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Agenda Item 5

Item 5 LONDON BOROUGH OF WALTHAM FOREST Committee/Date:

Cabinet 15th September 2009

Title:

Arcade site development

Council Priority:

Create vibrant Town Centres

Directorate:

Environment and Regeneration

Report of:

Director - Development

Contact:

Paul Humphreys, Sam Neal

Phone:

0208 496 8079 or 0208 496 6753

E.Mail:

Paul.humphreys@walthamforest.gov.uk Sam.neal@walthamforest.gov.uk

Action required:

For Decision

Wards affected:

High Street, Hoe Street, Markhouse

Appendices:

None

Status:

Open

1.

SUMMARY 1.1.

2.

This report advises of the options available for the future of the Arcade site and seeks Cabinet approval to the recommended course of action.

RECOMMENDATION 2.1.

For Cabinet Decision 2.1.1. Cabinet is requested to authorise officers to proceed with a procurement exercise to identify a developer for a Leisure centre led mixed use scheme of development on the Arcade site. The Leisure Centre would replace the current indoor facilities at Pool & Track. St Modwen and other developers will be invited to tender. 2.1.2 To note that a recommended development partner and outline scheme proposal would be reported back to Cabinet for consideration and approval following the procurement exercise. That report would also indicate in more detail the proposed financial arrangements and would, if appropriate, seek approval for the financial package, which might include a proposal that the Council becomes funder for the development.

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3.

REASON FOR DECISION 3.1.

The significance of the site and its development, which is a key priority for the Council.

PROPOSAL 3.2.

The Compulsory Purchase Order for the acquisition of the Arcade site was made in 2003 and possession was taken in August of that year. The site was then the subject of demolition and clearance.

3.3.

The selection of a development partner (St Modwen plc) and completion of a development agreement for a mixed use scheme was completed in December 2007. The development agreement with St Modwen will continue to the end of December 2009 unless both parties agree to abandon the current agreement at an earlier date.

3.4.

Until the recent financial and property downturn a scheme had been evolving which included an 8 screen cinema, an 80 bed hotel, retail and restaurant space, with residential units above.

3.5.

The effect of the economic downturn has been that a scheme is no longer viable in the form originally envisaged for the following reasons: 3.5.1. A reduction in the region of 40% in commercial property values 3.5.2. Bank funding for developments of a speculative nature is extremely difficult to obtain. 3.5.3. The retail market has now become very selective about new space, and retailers are reluctant to commit to schemes without significant incentives or inducements 3.5.4. Private residential values have also seen significant reductions, and at present very little if any private housing is being constructed.

3.6.

All told these factors have combined to prevent a scheme being able to progress.

3.7.

In May 2008 Cabinet agreed that the Pool and Track facilities (not including the track) should be reprovided on a town centre site.

3.8.

Initial work undertaken with St Modwen indicates that a new Leisure Centre could be physically accommodated within a form of mixed-use development on the Arcade site.

3.9.

Although St Modwen have indicated that they could deliver such a scheme it would be necessary for the Council to undertake a new procurement exercise in order to meet EU procurement regulations. Such a process will ensure that St Modwen and other potential developers have an opportunity to submit proposals. Due to the importance of proceeding with the

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development of this key site, an accelerated process could be used in the tendering exercise. 3.10. St Modwen understand that procurement legislation requires the Council to tender this revised development opportunity and have indicated that they would be prepared to enter into a legal agreement with the Council which would enable such a tendering exercise to take place, notwithstanding the current development agreement, and which would not result in any financial liability falling on the Council. 3.11. If Cabinet does not wish proceed with a procurement exercise to include a new Leisure Centre in the scheme, no other proposal is likely to be financially viable until the commercial and residential property markets improve. Market commentators are not predicting an upturn until 2011 at the earliest. There is the option of extending the development agreement with St Modwen until this time, or if not pursued a tendering exercise for a new developer of the site (without a leisure centre) would then need to be undertaken (taking at least 6 months); after which the selected developer would commence design, consultation and seek occupiers and prelettings, given the need for risk mitigation. 3.12. The timescale for such a scheme could therefore be 4 years at the earliest to a start on site. 3.13. Works have been undertaken to the site to enable short term uses to be provided. This will ensure that the site can be of beneficial use to the Town Centre during the procurement period. 4.

5.

OPTIONS CONSIDERED 4.1.

Procure a developer for a Leisure Centre led development as part of a mixed-use scheme, which would allow proposals to be brought forward in the next 12 - 18 months.

4.2.

Defer development of the site for a significant period and awaiting the recovery of the financial and property markets. This option would lose current cinema and hotel interest, and put off indefinitely the time when a viable development may be possible. This is not recommended.

4.3.

Develop the site for housing alone. This is not recommended as such a development would not meet the Council’s regeneration vision for the Town Centre.

