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Cabinet 8 July 2013

Future Brixton: Somerleyton Road Project Coldharbour Ward

Cabinet Portfolio: Report authorised by:

Cabinet Member for Housing and Regeneration: Councillor Pete Robbins

Executive Director, Housing, Regeneration and Environment: Sue Foster

Executive summary

Lambeth Council’s Future Brixton programme is about positive change to the lives of local people. The Somerleyton Road project is one of the first to come forward as part of Future Brixton and is being developed in partnership with the local community and in particular two local organisations; Brixton Green and the Ovalhouse Theatre. The report sets out a series of proposals and recommendations for Somerleyton Road. These have been worked up in partnership with local people and local groups. The proposals work on the principle that we use the Council’s land assets along Somerleyton Road to deliver positive and lasting change to the local area. The report represents a key milestone for the project and contained within is a recommended Delivery Strategy and Procurement Strategy which clearly set out how the project will move forward, how local people and local groups can continue their involvement and how decisions are to be made. The project represents an outstanding opportunity for local people and local groups to work alongside the Council to bring about transformational change to this exciting part of Brixton. There is a major aspiration for good quality design and for key elements like the arts and cultural facility to be clearly accessible and visible in distinctive buildings. The arts and cultural facility will be owned and managed by Ovalhouse and the proposals include employment and training opportunities, workspace for local businesses and an aspiration that a significant proportion of new homes built along Somerleyton Road will be affordable to local people. There is also a major aspiration for the community to take on a long term stewardship role in the new development. Summary of financial implications

The proposals outlined in this report work on the principle that the Council’s land assets along Somerleyton Road are used to deliver positive and lasting change to the local area. The Somerleyton Road project will be self-financing and whilst there will be upfront costs (such as project delivery costs and costs related to achieving vacant possession of the site) these will be reimbursed to the Council via a capital receipt. A core criterion for evaluating the bids, which will be coming forward as part of the procurement process for a development partner, will be a financial assessment to ensure the Council achieves best value for its asset. Recommendations

(1) To note the feasibility study produced by Pollard Thomas Edwards architects to assess the capacity of Somerleyton Road.

(2) To agree the procurement of a development partner using either the GLA’s London Development Panel or a Council run Restricted Procedure.

(3) To delegate authority to the Executive Director for Housing, Regeneration and Environment in consultation with the Cabinet Member for Housing and Regeneration to approve the Invitation to Tender documents and to shortlist the bidders prior to issuing the Invitation to Tender.

(4) To note the accompanying Part II report

(5) To note the estimated project delivery costs.

(6) To delegate authority to the Executive Director for Housing, Regeneration and Environment and Head of Legal Services to either purchase 16-22 Somerleyton Road or enter into an Option Agreement that secures the inclusion of the property at 16-22 Somerleyton Road as part of the proposed development site.

(7) To agree the making of a Compulsory Purchase Order for the development site outlined in red on the plan at paragraph 2.2 to ensure delivery of the project as a comprehensive development.

(8) To note the draft Heads of Terms at Appendix 1 of the Part II report between the Council and Christ Church Oxford United Clubs trading as the Ovalhouse Theatre and to support their application to the Arts Council for grant funding to support the build costs of the new arts and cultural facility.

(9) To delegate authority to the Executive Director for Housing, Regeneration and Environment and Head of Legal Services to enter into a legal agreement, based on the draft Heads of Terms, with Christ Church Oxford United Clubs trading as the Ovalhouse Theatre to commit them to disposing of their existing site in Kennington, as part of their contribution to the building of the new theatre and for the Council to grant them a long-lease of the proposed new Theatre on completion of construction.

(10) To delegate authority to the Executive Director for Housing, Regeneration and Environment and Head of Legal Services to enter into Agreements of Intent or Agreements to Lease with tenants for the future development.

