Tower Road South - Office Development: Put/Call Option
- Meeting of Cabinet, Monday, 30th September 2019 10.00 a.m. (Item 38.)
- View the background to item 38.
Councillor Tony Jones introduced a report which sought the Cabinet’s approval to the Council entering into a PUT/CALL option with Peel Land and Property to enable Peel to nullify the risk of constructing Tower Road South (TRS), a speculative 3,116sq.m Grade ‘A’ office building on Tower Road South. From a Council perspective this major thoroughfare through Wirral Waters had been identified as providing significant growth opportunities.
The Cabinet was informed specifically that Peel’s construction of TRS delivered:
· A BREEAM Excellent rated Grade ‘A’ office building in the Four Bridges neighbourhood of Wirral Waters;
· Potential to create 280 gross direct and indirect jobs;
· 1 acre of brownfield land developed
· 150 college students assisted in their skills development and;
· Support for the development of the Mersey Waters Enterprise Zone by attracting new occupiers to Wirral Waters.
The Cabinet noted that the PUT/CALL arrangement worked by both parties entering into an option agreement that allowed for Peel to require the Council to purchase from them after an agreed period of time (in this case three years from practical completion of TRS) the building at the pre-determined purchase price (the PUT option) or for the Council to require Peel to sell them the property in the same timescale at the pre-determined price (the CALL option). The completed value of the building had been determined by a detailed scheme appraisal carried out by the Combined Authority as part of Peel’s application for SIF grant support for TRS. The triggering of the PUT/CALL option was not obligatory on either side and would have a definitive end date for accountancy purposes because, if during the three years post practical completion period, TRS was valued at a sum equal or greater than the PUT option price then the Council’s obligation to Peel immediately fell away. Notwithstanding this scenario and depending on valuation Peel could only trigger the PUT option at three years from practical completion of the building. The Council had, however, negotiated the right for it to exercise its CALL option anytime during the three years and without the obligation falling away. This meant that if market conditions strengthened over this period and the value of the completed development increased, the Council had the right to purchase the asset from Peel for the lower predetermined price.
Councillor Jones informed that the strategic case for the acquisition was set out in the report. However, the commercial details of the proposal were contained in the Business Case, attached as Appendix 1. This had been approved by the Investment and Change Board and was exempt from publication due to commercial sensitivity considerations under paragraph 3 Schedule 12A of the Local Government Act 1972. (Minute No. 44 refers.)
The report informed that there were a number of options available to the Council to secure the construction of TRS. These were set out in Appendix 1, the Business Case.
Councillor Tony Jones reported on the need for investment in Birkenhead and Wirral as a whole. He informed that it was crucial in ensuring that the Council was sending out the right signals that ‘Wirral was open for business’. It was expected that the Tower Road South site at Wirral Waters would be one of the first to kick-start regeneration and this would prove to be really significant. The Council now had to capitalise on the opportunity and do all it could to make sure that there was a substantial confidence in the scheme. Financially and from a Council perspective this was really important. The arrangement not only allowed for the regeneration of Tower Road South but also allowed the Council the option of purchasing the building within three years of completion for less than its potential value, at the time.
Councillor Anita Leech thought that it was very important that the Council did kick-start regeneration as it was vital to attract inward investment and to boost the Wirral economy.
Councillor Stuart Whittingham informed that he was pleased to see so much Grade ‘A’ office space coming forward which was very much needed in Wirral as a whole.
(1) the Council seek to enter into a PUT/CALL option with Peel Land and Property for the reasons outlined in the Business Case and on terms consistent with the advice contained in Cashman and Wakefield so as to ensure compliance with the rules on State Aid; and
(2) delegated authority be given to the Director of Housing and Economic Growth in consultation with the Director: Governance and Assurance to negotiate and agree the terms of the Put/Call option with Peel Land and Property.