Report of the Strategic Director (Growth and Development) attached

The Executive considered a report of the Strategic Director (Growth and Development), which provided an update on progress on the Mayfield development and informed Members of proposals for the Mayfield Development Partnership Limited Partnership (MDPLP), in which the Council (through various contractual and joint venture arrangements) was a partner, to enter into a partnership with a Landsec (Land Securities Group plc) special purpose vehicle  for the delivery of the first phase of commercial development and to acquire an interest in the neighbouring Macdonald Hotel car park site.

The Leader reported that despite some delays caused by the COVID-19 pandemic, substantive progress had now been made on delivering the first phase of Mayfield, which would set a strong foundation for realising the overall development.  Mayfield Park had been completed and was opened to the public in September 2022. 

Following the acquisition of U&I PPP Limited (the former preferred private sector development partner for the site), Landsec had expressed a desire to progress with the first phase of commercial development at the earliest opportunity.  The delivery of Phase 1 would kickstart the future phases of development, provide essential investment to the site, and begin to bring new businesses and jobs to the area

The MDPLP had been negotiating with Landsec on development delivery arrangements to deliver the first phase, and were now looking to enter into this arrangement, which could then be extended to future phases. The agreement did not alter the terms of the overarching Public Sector and Partnership joint venture arrangements, reported to the Executive in September 2016.  The public sector partners had been advised by an independent property agency and every care had been taken to ensure that the partners received best value from the arrangements and that any risks to the Council and the other public sector partners were minimised.  

However, it was noted that should the delivery arrangements fail, and the expected receipts were not received, the Partnership would be required to meet the future costs of the maintenance of the site, including the running costs of the park. These were estimated to be £750k for 2023/24, and reaching £1.1m p.a. by 2025/26.

It was also reported that the current owners of the Macdonald Manchester Hotel on London Road recently marketed the car park adjacent to the hotel for sale as it was considered to be surplus to their operational requirements for the hotel.  This site was included within the Mayfield SRF. The MDPLP had made an offer to the owners to purchase the site, with the price based on independent valuation advice. This offer had now been accepted and terms agreed, in principle, for the sale

The acquisition costs would be met by the public and private sector partners which make up the MDPLP, in line with their respective interests.  This meant that the Council’s contribution to the acquisition would be £1.262m and it was proposed that these costs were funded from the existing approved Strategic Acquisitions Budget.

In addition, there was a requirement for additional working capital from the public and private sector partners in the MDPLP in order to maintain the operational and development activities of the Partnership and enable the preparations needed for the delivery of Phase 1.  The Council had previously provided land and working capital to a value of approximately £4.25m. to the Partnership.  The Council’s share of the additional capital was £90k, of which £83k is already budgeted for within the Mayfield budget.  It was proposed that the £7k difference is transferred from the Strategic Acquisitions Budget to the Mayfield Budget.

To support the public sector limited partnership’s funding of the acquisition and enable the development to progress there was also a need to refinance the existing public sector partnership (which made up 50% of the overall Partnership joint venture).  Significant historic costs were incurred relating to the original procurement of U&I PPP Limited, costs for negotiating the original public sector and Partnership agreements and the more recent property advice to inform the Phase 1 arrangements.  It was anticipated that the refinancing of historic public sector partnership costs and the additional capital funding to the Partnership would enable the realisation of future capital receipts provided from the longer-term re-development of the Mayfield site, including from the development of the Macdonald car park site.

The report was accompanied by a Part B report, which outlined the confidential commercial terms of the arrangements for both of these transactions.

Decisions

The Executive:-

(1)          Note the progress made on delivery of Phase 1 of the Mayfield development.

(2)          Note the terms of the arrangements for delivery of Phase 1 of the commercial development of Mayfield and for acquiring the Macdonald Hotel car park site as set out in this report and the detailed confidential commercial terms for those transactions as set out within the Part B report on Mayfield Phase 1 on the agenda.

(3)          Approve a virement of £886k from the Strategic Acquisitions budget to the Mayfield budget.

(4)          Approve the use of the Strategic Acquisitions budget (£1.262m) and the Mayfield budget (£90k) to fund additional working capital to the Partnership by way of loan notes in the sum of £1.316m to facilitate and support the delivery of Phase 1 of the Mayfield development and the acquisition of the Macdonald Car Park.

(5)          Approve the use of £879k from the Mayfield budget to refinance some of the historic development costs of the public sector limited partnership.

(6)          Delegate authority to the City Solicitor to complete and enter into any necessary contractual or ancillary documents required to give effect to the above recommendations and the arrangements as set out in the report.

(7)          Approve, in the Council’s capacity as shareholder or limited partner, the entering into or completion of any necessary contractual or ancillary documents on behalf of Mayfield Development Manchester Limited, Mayfield Partnership Limited Partnership, Mayfield Partnership (General Partner) Limited, Mayfield Development Partnership Limited Partnership and Mayfield Development (General Partner) Limited required to give effect to the above recommendations and the arrangements as set out in the report.

(8)          Note that in accordance with paragraph 18 of Part 4, Access to Information Procedure Rules and paragraph 14 of Part 4, Scrutiny Procedure Rules of the Council’s constitution, and having considered the advice of the relevant statutory officers, the Chair of Resources and Governance Scrutiny Committee has agreed that the above decisions are deemed as urgent, in that any delay caused by the call-in process, would seriously prejudice the legal or financial position of the Council or the interests of the residents of Manchester and as such has exempted these decisions from Call In.