The report of the Strategic Director (Development) is attached

(Councillor Richards declared a personal interest in this item as a member of the Board of the Joint Venture Company)

In March 2017 we had authorised the City Solicitor, City Treasurer and Strategic Director (Development) to enter into an agreement with the Council’s preferred investment partner for the regeneration of the Northern Gateway lands, Far East Consortium International Limited (FEC). We had also delegated authority to the Chief Executive to dispose of the Council’s interest in land at the Northern Gateway Site (Minute Exe/17/064).

The Council had entered into the Joint Venture (JV) with the Far East Consortium (FEC) in April 2017 for the comprehensive redevelopment of the Northern Gateway for housing and ancillary development. As part of the delivery arrangements, the Council and FEC established a JV company, Northern Gateway Operations Limited (OpCo), to have strategic input into and oversight of the development of the Northern Gateway.

In February 2019 we approved the Strategic Regeneration Framework for the Northern Gateway, the 155 hectare land area made up of the adjacent neighbourhoods of New Cross, the Lower Irk Valley and Collyhurst. This Framework was to support the opportunity to deliver up to 15,000 new homes over a 15-20 year period (Minute Exe/19/25).

A report now submitted by the Strategic Director, Development summarised the context and benefits associated with the provision of a commercial loan facility to Far East Consortium International Limited (FEC) to support strategic land acquisition as part of the Northern Gateway programme.

The report explained that there were some areas within the Northern Gateway area where the JV partners would be seeking to make strategic land acquisitions to facilitate comprehensive development activity. FEC have already acquired two sites within the area since formation of the JV and Heads of Terms have been agreed for a third large site. Given the potential upfront costs associated with acquiring sites for future development, the parties have explored opportunities for a co-investment arrangement.  It was therefore proposed that co-investment in land assembly be in the form of a commercial loan set at a rate of interest acceptable to both parties and which would be State Aid compliant.

The report explained that the co-investment in land assembly via a fully recoverable commercial loan would provide significant benefits. We examined those and compared them to the alternative of the Council acquiring the lands for itself. On balance it was agreed that the loan facility approach would provide greater benefits and fewer risks. The loan would be expected to be provided on a maximum loan-to-value rate of 50% with the Council having first charge on the land in order to protect its position and with a parent company guarantee provided by FEC. The loan would be funded through the £25m allocated to Northern Gateway activity as part of the 2017-2022 Capital Strategy. The loan approach had the potential to facilitate delivery of the same, if not greater, quantity of new homes at considerably lower risk than if the Council were to acquire the land directly.

We noted and accepted the views that the Resources and Governance Scrutiny Committee had expressed on this report at a recent meeting (Minute RGSC/19/26).

Decision

To note the report and the proposed approach to facilitating strategic land acquisitions within the Northern Gateway SRF area and the proposal to provide a term loan Facility to Far East Consortium as set out in another report (Minute Exe/19/57 below).