Agenda item

1.     Work to progress on the creation of a Devco based on Option 3b of the Cushman Wakefield model, i.e. to sell a portion of the units developed on the private market, and to retain a portion for private rental in order to generate a revenue stream for the Council be approved

Resolved to Recommend:

2.     the approval of a budget of £200k to progress Recommendation 1 of this report. This will cover the finalisation of design work, the finalisation of the business case, and consequent legal advice on the most appropriate tax and governance arrangements on creation of a Development Company.

Decision

1.     Work to progress on the creation of a Devco based on Option 3b of the Cushman Wakefield model, i.e. to sell a portion of the units developed on the private market, and to retain a portion for private rental in order to generate a revenue stream for the Council be approved

Resolved to Recommend:

2.     the approval of a budget of £200k to progress Recommendation 1 of this report. This will cover the finalisation of design work, the finalisation of the business case, and consequent legal advice on the most appropriate tax and governance arrangements on creation of a Development Company.

Reason for Decision

To update Cabinet on work undertaken to date on the viability of the Council establishing a Development Company to develop the Civic centre site.

Corporate Objectives

This project aligns with all of the Council’s corporate objectives, as approved by Council in February 2016.

Monitoring Officer/S.151 Officer Comments

Monitoring Officer:

The Council has the power to establish a Development Company pursuant to provisions contained in the Local Government Act 1972, Local Government Act 2003 and the Localism Act 2011.

As highlighted in the report, detailed legal advice will be obtained in relation to the governance arrangements, which will operate between the Council and the Development Company, the applicability of ‘State Aid’ rules (EU rules in place to prevent members states distorting cross boundary competition), and the Council’s requirement to achieve ‘best consideration’ for any disposal/transfer of land to the Development Company.   This further advice will be reported in forthcoming reports.”

S.151 Officer

My comments are included in the body of the report.

Advice

J Deane introduced the report and explained that it had been based on a feasibility study. He explained that following a procurement exercise, Capita Asset Services was appointed to produce a report on the viability of several Council-owned sites. This report identified the Civic Centre site as the most viable development opportunity. Cushman Wakefield (CW) was appointed to undertake this detailed modelling based on previous knowledge of the site gained from a Feasibility Study they produced in 2016.

Of the 5 development options, Option 3b would be the preferred options with headlines based on currently modelled assumptions:

·        180 units – 60 sold as affordable; 60 sold private market; 60 rental units retained

·        Net revenue stream – c£300k in first full year; inflationary increase up to c£400k by year 12

·        Interest premium for Council lending to Devco not yet factored in (subject to legal advice)

·        Debt profile (c£6.5m outstanding after sales) – interest only repayments

·        Model assumes sale of units/refinancing in year 30

Some of the key risks and mitigations associated with Option 3b were summarised in section 7 of the Cabinet report.

He added that it is likely that the primary source of funding for the Devco will be via the Council borrowing from PWLB and then on-lending to the Devco. This will require the Council to meet financing costs on its borrowing for a likely period of 2-3 years until the Devco is able to generate a capital receipt from those units earmarked for sale, and to generate a return on rental units.

He concluded that following the outcome of the CW report, it is recommended that

Members approve officers to begin the following workstreams to run concurrently:

a.     Procurement of more detailed designs in conjunction with Planning officers and in consultation with Cabinet Members;

b.     Procurement of legal advice to establish and the most appropriate governance and tax structures for the delivery of this specific model;

c.      Contingent on the progress of the above two points, to create a Devco for the development of the Civic Centre site

Councillor Griffiths agreed with the recommendations and that the council should move onto the next stage. She recognised that this would not stop the possibility of other options but it would be good to explore all.

Councillor Harden endorsed the recommendations.  He was keen to have a revenue stream and this would guarantee that.

Councillor Marshall asked if this work would just look at the Civic Centre site or would it branch out further.

Councillor Williams said that currently it would just be the Civic Centre site as it was a sufficient size for the project.

J Deane added that the size of the site could be looked at once it was set up.

Councillor Tindall said that if the government decided to introduce steps which affected this, the council could still sell the site to a developer; without making a profit or a loss.

J Deane said that the council needed to commit at some point. He assured members that each stage would be phased to minimise the risk and this would be monitored.

Voting

None.