Consultation

Name of consultee

Department or Organisation Date sent Date response received

Comments appear in report para:

Internal

Sue Foster Executive Director of Housing Regeneration and Environment

24.06.13 26.06.13 Throughout

Alison Young Divisional Director Planning, Regeneration and Enterprise

11.06.13 14.06.13 Throughout

Rachel Sharpe Divisional Director for Housing 11.06.13 14.06.13 Throughout

Hamant Bharadia Finance Business Partner 11.06.13 12.06.13 Throughout

Greg Carson Governance & Democracy 16.06.13 17.06.13 71. to 7.9

Christian Fleming Corporate Finance 23.05.13 18.06.13 6.5

Gary O’Key Governance and Democracy 11.06.13 12.06.13 Throughout

Mike Pocock Divisional Director for Education Estates and Capital Projects

23.05.13 28.05.13 Throughout

Adrian Smith Divisional Director for Culture and Communities

23.05.13

Cllr McGlone Cabinet Member for Finance and Resources

13.06.13

Cllrs Heywood, Parr and Anyanwu

Ward Councillors 13.06.13

Cllr Robbins Cabinet Member for Housing and Regeneration

10.06.13 27.06.13 Throughout

Cllr Prentice

Cabinet Member for Culture and Leisure

13.06.13

External

Stephen Jordan Brixton Green 13.06.13 12.06.13 Throughout

Deborah Bestwick Ovalhouse 13.06.13 12.06.13 Throughout

Report history

Decision type: Key decision: reason

Key decision (first entered on Forward Plan 7 June 2013)

2. Expenditure, income or savings in excess of £500,000; AND 3. Meets community impact test

Authorised by Cabinet member:

Date report drafted:

Date report sent: Report deadline

See above 16.05.13 16.05.13 17.06.13

Report no.: Report author and contact for queries:

86/13-14 Neil Vokes, Regeneration Project Manager

020 7926 3068; nvokes@lambeth.gov.uk

Background documents Future Brixton Masterplan (2009) Brixton Green’s ‘Delivering a Key Programme of Future Brixton’ (2011) Draft Brixton SPD (2013) Lambeth Council: Enabling Community Asset Ownership and Management (October 2012) Appendices

Future Brixton: Somerleyton Road Project – Feasibility study, PTEa 2013 Accompanying Part II report - reason for Exemption from Disclosure The accompanying part II report is exempt from publication by virtue of the following paragraph of Schedule 12A of the Local Government Act 1972: 3. Information relating to the financial or business affairs of a particular person. (Including the authority holding that information).

Future Brixton: Somerleyton Road Project

1. Context

1.1 The council is an enthusiastic partner in the transformation of Somerleyton Road. It shares the community's aspirations to provide as much affordable housing as possible and to create local jobs and training opportunities. The Council will work together with the community to lead the changes in Somerleyton Road now and to have a longer term management role once it is built.

1.2 The Brixton SPD 2013 provides an overarching framework for this area of Brixton and is based on consultation and engagement carried out initially by the Council (as part of the Future Brixton Masterplan 2009) and more recently by Brixton Green (as part of Brixton Green’s ‘Delivering a Key Programme of Future Brixton’ 2011).

1.3 Somerleyton Road is identified within the Brixton SPD 2013 as a major development opportunity and one which could transform this part of Brixton. Major investment here would deliver new housing, new community infrastructure and provide new employment and training opportunities for local people and reduce crime. In addition, the SPD identifies the northern end of Somerleyton Road to be the location of a major new arts and cultural facility.

1.4 The Council has undertaken to deliver this project in partnership with two local organisations, Brixton Green and the Ovalhouse Theatre. The principle behind the development is that the Council’s land assets along Somerleyton Road will be used to generate either income, which can then be invested back into the local community, or to deliver much needed social infrastructure such as new affordable homes.

1.5 Each of the three partners has brought to the project different strengths, skills and areas of expertise, resulting in a strong partnership and a stronger project.

1.6 The Ovalhouse Theatre has thrived as a radical theatre and pioneering youth arts organisation for 50 years. Based in Oval, it has been looking for a suitable site in Brixton for more than eight years and sees Somerleyton Road as an ideal site for its lively programme of activities for all ages. It is in the heart of Ovalhouse’s “catchment area”. Ovalhouse is the freeholder owner of their current site; disposal of this site will be used to contribute to the construction costs of the new theatre.

1.7 Brixton Green is a registered community benefit society set up four years ago to make it possible for all sections of the community to come together and make a positive and informed contribution to the redevelopment of Somerleyton Road. There are now over 1,000 people who live or work in Brixton who are shareholders and are supportive of the vision. Brixton Green is a consultative body affiliated with local organisations that provides a wide community base for discussions over the future of Somerleyton Road.

1.8 This partnership shares a vision for “a truly mixed development to support and respond to community life along Somerleyton Road. Adding to Brixton’s attractions, it could include more homes, work spaces, and possibly health and

education facilities. It could also include a new cultural facility on the corner of Coldharbour Lane that would bring theatre performances and activities for all ages, along with training and community spaces.” (Somerleyton Road Project Vision).

