Agenda item

Report of the Acting Strategic Director of Regeneration and Environment

Recommendations:-

1. That approval be given to enter into a development agreement and the granting of the long lease of the Forge Island development site to the selected developer, Muse Developments Ltd.

2. That approval be given to the outlined financial approach to deliver the Forge Island development and the Strategic Director for Regeneration and Environment be authorised to approve the final proposal in consultation with the Cabinet Member for Jobs & the Local Economy; subject to confirmation by the Strategic Director Finance and Customer Services that the final proposal is affordable within the Budget and Financial Strategy and within the following parameters:

·         The initial rents the Council is entitled to receive from occupiers are greater than the initial head lease rent and

·         The financial modelling over the 35 year period shows that the Council’s anticipated income from the development exceeds the total anticipated head lease costs.

3.    The Assistant Director of Legal Services be authorised to agree the final legal documentation.

Consideration was given to the report which within the Masterplan identified the redevelopment on Forge Island as an essential catalyst to wider regeneration.

Following an extensive selection process, a development partner had been identified for the Forge Island development, this report sought approval for the approach required to deliver this. This included both the legal and financial aspects outlined in the ‘Agreement for Lease’ and ‘Development Agreement’ documents.

The head lease approach required that the developer raised funding for the total development costs and built out the scheme in return for the Council taking a head lease of the completed development over a fixed term. The Council, as head lessor, would sublet to and collect rents from operators, which would generate an income stream to fund the head lease costs. This was the option being proposed.

Under the proposal submitted by Muse, the Council did not take on the head lease until the various phases of the development were completed and a sufficient number of sub-tenants have been secured and have entered in to lease agreements, thereby minimising the financial risk for the Council.

This report had been considered by the Overview and Scrutiny Management Board as part of the pre-scrutiny process who were in support of the recommendations, but requested that quality updates be provided, that the Cabinet Member provide exception reports in the event of the scheme not progressing to plan, that further assurances be provided that the insertion of a break clause was not feasible prior to entering the lease agreement and that a report be provided on the feasibility of inserting a break clause for future major projects.

The Chair confirmed Cabinet were happy to accept the Overview and Scrutiny Management Board’s recommendations and assured the Chair of the Board that the financial arrangements were feasible, but would be content for further information to be provided in taking break clauses forward.

Resolved:-  (1)  That the entering into a development agreement and the granting of the long lease of the Forge Island development site to the selected developer, Muse Developments Ltd. be approved.

(2)  That the outlined financial approach to deliver the Forge Island development be approved and the Strategic Director for Regeneration and Environment be authorised to approve the final proposal in consultation with the Cabinet Member for Jobs and the Local Economy; subject to confirmation by the Strategic Director for Finance and Customer Services that the final proposal is affordable within the Budget and Financial Strategy and within the following parameters:

·             The initial rents the Council is entitled to receive from occupiers are greater than the initial head lease rent and

·             The financial modelling over the 35 year period shows that the Council’s anticipated income from the development exceeds the total anticipated head lease costs.

(3)  That the Assistant Director of Legal Services be authorised to agree the final legal documentation.