Agenda item

Report of the Group Director of Operations

The Cabinet Member with the Resources Portfolio introduced the report of the Chief Executive (previously circulated) requesting that consideration be given to the establishment of a Joint Venture Company (JVC) which will provide the infrastructure build and sale of homes at Neasham Road, under the company name Hurworth Gardens JV Limited; the sale of the land at Cell C, Neasham Road, as shown on the plan appended to the submitted report (also previously circulated) to the newly incorporated JVC; and to the payment of Nutrient Neutrality credits of circa £0.052M awarded, and agreement in principle to the purchase of further credits in accordance with Natural England requirements estimated at £0.122M.

The submitted report stated that the Council issued an OJEU procurement exercise in July 2017 to seek a joint venture partner for residential development; Esh Homes Limited were appointed; recommended the establishment of a new Joint Venture Company between the Council and Esh Homes Limited to acquire the site and bring forward residential development on the Neasham Road Cell C; stated that the purchase price for the site had been negotiated; and that the Joint Venture Company would purchase the site and undertake associated works to deliver housing.

It was reported that an application for planning permission had been submitted for the delivery of 144 houses on the site; in order to develop the site a payment for Nutrient Neutrality credits (payable to Natural England) of £51,690 was required; the calculations had now been revised in line with new advice from Natural England, meaning that an additional circa £0.122M could be required; the Council would apply for those additional credits however if they were not forthcoming in the required timescales there was a Plan B, where mitigation land could be made available.

The Joint Venture Company would be based on a 50:50 split between the Council and Esh Homes Limited and the Company would return developer profits to the Council and Esh Homes Limited; the Joint Venture Company would be fully funded by the Council and this would be via prudential borrowing of up to a maximum of £6.7M; the loan would be repaid via the Joint Venture Company to the Council and it would generate a net income to the Council after taking into account any cost of borrowing undertaken by the authority; and that the estimated pre-tax profit share for the Council would be £0.694M. 

Reference was made at the meeting to the loss of affordable housing on the site; whether a review had been undertaken of the scheme; the need to undertake a re-assessment of Housing Association and affordable housing in the Borough; and the benefits of mixed communities.  The Chair and the Cabinet Members with Health and Housing and Resources Portfolios responded thereon.

RESOLVED -  (a)  That the establishment of the Joint Venture Company to acquire the site, deliver, build and sell new homes at Neasham Road Cell C, as shown on the plan appended to the submitted report, be approved.

(b)  That the release of £6.7M from the Investment Fund, be approved, to fund the Joint Venture Company financed by prudential borrowing, subject to a first Legal Charge in favour of the Council over the land acquired by the Joint Venture Company, together with a Guarantee from the Joint Venture Partner in respect of 50 per cent of the loan sum.

(c)  That the Joint Venture Agreement, be approved, and authority be delegated to the Chief Executive to negotiate the final terms of the Joint Venture Agreement and finalise the establishment of the Joint Venture Company, in line with the terms and supporting Development Appraisal and Cashflows as detailed in Appendices 2 and 3 (Part III), of the submitted report.

(d)  That, conditional upon completion of the Joint Venture agreement, a secured loan facility be entered into with the Joint Venture Company, as a secured loan simultaneous with the land acquisition.

(e)  That the Chief Executive, Group Director of Operations and the Assistant Director Law and Governance be appointed to act as directors in the Joint Venture Company as part of its Executive Board.

(f)  That the Joint Venture be funded from prudential borrowing from the Capital Investment Fund.

(g)  That the purchase of initial Nutrient Neutrality credits of £0.052M, be approved, and any future obtained credits circa £0.122M be approved, to enable the site to be built out.

REASONS – (a)  To assist in the delivery of the Economic Strategy by speeding up the building of new homes.

(b)  To deliver income for the Council.