Agenda item - King Alfred Development - Update

Report of the Executive Director Economy Environment & Culture (copy attached)

RESOLVED: That the Committee –

1.    Noted the work undertaken in negotiating the final terms of the Development Agreement with Crest Nicholson since the 6th December meeting;

2.    Authorised officers to enter into the Development Agreement on the terms set out in the Summary attached at Appendix A to this report, the full version of which (excluding Annexures) is presented in the Part 2 report to this committee;

3.    Noted the contents of the letter from Crest dated 23 January 2019, and agrees that, in light of this letter, that if the development agreement is not signed by the end of January 2019, the Executive Director Economy, Environment & Culture is authorised to explore all alternative delivery options, including the potential use of prudential borrowing, and in-house delivery of the project;

4.    Agreed that if the development agreement has not been signed by 30 March 2019 the Council will not enter into the development agreement with Crest Nicholson and will bring the matter back to the next Policy Resources & Growth Committee including the initial evaluation of the alternative delivery options;

5.    Grants delegated authority to the Executive Director for Economy, Environment & Culture, Assistant Director Property & Design and the Executive Lead Officer Strategy, Governance & Law to make minor amendments to the Development Agreement, settle all the legal documents and take any other necessary steps required to implement the recommendation at 2;

6.    Approved the Council’s capital contribution of £8m (in accordance with the decision of Policy & Resources on 21 January 2016) towards the development of the new public sport and leisure centre, the sum to be through borrowing and the financing costs funded by forecast operational savings resulting in a cost neutral position for the Council;

7.    Agreed in principle to appropriate the site for planning purposes and delegates authority to the Executive Director for Economy, Environment & Culture to appropriate the site for planning purposes once the indemnity described in paragraph 3.25 has been executed and satisfactory planning permission has been secured;

8.    Agreed in principle that the council will authorise the use of S203 and delegates the final decision to authorise the use of S203 powers to the Executive Director for Economy, Environment & Culture;

9.    Authorised officers to enter into the Development Agreement on the terms set out in the Summary attached at Appendix A to this report, which contains provisions which seeks to ensure that 20% affordable housing is built as part of the development, the full version of which (excluding Annexures) is presented in the Part 2 report to this committee; and agrees that following signature of the development agreement if there is any proposal to either downgrade the quality, specification or amenity value of the sports centre that it be brought back to this committee.

114.1    The Committee considered the report of the Executive Director Economy Environment & Culture which provided an update of progress made in negotiating the terms of the Development Agreement.

114.2    The Chair noted that there were Part Two papers to this report, and said that if the Committee needed to refer to those papers they would go to a closed session.

114.3    The Chair said that there had been significant developments since the report had been published, and referred to a letter from Crest Nicholson dated 23 January 2019 which had been sent to the Executive Director Economy Environment & Culture. The letter was on page 3 of Addendum 2.

114.4    Councillor Wealls asked the Chair if following meetings he’d had with Crest, whether he felt that there was a desire for them to move forward with the scheme. The Chair said that he hadn’t yet met with Crest Nicholson, although he had asked for meetings, and said that in correspondence there was a shared commitment for the development.

114.5    Councillor Sykes asked if our expectations of a sports centre and 400 units was too high, and asked if there had been a full analysis of risks attached to the project. The Executive Director Economy Environment & Culture said that said that the risks were outlined in the Deloitte report in the Part Two papers. With regard to expectations being too high, at the start of the project the viability of it was assessed and it was shown to be acceptable. However, a project of this size was always going to be difficult.

114.6    Councillor Peltzer Dunn referred to the letter from Crest Nicholson and asked at what point officers were aware during the detailed negotiations with them, that they were agreeing to everything but subject to the Brexit deal. The Executive Director Economy Environment & Culture said that the letter was received late yesterday evening following Crest Nicholson’s board meeting earlier in the week.

Whilst Brexit was always in the background, but the risks of leaving the EU without a deal were now being considered.

114.7    Councillor Mac Cafferty referred to paragraph 3.7 of the report and asked how detailed the planning application would be, and suggested it should be a full planning application. The Executive Director Economy Environment & Culture said it would be a full planning application, and two months prior to that the developer would be obliged to provide their detailed design to us for sign off prior to submitting their full application.

114.8    Councillor Mac Cafferty was concerned that if the development proceeded there was a risk that only half the properties may be built and there be no leisure centre, and said that there needed to be a cast iron guarantee that there would be both a leisure centre and affordable housing. The Assistant Director City Development & Regeneration said that Crest was offering their parent company, which was a plc, as a guarantee, and the Council would put a charge on the land and would only release the units for sale when the leisure centre was delivered.

114.9    Councillor Mac Cafferty referred to Appendix 1 and asked what ‘value engineer’ meant, and was advised that if the Council wanted to change the specification the developer would look to manage costs in another area of the development before asking for additional funding.