1.9 The project is being delivered in accordance with the cooperative values of Lambeth Council and the project will result in a significant contribution to key strategic areas including Housing, Arts and Culture, Employment and Enterprise, Health and Well Being, Community Safety and Education.

2. Proposals and reasons

2.1 The proposal is for the Council to procure a development partner with the requisite skills to deliver a major, mixed-use development along Somerleyton Road.

2.2 The Somerleyton Road development site is a 1.5ha site located in the Coldharbour Ward of the London Borough of Lambeth. Approximately 75% of the site is within the ownership of the Council; most of the Council land is owned as freehold, with the part occupied by Carlton Mansion being held by the Council on a long-lease by the Council from Network Rail. A private business owns part of the proposed development site mid-way down Somerleyton Road. London Underground Ltd (LUL) own a site occupied by a sub-station between the Council owned land and the privately owned land. For operational reasons LUL are unable to release this land; although they are willing to explore means of improving the appearance of the site as part of the development scheme. The site is bordered by Somerleyton Road on the eastern side, Coldharbour Lane on the northern side, the overland railway to the west and the Guinness Trust estate to the south. The only access to the site from the west is under the railway viaduct via the Somerleyton Passageway.

Red line plan of the Somerleyton Road site:

2.3 What sets this project apart is the partnership with local people and local groups, sharing information and working together to see how the Council’s land assets along Somerleyton Road can best be used for the benefit of the communities living and working in Brixton.

2.4 In order to crystallise what can be achieved on Somerleyton Road further design work was needed. The Council commissioned Pollard Thomas Edwards architects to provide architectural and design support for the project. Their remit was to support the Council, Ovalhouse Theatre and Brixton Green in developing a feasibility study for Somerleyton Road which would deliver substantial benefits for the local community as well as be acceptable in Planning and viability terms.

2.5 In order to understand what would be viable, the Council commissioned cost consultants to run development appraisals. The viability assessment work

demonstrated that the base scheme as set out in 2.10 of this report is achievable without a capital contribution from the Council.

2.6 In addition to the base scheme, there are a range of additional benefits that the community would like to see delivered as part of this project, and therefore we aim to crystallise as much of this as possible during the drafting of the tender documents and then use the procurement process to explore how these additional benefits can be included without any detrimental effect on the viability of the scheme.

2.7 The PTEa feasibility study was developed over a period of several months with a series of design workshops held in the temporary school on Somerleyton Road. Representatives from Southwyck House, Carlton Mansions, Moorlands Estate, Brixton Society and the Mural Preservation Society all attended.

2.8 It is important to note that the feasibility study does not have any formal planning status; however, it sets out a clear vision and a realistic capacity for the site. The feasibility study demonstrates to both the Council and potential development partners that the extent of development is financially viable and acceptable in planning terms. The involvement of Brixton Green, Ovalhouse and the local community as well as key departments from within the Council (including Planning) in preparing this feasibility study also gives greater confidence that the scheme will deliver the benefits we want to see.

2.9 The feasibility study (Appendix 1) will therefore be used as a basis for procuring a development partner. The scheme is not fixed and it is likely that it will be further developed and improved upon over the coming months through further soft market testing, community workshops and feedback from Council departments.

2.10 The base scheme is as follows:

• 280 residential units;

• 60% private and 40% affordable;

• 2,500 m2 arts and cultural community facility (to be owned and managed by Ovalhouse);

• 1,300 m2 workspace / art studios (to be managed by Ovalhouse);

• 2,000 m2 commercial space (to be managed by a trust);

• Renovation of the Nuclear Dawn Mural and the front façade to Carlton Mansions – with the rear of Carlton Mansions being either rebuilt or renovated as workspace / art studios depending on building survey and feasibility work.

Bringing Ovalhouse to Brixton

2.11 The feasibility study includes a proposal for a new, purpose built, arts and cultural facility (circa 2,500 m2) situated at the northern end of the site at the junction of Somerleyton Road and Coldharbour Lane. The facility will include two

theatres, rehearsal rooms, space for community activities as well as a café. It is proposed that the building will be owned and managed by Ovalhouse.

2.12 A further 1,300 m2 of commercial space will be managed by Ovalhouse on a long term income sharing arrangement with the Council. This income sharing arrangement will help secure the long term viability of the theatre. The Council should be aware that there will be an opportunity cost as a result of the loss of revenue arising from this income sharing arrangement.

