PAPER B2

For Decision

Committee : REPORT TO THE EXECUTIVE

Date : 18 JUNE 2003

Title : SURRENDER AND RENEWAL OF LEASE – RIVERSIDE CENTRE, NEWPORT, INCLUDING QUAY HOUSE, NEWPORT

REPORT OF THE PORTFOLIO HOLDER FOR RESOURCES

IMPLEMENTATION DATE :30 June 2003

SUMMARY/PURPOSE

1. The purpose of this paper is to grant the Riverside Centre a new longer term lease to include Quay House, Newport.

BACKGROUND

2. The Riverside Centre in Newport has been leased to the Riverside Centre Limited since 1989 on the basis of a 21 year lease. The Riverside Centre Limited is responsible for internal repairs, insuring the property and is to use the property as a multi-purpose centre for disabled persons in accordance with the Memorandum of Association. Assignment or sub-letting of the property is subject to the Council’s consent.

3. The existing Riverside Centre has been developed over many years in three phases and the company pays a current rent of £49,500 per annum.

4. The accompanying plan indicates the phased development of the Riverside Centre which was developed partly on former Council workshops, the old Newport Pumping Station and partly on contaminated land. These existing arrangements will expire in 2010.

5. The Riverside Centre is a fully registered charity and the company’s objects are :

(a) To promote the relief and rehabilitation of disabled persons in the Isle of Wight and to assist those persons to overcome their disability by the provision of workshops and vocational training at the Riverside Multi-Purpose Centre, The Quay, Newport, Isle of Wight.

(b) To provide or assist in the provision of facilities in the interest of social welfare, recreation or other leisure time occupation for persons who have need to such facilities by reason of their youth, age, infirmity or disability with the object of improving their conditions of life.

6. Further the company’s objects provide that the income and property of the company shall be applied solely towards the promotion of its objects as set out above and no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoever by way of profit to members of the company and no member of its Board of Directors shall be appointed to any office of the company paid by salary or fees or receive any remuneration or other benefit or monies worth from the company.

7. The Riverside Centre is now underway with planning and commissioning Phase 4 of the development for the Riverside Centre to include new workshops and facilities with up-to-date technology. In order to raise the funds necessary to achieve Phase 4 development funders need assurance that their grant or loan will have sufficient life in terms of tenure to ensure the resources so invested are well used and to that end the Riverside Centre Limited wishes to surrender its existing lease and take back a new longer term lease on similar terms as prevailing currently and under this scheme the Centre will be able to take forward the Phase 4 development.

8. These discussions have been ongoing for some time and the proposal to renew the Riverside Centre lease is supported by Social Services which obtains significant service support under an annual contract for services from the Riverside Centre.

9. Whilst these discussions have been ongoing, the Council has moved forward with changes to Quay House that adjoins the Riverside Centre. In the process of these changes the Riverside Centre has also promoted the idea of converting Quay House to a club house managed by the Centre that would support the Council still further. The Riverside Centre has therefore applied to incorporate Quay House in the new lease.

10. Leasing Quay House to the Riverside Centre would enable the Centre to develop projects consistent with Social Service needs assessments and secure extra funding. The Centre would offer further support to other organisations who share the Centre’s aims and the Local Authority’s social aims, for example Victim Support and Youth Advocacy. In addition it would enable the Centre to expand its capacity as the Island’s principal social firm to provide increased opportunities and physical space for disabled and non disabled people to participate in new activities and contribute to the local community. Promises of funding towards this club house scheme have already come from the Department of Health.

11. Because this would represent a marriage of two property interests independent valuation advice has been given that supports the proposals set out below.

12. Under the Executive paper dated 13 June 2002 which deals with accommodation changes and refers to Quay House where the Museums Workshop Team has now moved to Cothey Bottom in Ryde, the Portfolio Holder for Resources was delegated authority to make changes to the accommodation review programme and consider selling Quay House to fund the planned moves.

13. The use of Quay House as part of the Riverside Centre also fits in with the development of Newport Harbour and given that the rear offices to this property are only temporary construction, the Riverside Centre would plan to build a further extension on the side of Quay House to replace these temporary offices and that in its turn would help reinforce the sense of a green space and square at this point in the harbour. A sketch plan to this effect has been prepared.

14. Discussions about the Riverside Centre taking over the management and maintenance of the public toilets fronting the Riverside Centre have also been ongoing and to date a recommendation has yet to emerge.

15. In short over the years the Riverside Centre has grown into a successful and well respected organisation that now wishes to take forward further proposals to develop its social function in the area.

16. The terms proposed for the new 25 year lease is a rent of £54,000 per annum (instead of £49,500 per annum) subject to review every five years according to general index of the RPI. The Riverside Centre would be responsible for all repairs and all outgoings and the Riverside Centre is to pay a premium of £50,000.

