in memory of his mother, Queen Victoria, and completed in 1912. It was, until recently, used by the Cabinet Office, but sold as part of a government cost-cutting drive.

The bidding war for the property ran for more than six months with a shortlist of 28 possible buyers. Rigorous security checks were made on bidders due to the existence of subterranean passages linking the arch with Whitehall.

A spokeswoman for PIC said the company was "pleased with the planning report and the overall recommendations on the Admiralty Arch application", adding: "The principal aim of our proposal is to identify and enhance the heritage values of Admiralty Arch through careful restoration and to secure its long term future."

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