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Agenda item
Cornwallis Street Hotel Part 1
Decision:
1. That Cabinet agree to sell the land at Cornwallis Street to Whitbread PLC on the proviso that the Premier Inn hotel is built at their expense, within a reasonable timeframe (to be confirmed subject to legal due diligence) and that the council is released from all liabilities contained in the current agreement.
2. That the Chief Executive, Chief Legal Officer and Chief Finance Officer be delegated authority to conclude the legal details of the new agreement (as per the requirements set out in the Part II confidential report) with Whitbread Plc in consultation with the Leader of the Council and the Finance Portfolio Holder.
Minutes:
The Chief Executive presented a report to recommend as an alternative to the current legal agreement with Whitbread Plc, that the land at Cornwallis Street be sold to Whitbread Plc with the caveat that they build the Premier Inn hotel at their cost and release the council from all previous agreements.
In September 2023 councillors were asked to agree an increase in the capital budget for the project, with the cost of the build work exceeding the agreed capital programme budget. Following the cabinet meeting in September 2023, and considering the council’s financial position, negotiations were reopened with Whitbread Plc to seek an alternative agreement which will see a much-needed hotel built, but without the need for council investment. The Local Government Association, Chartered Institute of Public Finance and Accountancy (CIPFA) and external auditor all recommend this approach.
The council has reached an in-principle agreement which would involve selling the land at Cornwallis Street to Whitbread Plc and them building the hotel at their own cost. This would release the council from the existing agreement and improve the council’s financial stability.
Councillor Patmore asked the cabinet to agree that once the deal is finalised the previous decision to enter into the original agreement should be scrutinised to learn lessons for future projects. The Chief Executive said she had already committed to that once the proposed agreement is finalised.
Councillor Carr asked for the cost of the project to date including the losses from the income of the car park and whether the new agreement will include reduced business rates. The Chief Finance Officer replied that all costs will be included in the capital programme. The site was originally expected to be developed much sooner, and that’s why the car park was closed.
Councillor Beaney said he had calculated from publicly available information on the council website that between January 2021 and May 2023 over £499,000 had been spent on the project. Councillor Beaney asked if the total cost to date could be confirmed. The Chief Finance Officer replied that the financial monitoring report shows current year costs for capital projects, likewise the upcoming budget report will include details of costs for the year to date and the lifetime of the scheme.
Councillor Beaney asked why the land was not for sale on the open market to achieve best value. The Chief Executive replied the council is still in an agreement to build a hotel on the site, therefore the land is not available for sale on the open market.
Councillor Beaney asked if the Chief Executive had sight of the original agreement before it was signed. The Chief Executive replied that she didn’t.
Councillor Carr asked about right to light compensation for residents. The Chief Legal Officer confirmed that this was being looked into.
Councillor Hilton asked that when negotiations are completed a clear timescale for the work be shared publicly.
Councillor Willis proposed approval of the recommendations, seconded by Councillor Roark.
RESOLVED (unanimously):
1. That Cabinet agree to sell the land at Cornwallis Street to Whitbread PLC on the proviso that the Premier Inn hotel is built at their expense, within a reasonable timeframe (to be confirmed subject to legal due diligence) and that the council is released from all liabilities contained in the current agreement.
2. That the Chief Executive, Chief Legal Officer and Chief Finance Officer be delegated authority to conclude the legal details of the new agreement (as per the requirements set out in the Part II confidential report) with Whitbread Plc in consultation with the Leader of the Council and the Finance Portfolio Holder.
Reasons:
1. The council entered into an agreement in 2021 to build and lease a hotel on the site at Cornwallis Street.
2. The council tendered for the build work and following two procurement exercises, the costs of the build work exceeded the estimated capital programme budget.
3. Officers have negotiated with Whitbread PLC (in the light of the council’s financial challenges bought about by the housing crisis and requirement for the council to spend over £5.5m p.a. on temporary accommodation), an alternative agreement which enables the much-needed hotel to be built without the need for council investment.
4. The council is at present still legally bound by the original agreement which contains significant financial penalties if the hotel is not built within the specified timescale.
5. The existing agreement places significant financial and potential legal risks on the council’s sustainability and therefore the new agreement is strongly recommended as a solution.
Supporting documents:
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