CONSULTATION 5.1.

Although St Modwen has previously undertaken consultation on their proposals, there has been no detailed public consultation at this stage on the inclusion of a Leisure Centre.

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6.

5.2.

The Council’s own property finance and legal officers have been supported by external specialist advice.

5.3.

External consultants are finalising a report on the land, which currently contains the Pool & Track facilities, together with the Town Hall and Colleges, allotments and playing fields. This review includes consultation with key stakeholders. This review considers how this significant land holding (held by the Council and the adjoining colleges) could become more fully utilised and provide an important resource for local residents, and provide a wide range of facilities.

5.4.

Significant further consultation will be undertaken with users (and potential users) of the Leisure facilities, if a decision to proceed with the procurement of a replacement is made

5.5.

Any scheme of development proposed for the Arcade site will involve significant pre-planning consultation and public consultation

IMPLICATIONS 6.1.

Financial 6.1.1 The current capital programme, as agreed by Cabinet on the 26th June 2009, proposes a leisure centre in Walthamstow town centre. This is to be funded by an allocation of £10m from the disposal of the Pool & Track site for a replacement facility within the Arcade development. This allocation is therefore not transferable to other projects. 6.1.2 The Prudential code allows the Council to decide on its own borrowing limits. These must take account of the authority’s financial position, Medium Term Financial Strategy (MTFS) and in particular affordability, as funding capital expenditure has an ongoing revenue cost to repay loan capital and interest. The MTFS has been developed in the context of significant funding challenges and consequently no assumptions have been made in respect of prudential borrowing, as it will be unaffordable.

6.2.

6.1.3 Therefore, any proposal, which requires the Council to be the funder for the Arcade development, must be robust enough to cover the full revenue cost of prudential borrowing without putting the Council at risk. Legal 6.2.1. The Public Contracts Regulations 2006 require the Council to tender the opportunity to deliver a scheme that would include a Council owned Leisure Centre because this would be a significantly different development from the scheme previously tendered.

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6.2.2. A new procurement process for the revised scheme would indicate (if approved) that the Council would consider becoming the funder for such a scheme, subject to careful financial review. The Council has the power under section 1 of the Local Government Act 2003 to borrow money for any purpose relevant to its functions or for the prudent management of its financial affairs. 6.2.3. In the current economic climate the European Commission has approved the use of the accelerated restricted procedure for the procurement of major projects which will benefit economies by a quicker distribution of public funds into the market. No definition of major projects is given but government advice is that the accelerated procedure may be used where a faster procurement will be of benefit to industry. 6.2.4. The Council will need a formal agreement with St Modwen, prior to the commencement of any procurement exercise, to ensure they would take no action against the Council for a breach of the current development agreement. 6.3.

Human Resources 6.3.1. None at present

6.4.

Health Impact Assessment 7.4.1. The provision of modern leisure facilities will also assist in meeting the Councils key objective of ensuring that residents are fit and healthy for work.

7.5

Equality Impact Assessment 7.5.1. A more detailed EIA will be undertaken once the details of any proposal are known. 7.5.2. An EIA has been undertaken for the temporary use. 7.5.3 All new facilities constructed will be fully accessible in accordance with Document M of the building Regulations, and those areas developed for Council services would meet the Councils own access standards. 7.3.4 The Arcade site is located at a key junction in the Town Centre and a mixed development scheme will seek to ensure that the widest range of services will be available to the communities of the borough in a very accessible location.

7.4 Climate Change Impact Assessment

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7.6.1. A mixed-use scheme of development would provide opportunities for energy sharing and the overall reduction of the carbon footprint created by the new development. 7.6.2. In taking forward any form of development or use the Council would seek to minimise the footprint. 7.

CONCLUSION 7.1.

An opportunity to deliver a Leisure led mixed-use scheme to currently exists. This opportunity may not be available in the future. Therefore it is recommended that Cabinet approve this report and authorise officers to undertake a procurement exercise.

Background Information Cabinet reports May and October 2008, and March 2009 Approval by the Chief Officer (required for posting on the Bulletin Board) This draft report is cleared for publication on the Cabinet Bulletin Board. Subject to: (a) Any comments of Portfolio-holders via the Bulletin Board; (b) Clearance by the relevant Portfolio-holder prior to inclusion on the Cabinet agenda; and (c) My comments as set out below (e.g. identifying data not yet available); I consider the report suitable for the Cabinet agenda. Comments: (if appropriate)

Date 27 August 2009

Signed: Director of Environment and Regeneration

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Approval by the Portfolio-Holder (before inclusion on the Cabinet agenda) I have cleared this report for inclusion on the Cabinet agenda. Signed .............................................. Portfolio Member for Investment and Enterprise

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Date .................................


Arcade Report