REPORT NO: 201/2013
CABINET
17 September 2013
Barleythorpe Hall
Report of the Operational Director of Places
STRATEGIC AIM: Creating a brighter future for all; Creating a safer
community; Building our infrastructure
KEY DECISION YES DATE ITEM FIRST APPEARED ON
FORWARD PLAN
9th August 2013
1. PURPOSE OF THE REPORT
1.1 To provide an update on offers received for Barleythorpe Hall.
1.2 To seek approval to commence an EU procurement process, with further
reports being presented to Cabinet as part of that process.
2. RECOMMENDATIONS
2.1 That Cabinet consider the recent bids for Barleythorpe Hall and agree
to defer any disposal.
2.2 That subject to approval of 2.1, Cabinet approve the commencement of
an EU procurement process using the Competitive Dialogue procedure
under the Public Contracts Regulations 2006 to identify whether a joint
venture will provide a better return.
3. REASONS FOR THE RECOMMENDATIONS
3.1 The current bids may not represent offers that could give the best net capital
receipt.
3.2 An alternative way forward to achieve sustainable use of the site should be
considered.
4. UPDATE ON CURRENT BIDS
4.1 The Council has retained a commercial marketing agent to publicise and
market the Barleythorpe Hall site following the unsuccessful marketing in
late 2011/ early 2012. There are currently a small number of interested
parties with whom the agent is in dialogue. Scheme overviews and financial
bids are contained in the Exempt Appendix.
5. SITE ISSUES
5.1 There are a number of site issues that impact on the design, layout and
overall development potential and the following are highlighted:5.2 Demolition:
At least one of the parties has presented a scheme that proposes the
demolition of the Hall. This is likely to be contentious with the local
community, but the property is not listed and Planning has confirmed that the
building has limited architectural merit. They have however confirmed that
any demolition would require a specific consent, due to the size of the
building, and that whilst consent may be forthcoming it would present a level
of risk in terms of what planning permission might then be achieved for the
cleared site in terms of Barleythorpe‟s status as a Restraint Village.
Guidance has been given to several potential developers that the conversion
of the Hall and the erection of 5 new dwellings, as per the 2006 resolution,
would be the maximum that would be considered. Comprehensive new build
would be contrary to Core Strategy Policies.
5.3 Manor Lane Access:
Any new development application would include the access as part of the
application and a significant number of interested parties stated a preference
for access to be off Manor Lane, to create separation of residential users
from educational and football club users. Whilst in highway terms it may be
possible to introduce/upgrade the existing, but unused, access points on
Manor Lane this is likely to be contentious with the local residents as it would
be seen to be introducing more vehicle movements in Manor Lane. The lack
of access from Manor Lane is seriously detrimental to the value of the site,
as can be seen above. However, the joint development of the Hall site and
the walled garden site may present a further access opportunity from Main
Road. From a planning point of view it would be preferable to limit the
number of new access points off Manor Lane, partly to retain as much of the
wall as possible. The access at the far end is outside the Planned Limits to
development.
5.4 Adjoining development site:
Two of the interested parties have expressed an interest in developing the
Hall site in conjunction with the adjoining walled garden site that is in third
party ownership. This might enable a further access opportunity albeit the
access from Main Road is likely to be limited in terms of capacity. Increased
capacity may be possible with the demolition of a brick outbuilding.
6. ALTERNATIVE OPTIONS
6.1 In the light of the limited interest, the levels of value and the potential
planning difficulties, the alternative options that were previously considered
have been revisited. An options analysis has been reviewed with specific
reference to redevelopment potential. As there are parties interested in
exploring alternatives to straight sale the procurement regulations would be
triggered if the current straight sale offers are not deemed acceptable. As
such entering into a procurement exercise based on the Competitive
Dialogue process could be considered a way forward to explore potential to
achieve a greater net receipt. This will allow other models to be considered
compliantly, and may encourage further expressions of interest. A joint
venture, to be procured via a European Union (EU) procurement process, by
advertising in the Official Journal of the European Union, is one of the
potential options.6.2 The joint venture route gives the following advantages:
a. The structure of the joint venture can be flexible giving the
participants a certain degree of freedom in terms of their commitment
time/ resource/ finances etc.
b. It gives both parties access to more resource/capacity and expertise
including specialist staff where required or appropriate.
c. It allows the participants to gain access to business and knowledge it
might not otherwise have.
d. It enables the parties to share the risk of the “venture”
e. It should reduce the amount of cash to be raised to enable the project
to proceed.
f. It might allow access to forms of funding not normally available to
local authorities.
g. If structured correctly it will give the Council price certainty plus the
opportunity of sharing any “uplift” in values which might be secured
during the project.
h. The flexibility of the joint venture route also means the Council can
tailor their exit strategy.
6.3 The principal disadvantages are:-
a. There needs to be 100% agreement on the terms of the joint venture
and its objectives (financial and otherwise).
b. Inevitably there will be an imbalance in levels of expertise, resource
and assets which need to be established along with the split of the
capital/revenue streams.
c. There can be differences in cultures/management styles which may
result in less than perfect integration and cooperation.
d. There is potential for conflict particularly in leadership and support in
the early stages.
e. If the Joint Venture "fails" for any reason exiting the arrangement may
not be easy to achieve
6.4 The Council is not currently dependent upon a capital receipt from the site
and other outcomes may be considered. It may be financially advantageous
for a capital receipt to be deferred or for an alternative route to be
considered whereby a revenue stream is obtained. This could be worth
progressing as there are two of the bidders who have expressed an interest
in entering into a joint venture with the Council.
