Agenda item - Council Owned Sites - Sale of Assets to Qualis Commercial

(Leader) To consider the attached report (C-041-2019-20).

(1) That the following sale of assets be approved to support the business case with all asset purchases to be made by 30 April 2020:

(a) That the following identified properties be sold by the Council to Qualis Commercial on a ‘best value’ basis based on existing use values:

(i) The St John’s Road, Epping site for £5,400,000;

(ii) Bakers Lane Car Park for £2,348,000;

(iii) Cottis Lane Car Park for £3,737,000;

(iv) The Condor Building (Civic Centre) for £3,100,000;

(v) The Hemnell Street, Epping site (Epping Sports Centre) for £2,550,000; and

(vi) The Round Hills, Waltham Abbey site for £3,060,000;

(b) That a loan be granted to the Qualis Group, to be cascaded to Qualis Commercial to allow these purchases to be made, in the sum of £22,000,000 on a single draw down facility over a 30-year principal and interest basis; and

(c) That a revision clause be inserted into the sale contract allowing all properties to return to the Council’s ownership at the value sold if they were not developed within five years of the sale.

(2) That the granting of a development and construction loan be approved in support of the business case and that the decision on making these loans be dependent upon the completion of satisfactory site business cases by 30 September 2020:

(a) That a development loan be provided by the Council to the Qualis Group, to be cascaded to Qualis Commercial; and

(b) That the terms of the loan be in the total sum of £63,000,000 - with 50% to be drawn down on 30 September 2020 and 50% to be drawn down on 31 March 2021 - on a 30-year equal principal and interest basis;

(3) That decisions (1) and (2) above be made specifically in respect of:

(a) the provision of a leisure centre on the St John’s Road site following further specification and agreement reflecting the ownership, capital and ongoing operational arrangements before the development commences;

(b) that the re-provision of the Town Council on the St John’s Road site might require a net subsidy of £1,000,000 (after costs less development return) and was still to be approved;

(c) the indicative project timelines set out in paragraph 10 of the report;

(d) the establishment of a separate Community Interest company to include elements of the public realm and community benefit assets (see agenda item 16); and

(e) all recommendations were fully in accordance with the values set out and approved in the 2020/21 budget.

The Leader of Council introduced a report on the sale of Council-owned sites to Qualis Commercial, which was presented by S Jevans, Strategic Director.

S Jevans reminded the Cabinet that the Council had established a new Group of companies, including the development company known as Qualis Commercial. This company had been working on the business plan and development appraisals for the sites that were being proposed for asset sale from the Council into Qualis Commercial. The Cabinet was requested to note that the business case had been put together from the perspective of Qualis Commercial as a development company. At this pre-planning stage the business case predicted an indicative target developer return of 15%. The business case had also examined all major risks and sensitivities and under these circumstances the development was still considered financially worthwhile, with contingencies being built in to reflect uncertainties.

The Cabinet was also requested to note that whilst any land transaction would be between the Council and Qualis Commercial to reduce transaction costs, the loans would be between the Council and the Qualis Group who would then cascade these resources as needed to Qualis Commercial. This loan cascade would purposefully allow the Council to advance funding to Qualis with long term certainty around returns but would also allow individual companies in the Qualis Group to draw and repay monies within the Group (in line with normal commercial practice).

The Strategic Director stated that the Qualis Commercial business plan included development appraisals and sensitivity analysis for the following sites:

· St John’s Road in Epping;

· Cottis Lane car park in Epping;

· Bakers Lane car park in Epping;

· The Epping Leisure Centre in Hemnell Street;

· land at the Civic Offices, the Conder building; and

· the Roundhills Site in Waltham Abbey.

S Jevans reported that on 6 February 2020, the Cabinet had approved the establishment of the interim Qualis Group Board. Assuming the transfer of sites into Qualis Commercial, the Group Board would oversee the detailed work required to develop each site into a full business case. Following the transfer of the sites to Qualis Commercial, the Qualis Group Board would oversee the development of full business cases on a site by site basis as designs were developed during the pre-application process. This would require the appointment of the design team and a commitment to further costs associated with detailed architectural design work required to develop the full business case ready for submission to planning.

Finally, S Jevans highlighted that a revision clause would be placed into the sale contract allowing all properties to return to the ownership of the Council at the value they were sold for unless they were developed within five years of this proposed sale.

Cllr S Murray expressed his scepticism about the process and was concerned at the potential loss of control and influence over the development of these sites. However, Cllr C Whitbread took a different view by stating that – historically – the Council would have sold such sites to a major developer for a one-off capital sum, but this approach gave the Council more control and influence over the developments, such as the planned new Sports Centre in St Johns Road, Epping. These developments would bring long-term benefits to residents and the revenue would enable the Council to fund its services into the future.

Cllr J M Whitehouse highlighted the importance of regularly reporting progress with these development projects to Members, and wanted to know when further details on these developments would be available. S Jevans responded that the detailed business cases for the schemes were being progressed and would hopefully be finished within the next month; these would then feed into the detailed planning process, which is when Members would start to see how the sites would look like when completed.

Cllr J M Whitehouse also highlighted the planning risk if the Council attempted to put more units on a site than outlined in the District’s emerging Local Plan. S Jevans acknowledged this and stated that the business planning process had included the risk of development schemes being revised as they progressed through the planning process. The Chief Operating Officer, N Dawe, accepted that the figures for each site would be likely to change during the next three – six months, but the progress of each scheme would be reported to the Council every quarter to provide transparency.

Cllr J M Whitehouse also enquired about the consultation and planning strategies for these sites. N Dawe agreed that there would be issues arising for these sites, especially from the multiple site development planned for Epping, but that the Council’s Planning Officers would determine the applications in accordance with the Council’s agreed Planning Policies and recommend accordingly to the Council’s Planning Committees. The Planning Policy Manager, A Blom-Cooper, added that all of the consultations planned for these sites would be conducted in accordance with the Council’s agreed Statement of Community Involvement, and that discussions were already taking place with Officers in Qualis as to which consultations could be commenced during the current Coronavirus pandemic.

Cllr S Heap enquired if there was confidence in the ability of Qualis and its staff to deliver these projects on time and within budget, and whether the obligation to offer the ‘Right-to-Buy’ scheme for new Council houses was being removed. Cllr C Whitbread reassured Cllr S Heap that if Council housing was developed then there was a legal obligation to offer the ‘Right-to-Buy’ scheme for tenants. However, if social or affordable housing was developed then there was no obligation to offer the ‘Right-to-Buy’ scheme. The current Council Housebuilding Programme had suffered from delays due to the type of sites that the Council was looking to develop, such as former garage blocks, but the Council was looking to make up the time on these sites now. The Chief Executive, G Blakemore, added that the recruitment requirements for Qualis employees had been very clear to ensure that candidates with the right skills wre attracted

Decision: