To enter into a development agreement to provide student accommodation on the station approach site.

The leader of the council welcomed the principal and the president of the student union from Herefordshire College of Arts (HCA) and the project lead for finance and accommodation from NMiTE.

The cabinet member contracts and assets introduced the item. He noted that:

·        the proposed accommodation block would provide for students from HCA and NMiTE;

·        the project would be part of the development regeneration programme (DRP) with partner Engie Regeneration Ltd;

·        HCA did not currently have a high quality campus where students could live together, this project would address this and support planned growth in student numbers;

·        the recommendations in the report supported the September 2020 opening target;

·        the level of demand had been validated and feedback from potential investors had been positive, with the approval of cabinet it was intended to move into negotiations with a preferred funding partner early in 2019;

·        the preferred route for funding was to have an external partner but the recommendations put forward allowed for the council to provide funding if required.

In discussion of the item it was noted that:

·        there had been great interest from potential funding partners with four interested parties to date, due diligence checks would be carried out to confirm whether any or all of these could be taken forward;

·        it was possible for the council to deliver the project itself and there was some support for this option but it was acknowledged that the council had finite resources to invest and that attracting external investment would allow the council to recycle its investment into other much needed projects;

·        the council should pump prime sites which were not viable for private investors, as there was interest from private investors for this scheme, the council should act as a facilitator only;

·        there was support and demand for higher education opportunities in Herefordshire which this project would support;

·        the reduction in parking spaces at the front of the train station would be mitigated by ensuring that there were sufficient alternatives within a 5-10 minute walk and in the longer term by a review of parking.

Group leaders were invited to give the views of their group. There was general support for the principle of the project and the educational institutions involved. Other points made were:

·        that the building and its setting should be attractive as it was to be located in a prominent site and aim for high environmental standards in its construction;

·        the design should be flexible so that the building could be repurposed in future if needed;

·        the projected growth in the student population would likely give a boost to the night time economy and it was hoped that this would not lead to tensions;

·        the proposed timetable was tight and there might be other constraints on the site not yet identified;

·        the project must demonstrate a sound business case and return for the council;

·        the council should focus on projects to support vulnerable people such as developing sites for affordable housing.

The ward councillor expressed support for the principle of providing accommodation for students and hoped that this might release accommodation elsewhere which would better suit other users. She expressed concern about the design of the building and stressed the need for a high quality building on this key site.

The leader of the council noted that this was an excellent opportunity to support two important educational organisations.

It was resolved that:

(a)             the council approves the Stage 1 Submission (appendix 1) for the Station Approach student accommodation project, provided by Engie Regeneration Ltd under the development and regeneration programme (DRP), and the project be authorised to proceed into stage 2 of the DRP new project approval process with the Project Criteria, for submission in February 2019, being as follows:

i.                 A student accommodation block of up to 180 units;

ii.               A design and specification in line with normal market practice and demand, subject to other criteria set out here;

iii.              A design which is Equality Act compliant and which respects the requirements of students with diverse needs and promotes the wellbeing of all its residents;

iv.              To achieve the earliest possible completion date to align with the commencement of an academic year;

v.               To develop the project in liaison with higher education and further education providers identified by the council including Hereford College of Arts and NMiTE;

vi.              To clarify funding options for the project and recommend a preferred approach;

vii.            To identify options for the asset management of the accommodation;

viii.          To identify ways to provide active frontage and a commercially viable amenity on the site;

ix.              To work with the council to ensure sufficient public parking supply is maintained and that this is clearly identified for potential users;

x.               To provide a scheme which meets the requirements of BREEAM (Building Research Establishment Environmental Assessment Method) Good or above;

xi.              To provide the council with options for the project to make an enhanced contribution to environmental sustainability, over and above that which would be required by relevant law or existing planning policy;

xii.            To work with the council to develop the evidential framework by which the Stage 2 Submission can be assessed against the council’s requirement to demonstrate best value and meet all other relevant legal obligations.

(b)             a Stage 2 Development Fee of up to £752,648 be approved for underwriting by the council, subject to the terms of the overarching agreement, with an additional contingency of 20% (£150,530) to be released, if required, by the Director for Economy and Place;

(c)             the preferred funding model to the project is for a commercial investor to provide funding for the construction and operational phases (the council to act as guarantor during the operational phases)

(d)             the Chief Finance Officer be authorised to complete legal and financial due diligence on this preferred option during Stage 2, including the selection of a preferred funder and the negotiation of final terms, following consultation with the Cabinet Member Contracts and Assets, the Cabinet Member for Finance and Corporate Services, and the Director for economy and place, and provided that the funding model delivers for the council:

i.                 a capital receipt for the leasehold interest in the site that reflects the best consideration that can reasonably be obtained; and

ii.               a best value solution for the project which meets the Project Criteria.

(e)             in the event that acceptable terms cannot be agreed with a commercial investor in accordance with item (c) above by 28 February 2019 and subject to the Stage 2 submission having met the Project Criteria, the Chief Finance Officer be authorised, following consultation with the Cabinet Member Contracts and Assets, the Cabinet Member for Finance and Corporate Services, and the Director for economy and place to secure funding for the project up to a maximum sum of £18m from the council’s capital allocation for the Development Partnership by using the council’s own funds and/or Public Works Loan Board borrowing;

(f)              subject to the Stage 2 Submission meeting the Project Criteria (item a. above) and an acceptable funding model being secured under item (c), (d) or (e) above, authority be delegated to the Director for Economy and Place,  following consultation with the Cabinet Member Contracts and Assets and the Chief Financial Officer, to approve the project for immediate implementation;

(g)             authority be delegated to the acting Director for Economy and Place,  following consultation with the Cabinet Member Contracts and Assets and the Chief Financial Officer, to enter into all necessary legal agreements including as set out in Financing Options and Project Agreements (appendix 2 to this report) and/or the giving of securities or guarantees and take all operational decisions necessary to implement the above within the approved budget;

(h)             the £35k cost of further services commissioned from Engie on 14 August 2018 to address issues with the Welsh Water sewer crossing the site be capitalised as part of the project; and

(i)               a further capital sum of up to £100k is approved for drawing down from the Development Partnership capital budget for council client support to deliver the project, including staff costs, due diligence and financial and legal support.