17. An independent valuation report has been commissioned from Gully Howard and Lambournes. The recommendations is that joint report is as follows:

18. “It is our opinion that the current Market Rent of the Riverside Centre and Quay House, Newport Quay, Newport, Isle of Wight, under the aforementioned terms and conditions of a lease is fairly represented at a figure of £59,000 (fifty nine thousand pounds) per annum.

19. We understand that agreement has been reached between the parties at a rent of £54,000 (fifty four thousand pounds) per annum, with the tenant paying a single capital payment at the commencement of the lease of £50,000 (fifty thousand pounds). Based on the information contained within this report, it is our opinion that the proposed capital payment more than adequately compensates the Council for accepting a rent at less than the current full market rate.

20. It is our opinion that the Market Value of Quay House, Newport Quay, Newport, Isle of Wight, in its present condition for use as office accommodation is fairly represented at a figure of £70,000 (seventy thousand pounds).”

STRATEGIC CONTEXT

21. The proposals set out clearly support the Council’s strategic objectives for social inclusion, long life learning and bringing equalities to the Island’s community.

CONSULTATION

22. In addition to consulting with Social Services, Planning and Members of the Council, the Riverside Centre have made applications to various funding bodies who, in principle, support the proposals for Phase 4 and the club house scheme at Quay House.

23. At its meeting on 22 May 2003 the Resources Select Committee recommended that the recommendation set out in this report be accepted by the Executive.

FINANCIAL/BUDGET IMPLICATIONS

24. The scheme will represent a capital receipt. Existing commitments on running costs and building repair liabilities will be saved.

LEGAL IMPLICATIONS

25. S123 Local Government Act 1973 requires this disposal to be at best consideration.

OPTIONS

26. (a) The Council agrees to this request on the terms set out.

(b) The Council proceeds only with the surrender and renewal of the lease for the Riverside Centre.

(c) That the Council offers the whole property for sale on the open market.

EVALUATION/RISK MANAGEMENT

27. The first question is whether or not to grant the Riverside Centre Limited a new lease. The existing lease is a fully protected lease under the Landlord and Tenant Act 1954 and given new terms, such as the rent can be agreed then the tenant has right of renewal for a further 14 years and again thereafter. The surrender and renewal of a lease is a common commercial transaction to be arranged between a landlord and tenant, especially when a tenant is seeking to invest in his landlord property and wishes to enjoy the benefits of that investment over a reasonable period. If the Council decided not to renew the lease when it expires then the tenant would be entitled to compensation and no doubt it would be necessary to replicate the service presently provided by the Riverside Centre elsewhere.

28. The Council is redeveloping the harbour area and in doing so has used long lease arrangements to underpin proposals. By maintaining the freehold ownership of the area, the Council will be able to influence and control long term development. The proposal to grant a lease of Quay House fits with that policy. The question then is whether or not the lease premium and new rent is best consideration in terms of the open market. Two independent professional valuers have been asked to report on the point and both are happy to confirm that the proposed terms represent best consideration for the term of years as requested, and bearing in mind the Council will continue to own the freehold.

29. Working with the Riverside Centre Limited represents a good local private/public partnership. The demand for space is continually growing.

30. By passing the responsibility of all repairs and maintenance of these assets to the Riverside Centre Limited the Council’s corporate building maintenance budget will have less liability.

31. If the Riverside Centre should fail in the future then the Council would have first opportunity to take back the property concerned and certainly influence its future use.

32. With either the current or proposed lease in place the Council could sell its freehold reversion or a long lease interest and attract a significant capital receipt.

33. With either the current or proposed lease in place, the Council could sell the freehold of Quay House which would attract a more significant capital receipt.

34. The question also arises whether Quay House is suitable for residential use. The regeneration of Newport Harbour has not been for the purpose of promoting residential development. Where the emerging planning brief accepts residential development it is for the purpose of enabling employment and public realm improvements. Generally, the brief promotes ground floor uses for employment, services and public access uses and not residential development. Applying this logically to Quay House results in a mixed use that would be difficult to achieve, in terms of both building division and viability. As such, the best use remains as offices.

35. Were Quay House to be residential the disadvantages would be, the need for private car access, loss of existing employment capacity, need for additional curtilage to provide amenity space and possible future conflict between occupiers and adjoining activities.

36. The open market value of Quay House as freehold offices with vacated possession is £ 70,000. If permission for residential use of the whole was granted, then the freehold value with vacant possession is £100,000.

RECOMMENDATIONS

37. Option (a) be adopted.

BACKGROUND PAPERS

38. Valuers Report.

39. Current Lease.

Contact Point : Tony Flower, ( 823263, e-mail: [email protected]

M J A FISHER Chief Executive Officer Strategic Director Corporate and Environment Services

R R BARRY Portfolio Holder for Resources