One bidder has indicated an interest in entering into a joint venture
arrangement with the Council and creating a vehicle for providing
employment opportunities for ex-service personnel (retraining or
rehabilitating) in relation to the development process: project management,
building trades, marketing etc.
6.5 Other bidders may emerge with other proposals worthy of consideration. The
procurement process could be aborted if a straight sale became possible at
an acceptable price.
7. FINANCIAL IMPLICATIONS AND EU PROCESS
7.1 In considering any decision on whether to dispose of an asset, the Council
must ensure that it gets best value. In this case, the Council could simply
sell the asset, receive a receipt and use that receipt to fund other capital projects as required. Clearly if other projects are dependent on this receipt
then the Council may wish to progress this, but this is not the case.
7.2 Alternatively, the Council could consider other options that generate a
financial return and undertake a financial evaluation which assesses best
value over a period of time. These options might include:
a. providing the land up front and extracting a capital receipt from the
disposal of the completed scheme/ units, such capital receipt to be
set at a minimum level no less than the current bids;
b. providing the land up front and receiving a revenue stream from the
completed scheme
c. providing a mix of both capital and revenue
d. providing guarantees as well as either a, b or c. The form of
guarantees would be identified via the Competitive Dialogue process.
7.3 The assessment of such options and financial evaluation makes sense on
the assumption that:
There are identified parties who wish to discuss alternative options so
the exercise would not appear to be superfluous
The loss of interest from an early capital receipt is minimal as the
Council is achieving less than 0.5% return on cash balances
The Council has not received a formal offer above an expected
market value which would have indicated it should accept the offer
without hesitation
The cost of undertaking any EU process is affordable with costs
mainly being officer time (c£1k) although this could become
considerable and impact on other work and projects if there were
numerous tenderers. Ongoing agent and legal input is required if a
contract is secured, but this would be required for a straight sale.
Should the EU process not present any viable opportunities the
Council would be in no worse position in terms of trying to dispose of
the asset as the housing market is starting to show signs of recovery.
The ongoing costs of keeping the „for sale‟ asset do not pose a
serious financial risk to the Council, but are not insignificant – the
annual cost of retaining the asset is circa £10k to cover NNDR,
essential services, nominal repairs and grounds maintenance.
7.4 Progressing alternative options will require the Council to run an EU
procurement process to select a preferred partner. Using the Competitive
Dialogue process under the Public Contracts Regulations 2006 allows
flexibility and is appropriate where the final outputs for the project cannot be
defined at early stages of the project. These final outputs will be identified
through the Competitive Dialogue process resulting in submission of a final
solution/scheme proposal and financial package. This could commence
following a Cabinet approval and would progress through a number of
stages with a final decision being obtained by summer 2014.
Principal Stages (estimated timescale):
Submission of OJEU notice Week 1
Return of Pre-Qualification Questions [PQQs] Week 8
Agreed shortlist Week 11
Return of Invitation to Submit Outline Solution Week 20Commence dialogue with selected bidders Week 28
Initial award decision Week 48
7.5 In summary:
If the current outright sale bids were progressed a capital receipt could
be achieved, subject to Planning, but with deductions for affordable
housing and S106 developer contributions as detailed in the Exempt
Appendix. (The expenditure of any agreed developer contributions
would, in the main, be retained in the locality of the development)
If the OJEU route were progressed with a joint venture any capital
receipt would be deferred until scheme completion, and may be wholly
or partly substituted with a revenue stream.
The EU timetable would mean that the Hall would need to be
monitored and maintained for at least a further 12 months. The
ongoing costs of retaining this “for sale” asset do not however pose a
serious financial risk to the Council but are not insignificant.
Should the EU route not present any viable opportunities the Council
is unlikely to be in a worse position in terms of further attempts to
dispose of the asset, and there is evidence that the residential market
is currently improving.
8. RISK MANAGEMENT
RISK IMPACT COMMENTS
Time Medium The Hall is deteriorating and a solution needs to be found
for the future to remove the holding costs although a
further delay of 6-12 months will not impact greatly on
budgets.
Viability Medium There are a number of issues to be overcome in terms of
planning and highways to bring a scheme to completion.
Finance Med Further deterioration of the Hall and grounds will impact
on revenue budgets and continuing to hold the asset will
further delay capital or revenue receipts but this may
prove to generate a better net receipt.
Profile Medium The Hall has a high profile in the immediate locality but
the county wide impact is not great. The community will
benefit from the sale and reinvestment of the receipt or
revenue support to services from a JV scheme.
Equality
&
Diversity
Low An
EIA questionnaire has been completed which
indicates a full EIA is not required.
9. REASONS WHY THE REPORT IS MARKED “NOT FOR PUBLICATION”
9.1 The Exempt Appendix is marked “Not For Publication” because it
contains exempt information relating to financial and business affairs as defined in paragraph 3 of Part 1 of Schedule 12A of the Local
Government Act 1972. The public interest test has been applied to the
information contained in the Exempt Appendix and it is considered that
the need to retain the information as exempt outweighs the public
interest in disclosing it because to do so could prejudice the outcome
of negotiations.
Background Papers Report Author
Pritesh Parmar and Judith Bayes
Tel No: (01572) 722577
e-mail: enquiries@rutland.gov.uk
A Large Print or Braille Version of this Report is available
upon request – Contact 01572 722577.
