David Cockroft presented a report which summarised the Friargate Business District proposal and which highlighted the process undertaken already to challenge and clarify the proposed scheme. The report sought the approval of £51 million for Coventry Friargate Business District requested via a Full Business Case (FBC).
The Chair requested details of the timescale for the delivery of the scheme. David Cockroft advised that subject to approval of the funding package it was anticipated that the scheme would commence on site in the third or fourth quarter of 2018/19 with a build period of two years. It was hoped that the development would be completed prior to the commencement of the Coventry staging the City of Culture in 2021. Councillor Jim O’Boyle reminded the Board that Business Rates generated from the development would be shared with the WMCA through the pooling arrangements and that the scheme had been included as part of the bid in relation to the relocation of Channel 4.
Sean Pearce reported that this was a scheme that the WMCA was keen to support and that financial assistance would be provided by way of a grant to enable a loan to be taken out by the Joint Venture Company, once established. He advised that clarity was required within the legal agreement as to how the monies would be recycled to enable future phases of the project to be developed. Furthermore, the methodology on how profit from the scheme would be re-directed back into the scheme would be an integral part of the legal agreement.
The Chair queried the length of the proposed loan. Sean Pearce explained that the WMCA was being requested to make a grant to Coventry City Council, which in turn, would make a loan to the Joint Venture Company. David Cockroft stressed that the loan would be subject to commercial rates of interest. The Chair enquired whether the uplift in Business Rates would be returned to the WMCA. Sean Pearce advised that this scheme had formed part of the Devolution Deal One, that there was not a standard agreement in respect of the uplift in Business Rates and that this point would be the subject of consideration in due course albeit not in relation to this scheme.
Councillor Majid Mahmood enquired whether the sum of £23 million was for the first phase of the development only. Aimee Proctor advised that this sum was for the whole scheme and assumed that the total scheme would be completed. Income had been calculated on a 100% letting success but assumptions had been included for vacant units.
Gary Taylor registered his concern that the report contained insufficient detail for the Board to make a decision of such magnitude. It lacked market analysis and was unusual as it was based on 100% public sector funding. He also queried the relationship between the developer and the local authority and whether the developer retained a financial interest in the scheme. David Cockroft assured the Board that a Full Business Case prepared including a Dynamic Economic Impact Model (DEIM) assessment had been conducted. He reminded the Board that such information had been omitted from a publically available report as it contained commercially sensitive information. He advised that the developer did retain a financial interest in the scheme and would be a 50% partner in the Joint Venture Company. He also explained the history of the scheme. He reported that legal advice had been obtained with regard to ‘State Aid’ implications and on the options available with regard to the scheme. The land would be acquired at ‘Red Book’ market price and two market analyses had been carried out by reputable companies. He confirmed that the Joint Venture Company would bear all risks associated with the scheme.
In response to a further question from Gary Taylor, David Cockroft explained the financial arrangements for the scheme. Gary Taylor advised that it was apparent that this scheme requited support but queried the profit share arrangements given that the development capital was being provided by the public sector with the developer contributing the land only. On that basis he was not convinced that a 50:50 profit share was correct. David Cockroft explained that the profit share applied only to the first building with the developer being required to take joint responsibility for the loan for subsequent phases. Any profits from the first phase would be used to fund the borrowing for the second phase.
The Chair welcomed the questions posed in respect of the report having regard to the amount of public money under consideration. Councillor Jim O’Boyle reminded the Board that the request now under consideration was better for the public purse than that originally proposed. He emphasised the amount of commercially sensitive information which was available should members wish to consider it. He reminded the Board that this scheme was inter-linked to the Coventry Station Masterplan which had been recommended for approval earlier in the meeting.
Sean Pearce commented that the views of both PricewaterhouseCoopers (as part of a wider discussion on regeneration mechanisms) and Deloittes (who had been appointed by Coventry City Council to support the Business Case development and had completed an options appraisal) had been sought on this scheme. David Cockroft advised that both companies preferred the approach detailed in the Full Business Case. The Chair commented that in the event that this scheme was recommended to the WMCA Board for approval a more comprehensive report would need to be prepared.
Councillor Tony Jefferson commented that there were a number of key issues not addressed in the report which presented a problem to members in reaching a decision. David Cockroft reiterated his earlier comments that a publically available report could not contain commercially sensitive information but that the information was available outside the meeting. He reminded the Board that an option to pursue a Compulsory Purchase Order for the land would lead to lengthy delays in commencement on site.
1. That the West Midlands Combined Authority Board be recommended to support Coventry City Council application for funding to support its Friargate Business District proposal and to grant up to £51 million for this purpose;
2. That a briefing be arranged for the Chair and Gary Taylor to address the concerns expressed at the meeting.