To update Members on the Porthcawl Regeneration Scheme; advise that a proposal has been received from the Evans’ families, to sell to the Council their leasehold interest in Phase 1 – land at Salt Lake Car Park; present the terms of this proposal, and set out the consequential impact on the remainder of the Porthcawl Regeneration Scheme.  To advise members of the ‘due diligence’ that has been undertaken to date, and the further measures which will be put in place to protect the public interest; recommend that the offer be accepted; and seek agreement from Cabinet to present a report to Council for approval for a revised capital programme for 2017-18 to 2026-27.

The Corporate Director Communities presented an update on the Porthcawl Regeneration Scheme and advised that a proposal has been received from the Evans’ families, to sell to the Council their leasehold interest in Phase 1 – land at Salt Lake Car Park.  He advised Cabinet of the terms of this proposal, and set out the consequential impact on the remainder of the Porthcawl Regeneration Scheme.  He also advised Cabinet of the ‘due diligence’ undertaken to date, and the further measures to be put in place to protect the public interest. 

He reported that in 2006 the owners of development land in Porthcawl agreed to work jointly, by bringing together the freehold and leasehold interests which overlay substantial land holdings within the town.  The aim was to bring forward the land for sale, providing the owners with sale receipts to be split on a pre-agreed basis subject to minimum prices being achieved; and to deliver a clear planning context for disposal of sites for third party development.  Following the adoption of the Porthcawl Regeneration Supplementary Planning Guidance in 2007, land had been set aside for new homes within the overall area, plus major retail and leisure developments community provision, new road systems, land set aside for health provision, and other areas of public amenity, including new sea defences along Eastern Promenade and the Sandy Bay frontage.

The Corporate Director Communities reported that an Owners Agreement (OA) was signed in 2011 between the Council and the Evans Families, with the underlying principle being the disposal of land and all net proceeds would be split in a 60:40 proportion in the Council’s in favour (subject to minimum prices being obtained).  Phase 1 incorporated retail, community, leisure and housing uses would be the earlier phase for disposal.  Phase Two of the site (which was predominantly residential) would follow on at a later date.         

The Corporate Director Communities also reported on the disposal history of the land, in that in 2014, following the failure of the sale of the site to Morrisons (and bids for sale of the site in 2010 to Tesco / Chelverton), various offers were made to acquire the Council’s interest.  These were turned down as there was no market exposure (in terms of securing best consideration) and the nature of the offer did not meet either the minimum price requirement or the regeneration objectives of the Council.  In 2015 the parties then agreed to review the development proposals in light of the large scale food retailers retreat from the market and a new Master Plan was commissioned to support the existing Supplementary Planning Guidance.  However, the owners could not agree the final makeup of the overall development proposals.  In the summer of 2016 discussions on the Master Plan floundered, and the Evans’ subsequently proposed that the Council consider purchasing their leasehold interest within Phase 1.

He reported that within the terms of the OA the Council agreed to fund “necessary expenditure” such as planning costs, in order to enable the development scheme to proceed, on the basis that it would be reimbursed from the capital receipts generated from land sales.  He stated that no receipts had yet to be generated and that within the terms of the Owners Agreement the Evans’ are required to reimburse the Council on 5^th anniversary of the expenditure, commencing on the date of the Owners Agreement.  No payment had yet been received as this and related commercial matters had yet to be agreed.

The Corporate Director Communities explained the advantages and disadvantages of acquiring the Evans’ interest, and provided that this could be achieved on terms favourable to the Council, there was merit in this option as it would enable regeneration of the site to proceed.  He stated that a preliminary valuation was undertaken by an independent Property Agent, in order to establish the price range within which the Council could consider acquisition, and following this, a provisional offer was made by the Council in September 2017, with a short expiry date.  Terms had now been provisionally agreed to acquire the Evans’ interest on the heads of terms detailed.

The Corporate Director Communities also reported that as part of the terms for the purchase of the Evans’ interest, it would be necessary to amend the Owners Agreement.  He outlined the key changes necessary.  He also outlined the due diligence undertaken whereby the Council had consulted with the Wales Audit Office in relation to the steps it should undertake to ensure that it has followed due process and safeguards the public interest.  Two independent valuers had been appointed to consider and provide their advice on the market value of the land.  The Corporate Director Communities outlined the key risks and issues which had been considered, along with mitigation measures, prior to entering into the agreement. 

The Corporate Director Communities informed Cabinet that the capital programme included a scheme entitled ‘Porthcawl Infrastructure’ with a budget of £5.507 million.  He stated that this scheme approved in September 2012 was to fund the infrastructure works, with the cost being met initially from prudential borrowing until the Council secured the capital receipt arising from the sale of the land.  As such, this scheme is not cash-backed and cannot be used for another scheme without the guarantee of a resultant capital receipt to repay any borrowing.  A decision was still needed on the future use of the land, it was recommended that this scheme be removed from the capital programme and replaced at a future date with a revised proposal and associated costs and funding.  It was proposed that the repayment of the necessary expenditure of £330,000 would be treated as an earmark reserve to fund the future resourcing costs required to bring the site forward for disposal. He informed Cabinet that the cost of the transaction to the Council is £3,330,000 plus VAT (recoverable) of £666,000 and Stamp Duty Land Tax of £178,800, which totalled £4,174,800.

The Corporate Director Communities informed Cabinet that the terms are very specific and also time limited and that the negotiations are based on the recommendations to Cabinet and Council.      

The Cabinet Member Education and Regeneration in commending the proposal hoped that it would lead to a quality development on site which would complement the developments at Cosy Corner and the Jennings Building.  The Deputy Leader commented that this was an important milestone to deliver investment and regeneration in Porthcawl and that as this is a commercial investment by the authority it was vital for it to have return on investment.  The Leader stated that he was reassured at the robust process undertaken by officers including two independent valuations of the land value in the proposals and he thanked them for their part in the negotiations. 

 RESOLVED:           That Cabinet:-

(1)          authorised the Corporate Director Communities, in consultation with the S151 Officer and the Monitoring Officer, to:

(a)          Acquire the Evans’ families head lease and sub lease interests in Salt Lake Car Park, Porthcawl, at the price of £3,330,000, and terms set out in Appendix 1 of the report, and

(b)          Vary the existing Owners Agreement dated 11 March 2011 between the Council and the Evans families, on the terms outlined in paragraph 4.11 of the report.

agreed to submit the revised Capital Programme to Council for approval, as set out in Appendix 2 of the report.