Mill Hill East Limited Liability Partnership and Co-operation Agreement. 18 March 2011

Transcription

1 1271 DELEGATED POWERS REPORT NO. SUBJECT: Mill Hill East Limited Liability Partnership and Co-operation Agreement Control sheet All of the following actions MUST be completed at each stage of the process and the signed and dated report MUST be passed to Democratic Service for publishing All reports 1. Democratic Services receive draft report Name of DSO Date 16/2/11 Jonathan Regal 2. Democratic Services cleared draft report as being constitutionally appropriate 3. Finance clearance obtained (report author to complete) 4. Staff and other resources issues clearance obtained (report author to complete) 5. Trade Union response received (Staffing issues only) 6. Legal clearance obtained from (report author to complete) 7. Policy & Partnerships clearance obtained (report author to complete) 8. Equalities & Diversity clearance obtained (report author to complete) 9. The above process has been checked and verified by Director, Head of Service or Deputy (report author to complete) 10. Signed & dated report, scanned or hard copy received by Democratic Services for publishing 11. Report published by Dem Services to website Name of DSO Jonathan Regal Date 16/2/11 Name of Fin. officer Andrew Travers Date 18/3/11 Name of Res. officer N/A Date Name of TU rep. N/A Date Name of Legal officer Sheila Saunders Date 18/3/11 Name of P&P officer Andrew Nathan Date 16/2/11 Name of officer Julie Pal Date 16/2/11 Name Andrew Travers Date 18/3/11 Name of DSO Jonathan Regal Date 22/3/11 Name of DSO Jonathan Regal Date 22/3/11 Officer reports: 12. Head of Service informed report is published and can be implemented. Name of DSO Date Cabinet Member reports: 13. Expiry of call-in period Date 14. Report circulated for call-in purposes to COSC Name of DSO members & copied to Cabinet & Head of Date Service Jonathan Regal 22/3/11

2 ACTION TAKEN BY CABINET MEMBER(S) UNDER DELEGATED POWERS (EXECUTIVE FUNCTION) Subject: Leader Member(s) Mill Hill East Limited Liability Partnership and Co-operation Agreement Deputy Leader of the Council Date of decision 18 March 2011 Date decision comes into effect Summary Officer Contributors Status (public or exempt) Wards affected Enclosures Reason for exemption from call-in (if appropriate) 18 March 2011 This report seeks authority for the release of preconditions, previously approved by Cabinet 29 November 2010, to enable the Council to enter into a Limited Liability Partnership to deliver the programme for the Mill Hill East development. Stewart Murray, Director of Planning, Housing and Regeneration Abid Arai, Senior Project Manager, Regeneration Public Mill Hill None Not applicable Contact for further information: Abid Arai, Senior Project Manager (Regeneration Service), Tel:

3 1. RELEVANT PREVIOUS DECISIONS 1.1 Cabinet Resources Committee, 25 March 2008 (Decision item 17) considered a report regarding the Mill Hill East Area Action Plan and the resultant possible Landowners Agreement and authorised officers to commence preliminary discussions with other landowners and to report further upon the options. 1.2 The Director of Planning, Housing and Regeneration approved by delegated powers (DPR 568) on 9 June 2008 the appointment of CB Richard Ellis to examine the Council s options for the disposal of Mill Hill depot and adjacent lands and to consider the financial consequences of each option. 1.3 Cabinet Resources Committee, 8 August 2008 (Decision item 6) approved the acceptance of a tender offer for part of the former Friern Barnet sewage works site, also agreed to part of the land being developed for a new Council depot to replace that at Mill Hill. 1.4 Cabinet Resources Committee, 19 January 2009 (Decision item 7) approved the principle of the relocation of the Mill Hill depot to Pinkham Way site. 1.5 Cabinet Resources Committee, 19 January 2009 (Decision item 9) approved the principle of exploring the potential options for a land owners agreement for the Mill Hill East AAP area and depot site subject to a viable business plan, apportionment of costs and receipts being finalised and a development programme. 1.6 Cabinet, 20 January 2009 (Decision item 7) recommended approval of the Mill Hill East Area Action Plan for Council 3 March 2009 (Decision Item 157) which adopted the AAP. 1.7 Cabinet (special meeting), 11 August 2009 (Decision item 5) approved the sale of the Council s land holdings at the former Friern Barnet Sewage Works, Pinkham Way to the North London Waste Authority, subject to reservation of 4.5 acres for the Council to retain and construct a new depot facility. 1.8 Cabinet Resources Committee, 2 November 2009 (Decision item 8) approved the Council entering into a formal joint venture and land owners agreement subject to finalisation of a business plan and legal terms. 1.9 Cabinet 29 November 2010 (Decision item 14) approved the Council entering into a Limited Liability Partnership and Co-operation Agreement, instead of a landowners agreement, subject to a number of conditions. 2. CORPORATE PRIORITIES AND POLICY CONSIDERATIONS 2.1 The effective delivery of a successful new suburb of the highest quality at Mill Hill East supports all of the priorities of the Barnet Corporate Plan 2010/13: o A Successful London Suburb through the AAP and land owners agreement by close coordination between all principal land owners to ensure effective growth, new homes and businesses with supporting sustainable infrastructure to create an economically prosperous new place.

