Issue - meetings

Bournemouth Borough Council Cabinet approved the outline development proposals for a residential scheme at the Durley Road Car park site (“Durley Road”) (the “Durley Road Scheme”) in October 2014.

Following a challenging design and planning phase The Bournemouth Development Company LLP (“BDC”) subsequently secured planning permission in January 2020 for 44 flats and associated parking on the site via an appeal.

Upon satisfaction of certain conditions precedent as set out in an option agreement dated 2011 between the Council and BDC (the “Option Agreement”), BDC has indicated its intention to exercise the rights previously granted in an option agreement entered into in 2011 to call for the grant of a 150-year development lease of the site to proceed with this development (the “Lease”).

The purpose of this report is to (i) seek approval for the Council to lend £950,000 to a development subsidiary of BDC to support delivery of the Durley Road Scheme (the “Subsidiary”), (ii) seek approval to the Site Lease Value and (iii) extend the option execute date from 24 January 2021 to 23 January 2023 to enable sufficient time to finalise the scheme and secure third party debt.

The sums to be advanced by the Council to the Subsidiary will be matched by its partner in BDC, a company within the group of Morgan Sindall Group plc (the “PSP”) and on substantively the same terms.  The funding will be provided as a loan.  The loan will not have a fixed repayment date, but will become repayable:

(i)             after all third party funding (together with interest) for the Durley Road scheme has been repaid; and

(ii)            subject to sufficient receipt of sales proceeds in respect of the units within the scheme.

A funding chart for illustrative purposes is set out in the confidential Appendix B.

Under the terms of the Option Agreement, the parties must agree the value of the Lease (the “Site Lease Value”) and the Council must satisfy itself that it has achieved best value reasonably obtainable under Section 123 of the Local Government Act 1972.

The outbreak of the Novel Coronavirus (COVID-19), declared by the World Health Organisation as a “Global Pandemic” on 11 March 2020, has impacted global financial markets and market activity is being impacted in many sectors.

The short to medium term impact of COVID-19 on the residential market sector is unclear at this stage. The impact on the market and valuations will be constantly reviewed and considered as part of the due diligence still to be undertaken prior to completion.

RESOLVED that:-

(a)         the request for up to a further £950,000 by way of a subordinated secured loan (“Additional Council Finance”) for the Durley Road Scheme be approved;

(b)         the grant of the Lease of Durley Road to the relevant development subsidiary of BDC for a Site Lease Value of a minimum of £250,000 in return for a loan note issued in a sum equal to the Site Lease Value be approved;

(c)         the change to the “Option Execute Date” to be within 3 years after the date of planning consent be agreed;

(d)         an update to the MTFP in 2021/22 to include £48,000 per annum (plus interest) for the Minimum Revenue Provision (MRP) associated with recommendations a and b be approved;

(e)         BDC be approved to enter into the required contracts for the development;

(f)          the Corporate Property Officer be authorised in consultation with the Council’s Section 151 and Monitoring Officer to agree the detailed provisions of the legal documentation, including and not limited to the lease and the loan agreements;

(g)         the Section 151 Officer be authorised in consultation with the Portfolio Holder for Finance to determine and agree with BDC the terms of the Additional Council Finance;

(h)         an update to the MTFP be approved in 2021/22 for the net loss £42,800 of car park income arising out of the redevelopment of Durley Road; and

(i)           an amendment to the Capital Programme be approved to include the provision of Additional Council Finance in a sum of up to £950,000.

Voting: Unanimous

Portfolio Holder: Regeneration and Culture

Reason

To enable this residential-led regeneration scheme to go ahead, helping to deliver high quality homes, and increased footfall in Bournemouth Town Centre.

To contribute to the Council’s Corporate vision, specifically helping to create dynamic places, investing in the homes our communities need and revitalising and re-inventing our high streets and local centres.

The proposals take note of the HM Treasury consultation document; Public Works Loan Board: future lending terms dated March 2020.

The Portfolio Holder for Regeneration and Culture presented a report, a copy of which had been circulated to each Member and a copy of which appears as Appendix 'F' to these Minutes in the Minute Book.

Cabinet were reminded that Bournemouth Borough Council Cabinet had approved the outline development proposals for a residential scheme at the Durley Road Car park site (“Durley Road”) (the “Durley Road Scheme”) in October 2014, and that further to this following a challenging design and planning phase The Bournemouth Development Company LLP had subsequently secured planning permission in January 2020 for44 flats and associated parking on the site via appeal.

In respect of this Cabinet were advised that the purpose of this report was to (i) seek approval for the Council to lend £950,000 to a development subsidiary of BDC to support delivery of the Durley Road Scheme (the “Subsidiary”), (ii) seek approval to the Site Lease Value and (iii) extend the option execute date from 24 January 2021 to 23 January 2023 to enable sufficient time to finalise the scheme and secure third party debt.

Cabinet were informed that this decision would enable this residential-led regeneration scheme to go ahead, helping to deliver high quality homes, and increased footfall in Bournemouth Town Centre.

The Chairman of the Overview and Scrutiny Board addressed Cabinet advising that at their recent meeting the Board resolved to make the following recommendations to Cabinet in respect of this item:

The Overview and Scrutiny Board recommend to Cabinet that Cabinet does not agree Recommendations a, b, c, e or g as outlined in the report and that it amends recommendation d as follows:

“In line with the legal requirement under Section 123 of the Local Government Act 1972 to achieve best value for the Council Taxpayer, Cabinet offers a 150 year lease on the land for sale in the open market. Potential bidders must recognize they will be required to implement the planning permission already granted on the site including payments in accordance with the S106 agreement in place.”

In addition to this the Chairman of the Overview and Scrutiny Board in formed Cabinet that there had also been a request from a Ward Councillor that paragraph 19 of the report be amended to read as follows:

“This development is located within the Westbourne & West Cliff Ward. The Ward Councillors have been consulted and recognise that this site fallswithin the BDC option agreement. Having now obtained a planning consent it is necessary for BDC to follow the process and seek the necessary approvals as outlined in this Cabinet report. The Ward Councillors share the concerns raised by local residents during the planning consultation process relating in particular to the loss of car parking provision.”

The Leader thanked the Chairman of the Overview and Scrutiny Board for their recommendations and advised that copies of the briefing notes including officers and Portfolio Holder comments on the Boards recommendations which had been circulated to Cabinet Members  ...  view the full minutes text for item 186