2.13 The design of the theatre will be integral to the overall success of Somerleyton Road as it will be situated in a prominent position, adjacent to the retained parts of Carlton Mansions and opposite the locally listed laundry. The design will create an outward looking building which will revitalise this northern end of Somerleyton Road and encourage people to travel along Somerleyton Road to some of the other commercial and community uses. It will bring life and activity late into the evening which will bring the additional benefit of making the area safer for the entire community.

2.14 Ovalhouse will need to control the layout and appearance of the theatre and therefore the assumption is that they will novate their architects to work with the successful development partner and their appointed architects in bringing forward the detailed plans for the theatre element of the development.

2.15 The intention is that once the new arts and cultural facility is completed, Ovalhouse will move their operation from Kennington to Brixton and the site in Kennington will be disposed of as part payment to the Council for the building of the new theatre. The value of the existing freehold site will therefore form an important contribution to the viability of the whole redevelopment.

Housing which is affordable for local people

2.16 The consultation to date has highlighted affordable housing as one of the key issues for Brixton. There are a number of sites along Somerleyton Road which could be transformed and used for much needed new housing. There is a shortage of housing in London and Lambeth has a particular shortage of affordable family sized homes. Key to meeting the aspirations of the local community is ensuring that as much of that new housing as possible is affordable to local people.

2.17 The aspiration therefore is that a significant proportion of the rented affordable housing will be at Target Rent levels rather than at Affordable Rent levels. Target Rents are lower than Affordable Rents and are calculated using a formula which takes into account the value of the property in January 1999, the number of bedrooms and the earning levels in the area for manual jobs. By providing more homes at Target Rent levels there will be an opportunity cost to the Council and this will impact on other elements of the project.

2.18 The Council will ensure that the quality of the housing is very high and therefore a detailed specification for the affordable homes will be produced and this will focus in particular on space standards, storage and sustainability.

2.19 The current feasibility study and the viability assessment on that feasibility study assume that the affordable housing will be transferred to a Registered Provider. The cost for the Council to retain the affordable element is approximately £10m to £12m; at present the development does not generate enough income for the Council to fund this. If the new affordable units are to be owned by a Register Provider then the Council will be involved in their selection along with the development partner.

2.20 Innovation will also be encouraged and there is an aspiration for the new development to help support a strong community along the street. One approach raised at the Housing topic deliberative workshops run by Brixton Green is for some of the intermediate homes to be a form of self build; whereby the development partner builds the structure of the building (to a defined specification) and people buy the shell of their property and then complete the interior themselves, providing a deeper sense of investment in the area. The model would need to be market tested and a better understanding of what the opportunity cost might be of pursuing this as an option before a commitment could be made.

2.21 Another innovative approach being considered is that of a rental model whereby rather than having a mixture of private sale and affordable housing, the 280 properties are all for rent. The model allows for flexibility over the rent levels and therefore it may be possible to have a flexible rent policy, specific to the housing needs of the local area. This approach has the potential to deliver more affordable housing and to provide different rental options such as market rent, target rent and rental deposit schemes – enabling residents to put money aside for a deposit to be drawn down in the future.

2.22 The rental model would also enable an easier route to creating a cooperative housing structure for Somerleyton Road with the entire site remaining in the Council’s ownership or that of a housing cooperative.

2.23 The model is described in more detail in section 3.5 of this report. There will be a workstream to explore the feasibility of applying this model to Somerleyton Road and this will include an open dialogue with local residents and stakeholders. A decision on whether to consider this model will need to be taken by the Council prior to the commencement of the procurement process for a development partner

Carlton Mansions and the Nuclear Dawn Mural

2.24 Carlton Mansions is located on the Coldharbour Lane end of the site and has the locally listed Nuclear Dawn mural on part of the eastern flank-wall.

2.25 The Nuclear Dawn Mural and the front façade of Carlton Mansions will both be renovated and refurbished and the development partner will be required to undertake these works as part of the development.

2.26 The feasibility study proposes that the building is transformed into work space units which could house artist studios and small business units. This will represent a cost to the project as capital works will be required to the building and there will potentially be revenue implications.

2.27 The building is currently part of the Council’s Short Life programme.

A long term stewardship role for the Community

2.28 A key aim of the project is to put in place a structure which would enable the community to take on a long term stewardship role in the new development. The form that this takes will require further work and the involvement of the development partner as they would be required to assist with the setting up of the structure. Models being explored include that of a Community Land Trust or of a Housing Cooperative; whereby each resident in the new development would be a Member of the Community Land Trust and the Community Land Trust would own the freehold or long leasehold of the site.