4 o Better Services with Less Money by ensuring that the land owners agreement assists the Council s depot facilities relocation, provides a significant capital receipt as part of the longer term joint venture, including any regenerative uplift in land and sales values, securing best consideration of the Council s land and property assets and securing funding for new community and strategic infrastructure, particularly a new 2-form entry school and highways improvements; and o Sharing Opportunities and Responsibilities by delivering community benefits and opportunities in the form of improved health, schools and other community facilities and access to a choice of affordable and private sale housing. 2.2 Mill Hill East supports all three strands of Protect, Enhance and Consolidate Planned Growth in the Council s Three Strand Approach through the adoption of the Area Action Plan and by; (i) protection of Green Belt, Scout Land and adjoining woodland; (ii) enhancement of Barnet s classic suburban form by enabling the delivery of a significant part of the site for family houses with gardens; and (iii) high quality sustainable planned growth and supporting infrastructure coordinated through the AAP and land owners agreement to deliver 2,200 new homes and 500 new jobs, a new school, five new parks and significant transport improvements. 3. RISK MANAGEMENT ISSUES 3.1 At its meeting 29 November 2010 Cabinet approved the Council to enter into a Limited Liability Partnership (LLP) and Co-operation Agreement with regard to the development of Mill Hill East (former Inglis Barracks and Depot site). In granting this approval Cabinet did so subject to a number of pre-conditions. Subsequently some of the pre-conditions notably (iii), (iv) and (v) set out in the report cannot in fact be met unless and until the Limited Liability Company ( LLP ) has been set up. Therefore without a waiver to these conditions the LLP agreements are at risk of not being executed. 3.2 Without the LLP and the Co-operation Agreement being in place the JVCo land swap proposal on part of the existing Ridgemont development can not take place. The JVCo comprises Countryside Properties and Annington Homes who are currently building out Ridgemont. The land swap does not involve any Council land. It will enable the delivery of critical highways infrastructure works to unlock implementation of the LLP larger development in particular the strategically important East-West road from Bittacy Hill to Frith Lane. Delay in signing will impact the LLP development as well as result in abortive costs. There is a further risk where the JVCo are able to terminate the land swap if the infrastructure works are not completed by a longstop date, initially set at 31 December This has been mitigated by ensuring an extension to the long stop date with the JVCo and inclusion of a force majeure clause in the case of unknown events to May This extension has been agreed by all landowners but involves financial penalties to the LLP in the event of project slippage. The Council s 13.9% approved share would translate into a financial penalty. The force majeure clause mitigates the possibility of unknown delays such as unexpected site conditions or finds.

