Strainstall proposed move to Somerton
Background of Strainstall
Strainstall has been based on the Island for nearly 40 years and are winners of the Chamber of Commerce Exporter of the Year 2002 and Business of the Year 2002. We are very much an Island business and our major assets are our Island based staff.
Summary of the Proposal
Strainstall will purchase 2 units at Somerton for £465k + vat from MJH Developments (MJH) and will sell it’s property at Denmark Road for £420k to MJH. Following legal completion on the sale/purchase, Strainstall will remain at Denmark Road until the unit at Somerton is fitted out (this will take at least 3 months as the units are just a shell).
All of the staff employed by Strainstall at Denmark Road will move to Somerton once the units have been fitted out. There is no logical reason for any other course of action.
Strainstall does not benefit from proceeds of the sale of Denmark Road other than by acquiring premises at Somerton.
Problem with Current s. 106 agreement
The planning permission to develop Denmark Road is not effective until Strainstall have moved into Somerton. The land at Denmark Road is not worth £420k until this planning permission is effective. MJH are not prepared to pay £420k for land which is not worth it at that time. The event of Strainstall moving into Somerton is outside of the control of MJH and they cannot therefore take that risk.
In the absence of revised wording on the section 106 , MJH have proposed onerous contract terms on Strainstall, which include significant bank guarantees. Strainstall is unable to accept these terms for 2 reasons:
1. It is commercially not acceptable.
2. We are just 2 years into an Management Buy Out, we are already committed to bank guarantees for our normal business activities and in addition, we are financing expansion (to which the move to Somerton forms and integral part).
Under the current wording, the deal will therefore fall through. Without this move to Somerton, Strainstall will be forced to stay at Denmark Road and will have to put expansions plans on hold. An inability to expand is likely to result in job losses.
Proposed Revised s.106 wording
The s106 needs to come into force at completion i.e. when Strainstall has committed £465k towards the cost of the Somerton site (our total costs will be circa £700k including fit out).
Strainstall’s Commitment / Reason to grant the suggested wording:
We understand that the Council require a commitment that the employment will be preserved on the Island.
· All of the funds from the sale of Denmark Road will be spent on the Somerton Unit. There will be no net proceeds for Strainstall to spend.
· The deal is structured so that the exchange of the two properties will either stand or fall together (they are entirely dependant upon each other). If all of the cash arising from the sale of Denmark Road is invested in Somerton, It will be impossible for Strainstall to complete the disposal without moving to Somerton. We cannot afford to do anything else.
· Strainstall is substantially owned and managed by Islanders many of whom have service in excess of 20 years. We are a people business and fully intend to continue trading on the Island.
· We need to move. The Denmark Road site is not big enough to cater for expansion plans and the location presents potential safety issues with deliveries.
· Given the nature and location of the Denmark Road building and the future car parking restrictions due to the redevelopment of the adjacent car park, in the absence of Strainstall, the premises are never likely to suitable for other employment related purposes. They are in a residential area, and most suited to that purpose.
PLEASE NOTE THAT MJH WILL PULL OUT OF THE DEAL IF THE COUNCIL DO NOT AMEND THE S.106 WORDING AT THE NEXT COMMITTEE MEETING (25.2.03), AND STRAINSTALL’S EXPANSION PLANS WILL BE CANCELLED.