2.29 There is a clear commitment from the Council to deliver cooperative housing in the borough and further work will be undertaken to see how there can be cooperative housing on Somerleyton Road. Again this will need to be tested in the market place to ensure we have a scheme which is attractive to potential development partners and is deliverable.

2.30 The consultation has also demonstrated a clear desire by the local community to be able to influence the types of non-residential uses on the site and therefore further work will be undertaken to explore the possibility of some form of trust managing some of the commercial space.

2.31 The feasibility study includes more than 2,000 m2 of space to be used for commercial, retail or community use. The project aims to meet community aspirations for contributing uses and to manage the risk associated with any additional space. A proportion of the rents could be retained by a community

development trust and be used to address local concerns through practical projects and activities. The community development trust would work in partnership with statutory and voluntary providers to make their services more accessible to the local community, applying for and securing funding for their own programmes. To date significant work has been undertaken with Brixton Green and Ovalhouse as to potential users for some of the commercial space and this will be developed further. More work will be undertaken to develop a clear vision and business case for the community development trust.

2.32 Cabinet Members should note that there will be an opportunity cost as a result of the loss of revenue arising from transfer of the ownership of the freehold or leasehold to the community development trust. This should be measured against the monetised value of the social impact and benefits, as part of an Invest to Save approach. Further work is required to monetise the social impact and benefits.

Use of Commercial, Retail and Community Space

2.33 As referred to in 2.22 and 2.23 above, in addition to a new arts and cultural facility and new housing there will be 2,000 m2 of flexible space. Discussions have focused on bringing in a mix of uses, all of which would serve the local community and are financially viable and can be run by credible operators; however, some would be seen as income generators which could then cross subsidise less profitable uses. The proposals to date have included the following:

• A catering and hospitality school;

• A neighbourhood store and pharmacy;

• A TV / Radio Station;

• A dentist;

• Work space / Artists studios;

• Wellbeing and enterprise centre;

• Children’s nursery for 0-2 year olds;

• Budget gym; and

• Printing workshop;

2.34 Each of these uses will need to be a credible operator, be tested for viability and justified within the context of the overall development.

2.35 As part of the work to establish the community trust, a detailed business plan will need to be produced, and this business plan will need to test the above uses in a commercial environment, and explore whether it is appropriate for those uses to be included as part of the proposed development.

2.36 Alongside the business plan will be a clear vision for the community trust which would include the geographical area that it will cover, its membership, governance structures and the types of work it will engage in.

3. Delivery Strategy

3.1 The recommended delivery strategy for the Somerleyton Road project is for the Council to procure a development partner with the necessary skills, expertise and demonstrable track record to deliver successfully in partnership the required outcomes for the Somerleyton Road project.

3.2 There are currently two models which are being considered for the Somerleyton Road project and the procurement process will be designed to allow bids to come forward using both approaches.

3.3 The first model is the traditional development partner model whereby the Council will enter into a development agreement with the successful development partner. The development agreement will document the minimum requirements for the project which have been worked up in consultation with community partners as well as other provisions to protect, as far as possible the interests of the Council, and to secure the completion of the proposed development.

3.4 The development partner will be responsible for taking the scheme to detailed planning, financing the costs of the development and taking the risk for the sales of the private units. In order to enable the sale of the private units the development partner will be offered a long leasehold interest in that part of the development site where private housing is proposed.

3.5 The second model being considered is the newly emerging rental model. This is based on an agreement between the local authority, a funder and a development partner / contractor. The funder finances the project and in return is paid a rent over a period of 40 to 60 years. This rent is paid out of money earned from the letting of both the affordable and private rental homes. The model enables the Council to retain ownership of both the affordable and the private homes and, once the original loan has been re-paid, the land and the buildings revert back to the full ownership of the Council.

3.6 Further work is required to investigate which of the two options best meets the aspirations of the project.

3.7 For the project to be successful the Council will need to provide vacant possession of the site to enable regeneration to take place. Vacant possession could be provided in phases. Set out below is the Vacant Possession strategy:

Site Description Date Vacant Possession to be achieved

Carlton Mansions Carlton Mansions is part of the Council’s Short Life programme.

tbc

City Heights Children and Young People service have an identified use for the temporary school up

Sept 2014

temporary school until Sept 2014 for the use of the new E-ACT City Heights Academy.