5 3.3 The timing of entering into the LLP agreement is critical. If the options are issued once there is a resolution to grant planning permission there is a significant risk that the capital accounts system would not return (over the life of the development) to zero (for example if land values fell below the forecast set out in the current business plan). There is therefore a risk that the LLP could become technically insolvent owing debts to its members. This risk will be mitigated if the LLP is formally established prior to any resolution to grant planning permission is in place. 3.4 The Co-operation Agreement will not include the requirement to provide a serviced school site for a new 2 form entry primary school. However, the provisions for this will be included in the s106 agreement which will accompany any planning approval for the Mill Hill East development. This will ensure that these provisions are binding on both the landowners and their banks should the Co-operation Agreement be terminated for any reason. Planning permission will not be formally granted by the Council until the wording of the s106 is sufficiently robust to ensure these provisions are effectively secured. 3.5 The Council s investment at Mill Hill East is based on a robust business case and associated projections prepared by the Council s property advisors, CBRE. If the valuation assessment was not robust this could increase the level of cost and risk for all parties including the Council and potentially reduce its financial returns. To mitigate this risk due diligence has been undertaken by the Council in reviewing the business case. 4. EQUALITIES AND DIVERSITY ISSUES 4.1 The adopted Area Action Plan for Mill Hill East was accompanied by an Equalities Impact Assessment (EqIA). The subsequent master plan, now subject to planning, has taken into account the equalities dimensions of the adopted AAP through the Environmental Statement, which will be separately assessed by the Council s Planning and Environment Committee (Council Function). 4.2 By entering into a LLP and Co-operation Agreement the Council will enable the delivery of a new suburban development in the Borough that will increase housing choice, provide affordable housing to residents in housing need and create job opportunities that will benefit all of Barnet s diverse communities. 5. USE OF RESOURCES IMPLICATIONS (Finance, Procurement, Performance & Value for Money, Staffing, IT, Property, Sustainability) 5.1 The financial aspects of the proposed LLP and joint development approach were comprehensively set out in the report and considered by Cabinet 29 November Subsequent to the report a number of changes have occurred for which the financial and resource implications have been outlined in the exempt report. 5.2 Section 123 Best Consideration Land and Property matters Further work on Section 123 best consideration of the Council s land (depot) has been undertaken by the Council s appointed property advisors CBRE with a final report submitted for the Council s approval. An executive summary of the Business Plan is outlined in the exempt report, appendix A. Since Cabinet consideration of S.123 issues last year the property market has fluctuated and the prices and values have deflated.

6 Whilst the Council s land holding values and long term expected returns have reduced based on the latest CBRE property valuation assessment the conclusion and Section 123 advice is that entering into the LLP and Co-operation agreement continues to secure best consideration for the Council. The detailed financial elements and valuation changes are set out in the associated exempt report. 5.3 Business Plan / Cash-flow Model The cost model is an evolving document and has necessarily made a number of assumptions about the nature and costs of the infrastructure needed to sustain the development and anticipated land values. Whilst the assumptions made at the time were considered to be prudent they are subject to market fluctuations as well as changes to the Retail Price Index (RPI). 5.4 Primary School The planning Section106 agreement is intended to secure a significant contribution towards a new 2 form entry primary school to be paid in two instalments frontloaded to the Council. However the actual payment will be made by a third party developer; any delays in the receipt of the payments may result in the need for short term borrowing to maintain the cash-flow required to build the primary school. The Planning and Environment committee decision on the outline planning application is currently targeted for 13 April LEGAL ISSUES 6.1 The release of pre-conditions (iii), (iv) and (v), which are attached to the Cabinet decision dated 29 November 2010 will not give rise to any legal issues over and above those set out in the associated report to that meeting. 6.2 The Council, as a corporate member of the Limited Liability Partnership, must appoint individuals to act on its behalf with regard to the LLP. The power to appoint Officers, as representatives of the council on outside bodies, resides with the General Functions Committee. A report will therefore be presented to that Committee seeking such appointments together with approval for the provision of indemnities by the Council to the appointed Officers. 7. CONSTITUTIONAL POWERS 7.1 The Council s constitution in Part 3, Responsibility for Functions, paragraph 3.2 states that The Leader may discharge any function of the Executive. 7.2 Article 7 paragraph 7.04 of the Constitution provides that If for any reason the Leader is unable to act the Deputy Leader must take her place. 8. BACKGROUND INFORMATION 8.1 The rationale and commercial business case reasons for the Council to enter into the proposed LLP and Co-operation Agreement with the Mill Hill East land owners were set out in the 29 November 2010 report to Cabinet.

