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Agenda item

Newberries Car Park Development Scheme

The Executive is asked to consider a scheme for the development of Newberries Car Park in Radlett.

 

Minutes:

Decision that:

 

1.         subject to approval of the finance and costings laid out in part II report (EX/15/76), the Council be recommended to approve a scheme for an 11,000 ft² GIA Retail/Food Store and an 80-bedroom hotel, based on the initial design shown in Appendix 1, subject to planning consent and an “Agreement to Lease” being in place; 

 

2.         subject to (1) above, the Council also be recommended to approve the capital spend towards financing this project, as explained in paragraph 7 of the Part II report (EX/15/76), which will most likely be from prudential borrowing in line with the Council’s treasury management strategy;

 

3.         subject to the Council’s approval of recommendations (1) and (2) above:

 

(i)          these proposals be progressed with the preferred operators        identified in the part II report based on their current financial offers     as a minimum and negotiations be concluded to a position of               “Agreement to Lease”;

 

(ii)         authority be delegated to the Chief Executive, in consultation with the Finance and Property Portfolio Holder, to progress the scheme to the construction phase subject to approval of the business case as detailed in the part II report and an “Agreement to Lease” that is legally binding being in place; this based on the minimal rental figures detailed in the part II report and tendered construction costs being within 5% of the estimated build costs in the part II report;

 

(iii)        a Project Board Panel be set up consisting of Chief Officers, the Finance and Property Portfolio Holder and nominated elected members to manage the project and associated risks; and

 

(iv)   initial funding of £400,000 from the Innovation and Investment Fund      be approved to drive and deliver the project to planning application       stage including the procurement of a Project Manager; and

 

4.         further progress reports be presented to the Executive on a periodic basis.

 

Reasons for the Decision

 

The development would aid local economic regeneration by creating jobs within the Borough and boosting the local economy with hotel guests using the local shops, restaurants and other facilities.  It would also provide a much‑needed hotel facility within the area which currently did not exist as well as a retail food store.  The site was ideal for a hotel, having good connections to the M25, M1 and A1 and being in close proximity to the rail station with excellent travel links to London.

 

Further projected cuts in public spending would result in loss of the Council’s current Revenue Support Grant funding by 2019/20 or sooner and the Council was also unable to continue to rely on the New Homes Bonus.  Of equal importance was the fact that land was not an inexhaustible resource and it was inevitable that the building programme would slow down in future years.

 

For these reasons, the Council needed to look seriously at all its assets in a commercial and entrepreneurial manner.  The Newberries Car Park scheme was considered a key project which might be able to provide the Council with guaranteed revenue income through rent as well as additional business rates.  By designing and developing the scheme itself, the Council would be able to retain the whole of the rental income from the finished property. 

 

The preferred operators needed to agree and be ‘on board’ at the outset as their input was essential in the design and specification required to take the scheme to planning application stage.  Since an operator would only enter into an “Agreement to Lease” subject to the Council’s commitment to fund and deliver the project as well as seek planning permission, it was crucial that the scheme was developed to planning application stage as soon as possible, and the commitment to funding approved, subject to planning permission and final tendered cost.

 

The retail market could be very changeable as witnessed over the last twelve months with some major high street supermarkets forced to abandon or reduce their development plans.  For this reason too, it was essential that the Council was able to secure operators into an agreement to lease at the earliest possible stage.

 

Alternative Options Considered and Rejected

 

Disposal of the Site with Planning Consent

 

The Council could have chosen to advertise the development opportunity and simply sell the site to an interested party.  In this eventuality, the Council would receive a single capital receipt, would take no further part in the development of the scheme and would receive no share of the rental income.  However, the rental income resulting from the agreed scheme was necessary for the sustainable financial resourcing of the Council’s services.

 

Additionally, due to the complex nature of the site, it was considered that outright disposal of the site, even with planning consent, might not deliver a significant capital receipt.  Furthermore, in the current economic climate of low interest rates, the capital receipt would not generate much-needed revenue income streams unless other investment opportunities arose.

 

For these reasons, this option was not supported.

         

 

 

 

Lease-based Disposal

 

The decision could have been made to proceed similarly to an existing development in Borehamwood ieby selecting a development partner to develop the scheme as it saw fit on a long leasehold basis.  In this case, the Council would receive a share of the rental income for the scheme but would not contribute financially to the development, the Council’s input being in the value of the land.  However, in the case of Newberries Car Park, the higher build cost and the lower land value meant that the Council might realise no more than 2% in rental return (as detailed in the part II report on the agenda).

 

Accordingly, this option was not supported.

 

Joint Venture with Preferred Developer

 

Another option was for the Council to select a development partner for the scheme and make a financial contribution towards it in addition to providing the land.  In this case, the Council would only receive a share of the rental income from the scheme, proportionate to its investment.

 

However, while the Council had a cheaper source of borrowing via the Public Works Loan Board facility, a similar source was not available to private sector borrowers.  This meant that the preferred development partner might demand a 2% to 3% additional profit contribution, thus reducing further the Council’s ongoing income share in the region of 40% to 45%.  Furthermore, since the land value in this case was comparatively low, the Council’s contribution to the overall scheme would be low unless the Council decided to contribute additional capital.  The Council’s return would be dependent upon the size of its contribution towards the gross development cost.

 

In view of the above, this option was not supported.

 

Key Points Arising from the Discussion

 

·       The Planning and Localism Portfolio Holder asked whether the proposal would proceed to planning before the operators were tied in to an agreement.  The Engineering Services and Asset Manager clarified that the Council hoped to acquire an agreement with the two operators prior to the scheme being progressed to the planning stage.  The Chief Executive confirmed that, whilst both operators were committed, it was a two-way process requiring the full Council’s endorsement of the scheme.  He added that, following the Council’s approval, the two operators would be prepared to enter into a covenant to proceed.  The Planning and Localism Portfolio Holder commented that the operators’ commitment was sought because the Council needed their input on the design phase.

 

·       The proposal was strongly supported by the Executive Members.  The Property and Finance Portfolio Holder agreed that this was an attractive project fiscally which, if successfully delivered, would be good news for all residents in the Borough due to its impact on council tax and would also be a great benefit to Radlett.  The Chairman thanked all Members and Officers who had worked on the project.

 

(Action:  Director of Resources/Engineering Services and Asset Manager)

 

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