114.10 Councillor Bell said he was concerned over the timing of the letter and felt the reference to Brexit was just another excuse, and asked what assurances the Council had that the development would go ahead. The Chair agreed that he was surprised to receive the letter so late, but said that it was important to treat it in good faith.

114.11 The Committee then moved to Part Two to discuss the confidential papers, and then returned to Part One.

114.12 The Chair said that there was a cross-party amendment to the recommendations and proposed the following:

                        To add the following recommendations at 2.3 and 2.4 –

1.    Notes the contents of the letter from Crest dates 23 January 2019, and agrees that, in light of this letter, that if the development agreement is not signed by the end of January 2019, the Executive Director Economy, Environment & Culture is authorised to explore all alternative delivery options, including the potential use of prudential borrowing, and in-house delivery of the project;

2.    Agrees that if the development agreement has not been signed by 30 March 2019 the Council will not enter into the development agreement with Crest Nicholson and will bring the matter back to the next Policy Resources & Growth Committee including the initial evaluation of the alternative delivery options;

The Chair said that the amendments were suggested with the intention to give us confidence on how long the delay may last, and clarity with Crest Nicholson on where we expect to be if the agreement were not signed. He said that it was important to ensure that the Council were progressing with a new leisure centre.

114.13 Councillor Mac Cafferty seconded the amendment. He said that he was astonished at the letter received yesterday, and said it was not good enough and not fair on the residents of Hove. He said that the Council needed a Plan B if the Development Agreement were not signed.

114.14  Councillor Janio said that the residents of Hove wanted a new sports centre, and this matter had been going on for a number of years and certainty was now needed. He was concerned that Crest were not dedicated to this project, and said that the city needed a sports centre and affordable housing and if they couldn’t provide that then they should tell the Council now.

114.15  The Committee voted on the amendment and it was agreed.

114.16  The Chair noted that there was an amendment from the Conservative Group, and asked Councillor Janio to propose it.

114.17  Councillor Janio proposed the following amendment:

              To add the following recommendation –

Authorises officers to enter into the Development Agreement on the terms set out in the Summary attached at Appendix A to this report, which contains provisions which seeks to ensure that 20% affordable housing is built as part of the development, the full version of which (excluding Annexures) is presented in the Part 2 report to this committee; and agrees that following signature of the development agreement if there is any proposal to either downgrade the quality, specification or amenity value of the sports centre that it be brought back to this committee.

Councillor Janio said that it was important that if the scheme went ahead, and there any suggested changes to the sports centre then the matter should be considered by this committee.

114.18  Councillor Wealls seconded the amendment.

114.19 The Committee voted and agreed the Conservative Group amendment.

114.20   RESOLVED: That the Committee –

1.         Noted the work undertaken in negotiating the final terms of the Development Agreement with Crest Nicholson since the 6th December meeting;

2.      Authorised officers to enter into the Development Agreement on the terms set out in the Summary attached at Appendix A to this report, the full version of which (excluding Annexures) is presented in the Part 2 report to this committee;

3.         Noted the contents of the letter from Crest dated 23 January 2019, and agrees that, in light of this letter, that if the development agreement is not signed by the end of January 2019, the Executive Director Economy, Environment & Culture is authorised to explore all alternative delivery options, including the potential use of prudential borrowing, and in-house delivery of the project;

4.         Agreed that if the development agreement has not been signed by 30 March 2019 the Council will not enter into the development agreement with Crest Nicholson and will bring the matter back to the next Policy Resources & Growth Committee including the initial evaluation of the alternative delivery options;

5.         Grants delegated authority to the Executive Director for Economy, Environment & Culture, Assistant Director Property & Design and the Executive Lead Officer Strategy, Governance & Law to make minor amendments to the Development Agreement, settle all the legal documents and take any other necessary steps required to implement the recommendation at 2;

6.         Approved the Council’s capital contribution of £8m (in accordance with the decision of Policy & Resources on 21 January 2016) towards the development of the new public sport and leisure centre, the sum to be through borrowing and the financing costs funded by forecast operational savings resulting in a cost neutral position for the Council;

7.         Agreed in principle to appropriate the site for planning purposes and delegates authority to the Executive Director for Economy, Environment & Culture to appropriate the site for planning purposes once the indemnity described in paragraph 3.25 has been executed and satisfactory planning permission has been secured;

8.         Agreed in principle that the council will authorise the use of S203 and delegates the final decision to authorise the use of S203 powers to the Executive Director for Economy, Environment & Culture;

9.         Authorised officers to enter into the Development Agreement on the terms set out in the Summary attached at Appendix A to this report, which contains provisions which seeks to ensure that 20% affordable housing is built as part of the development, the full version of which (excluding Annexures) is presented in the Part 2 report to this committee; and agrees that following signature of the development agreement if there is any proposal to either downgrade the quality, specification or amenity value of the sports centre that it be brought back to this committee.