7 8.2 Cabinet resolved at this meeting that the Council enter into the LLP and Cooperation Agreement placing the Council s depot lands into a collaboration agreement for future development by means of each land owner granting an option over its land to the LLP. The decision was subject to a number of conditions. Pre-LLP Conditions 8.3 (i) Finalisation of the detailed commercial terms and Business Plan; (ii) Receipt of satisfactory guarantees from the parent companies of VSM; (iii) Transfer at nil cost to the Council of a fully serviced education site for delivery of a new primary school; (iv) Safeguarding an area of fully serviced land for residual Barnet Council Depot maintenance and ancillary facilities and access from Frith Lane (v) Obtaining satisfactory planning permissions for the following developments: Mill Hill East development (outline) Re-provide depot maintenance facility and related highways access from Frith Lane; 8.4 Progress has been made in addressing all these conditions as set out below. However, it has become apparent that as a requisite to fulfilling conditions (iii), (iv) and (v) the LLP needs to be formally established and in order to do so a formal decision that the Council can sign the LLP agreement before conditions (iii), (iv) and (v) are met, is required Pre-Condition (iii) concerns the transfer at nil cost to the Council of a fully serviced education site for delivery of a new primary school. Planning approval must be obtained before this condition can be implemented. VSM, the landowner of this site, will not transfer the land without: (a) planning approval in place (b) going unconditional. It should be noted that the Section 106 agreement which will accompany any panning approval will formally safeguard the Council s school provision interest. 8.6 Pre-Condition (iv) concerns the safeguarding of an area of fully serviced land for residual Barnet Council Depot maintenance and ancillary facilities and access from Frith Lane. Appropriate provision will be made in the Co-operation Agreement but again the Council is first required to be a signed up member of the Limited Liability Partnership. 8.7 Pre-Condition (v) concerns obtaining satisfactory planning permissions for: (a) Mill Hill East development (outline); and (b) the re-provision of depot maintenance facility and related highways access from Frith Lane. The LLP once operational will address the timing and sequencing of necessary regulatory consents including the securing of planning permission. 8.8 Mill Hill East landowners including the London Borough of Barnet will not be able to exchange documents unless a LLP exists first. A company registration number is required to be included in the documentation prior to exchange. 8.9 In relation to condition (i) finalisation of the detailed commercial terms and Business Plan Appendix 1 sets out a summary of the Business Plan.

8 8.10 In relation to condition (ii) it can be confirmed that, following a financial vetting process, satisfactory guarantees from the parent companies of VSM have been received As stated above the Council has secured a further extension to the land swap agreement between Countryside properties and Anningtons (JVCO) increasing the delivery window of key highways infrastructure works (in particular the proposed Northern Road) from December 2012 to May This represents an increase of 5 months and covers any force majeure unknown events and is considered appropriate risk mitigation The Ministry of Defence (MOD) owns important land interests which are needed for delivery of the project. Its development partner is Vinci St Modwen (VSM). These include ownership to the freehold reversionary interest to VSM s land. The MOD has indicated whilst it will grant the land option to the LLP it does not wish to become a party to the co-operation agreement or member of the LLP. Therefore the MOD has requested that rights of cancellation would apply where VSM becomes insolvent. The Council and Annington have progressively negotiated with the Ministry of Defence (MOD) on these terms in the legal agreement by; (i) Agreeing to a 40 working day review period, so that in the event of VSM suffering an insolvency event we as members of the LLP have the ability to find a solution before termination. (ii) agreeing to grant an option at open market value over VSM land in the event that VSM were insolvent and the cooling off talks failed. In the unlikely event that VSM, as a commercial operator, faced commercial problems or went into receivership but Mill Hill East was still a profitable development project, both Annington properties and the London Borough of Barnet would have the opportunity and legal option of either buying out the VSM apportionment or introducing a third party to take the place of VSM. Thereby the Mill Hill East development project would remain viable and on track. 9. LIST OF BACKGROUND PAPERS 9.1 Mill Hill East Area Action Plan adopted March Any person wishing to inspect the background paper listed above should telephone Abid Arai on DECISION OF THE DEPUTY LEADER OF THE COUNCIL I authorise the following action: 10.1 Release of pre-conditions (iii), (iv) and (iv), attached to Cabinet approval dated 29 November 2010, enabling the Council to proceed with the formation of the LLP for the Mill Hill East development which will then enable the outstanding pre-conditions to be met. Signed Andrew Harper Deputy Leader of the Council Acting in the Leader s absence Date 18 March 2011