The project has built in flexibility to enable the temporary school to remain until May 2015 should CYPS require to extend their use of

the building.

6 Somerleyton Road

The current lease expires in May 2013 and will not be renewed. Once the kitchen is

vacant, the recommendation is to secure the premises and demolish the building in advance of a development partner being

procured.

May 2013

10 Somerleyton Road

The Council will work closely with Lambeth and Southwark Community Transport to find them a suitable, alternative location. There is a break clause in the lease which the Council will exercise although agreement may be

reached to allow them to remain up until the time when the site is needed.

May 2015

16 – 22 Somerleyton Road

A private business. The Council will begin negotiations with the owner of the business to agree terms for either the purchase of the site Or inclusion of the site within the development by way of an option that shares risk and return with the site owner.

May 2015

Angela Davis Depot

The Angela Davis Depot is currently used by the Council to maintain and clean refuse trucks. Whilst the depot provides a necessary service, its location next to residential is not ideal. The depot is willing to move as long as a suitable alternative location can be found. More work is being done to identify a suitable site for relocation.

May 2015

3.8 It is important that the Council de-risks the scheme as much as possible in order to obtain the most competitive bids possible so that the land assets can produce more benefit for local people. The report therefore recommends that officers negotiate terms either to purchase the freehold interest in the property at 16-22 Somerleyton Road or to agree other terms for inclusion of the site within the development site and take the necessary steps to secure vacant possession for the Council-owned sites.

3.9 Whilst the Council will aim to secure vacant possession through negotiation; a Compulsory Purchase Order (CPO) will be sought to underpin the Somerleyton Road project to ensure that the Council can offer vacant possession of the entire

development site to the selected development partner. It is highly likely that all the developers bidding for the development opportunity will request this as a condition precedent within the development agreement. To give the comfort that bidders will require to ensure the Council will exercise its powers to seek a CPO, this report seeks Cabinet authorisation for the making of the CPO.

3.10 A report will also be brought back to Cabinet seeking agreement to appropriate the site for planning purposes. Again, it is highly likely that all the developers bidding will request this as a condition precedent.

3.11 The Council will further de-risk the scheme by undertaking the following surveys:

• Topographical survey;

• Underground services survey;

• Arboricultural survey; and

• Carlton Mansions building survey.

3.12 The budget identified at paragraph 6.1 includes amounts to pay for the above surveys.

3.13 Ovalhouse will also be seeking to make an application to the Arts Council for funding which will support both the design costs of the new theatre as well as the build costs.

3.14 It is proposed disposal of the existing Ovalhouse Theatre site in Kennington will be secured by a separate agreement between the Council and the Ovalhouse Theatre. This separate agreement will also include provisions to control and manage the total cost of building the new theatre. In addition the agreement will include provisions to enable Ovalhouse to drive the detailed development of the arts and cultural elements of the redevelopment to ensure that the community benefits that will be derived from its programmes can be maximised.

3.15 From the standpoint of the continuing viability of the theatre it is equally important that future running costs are minimised (for example, the rent payable on the long leasehold granted by the Council will be a peppercorn and service charges will be at the absolute minimal level) and opportunities for revenue generation (for example, the letting of space to creative businesses and other community organisations) are maximised.

3.16 Secretary of State approval will be required if the land is disposed of for an amount that is more than £2 million less than ‘best consideration’, which is defined by RICS as “the amount that would be received for a disposal of a property where the principal aim was to maximise the value of the receipt.” This ignores the social and economic long-term value. The initial advice is that this consent will have to be sought once the development partner is appointed and the development agreement signed, subject to this consent being obtained.

3.17 Set out below is the delivery timetable for the project:

Milestone Date

Contract Award – Development Partner 28th February 2014

Secretary of State Consent (s123) February 2014 to August 2014

Development Partner submits planning pre-application

5th May 2014

Detail planning application submitted 3rd November 2014

Planning Committee 4th May 2015

Vacant possession of site completed July 2015

Start on site – Phase 1 – Northern end of Somerleyton Road

August 2015

Phase 1 completed March 2017

Start on site – Phase 2 – Kennington site and southern end of Somerleyton Road

May 2017

Phase 2 completed Nov 2019

4. Procurement Strategy

4.1 The Council is bound by European Union public procurement law and in particular Public Contract Regulations 2006 (as amended). This provides a clear framework in which the procurement of a development partner must be carried out.

4.2 In assessing the most appropriate procurement route for the project a workshop was organised by the Council. The GLA, Brixton Green and Ovalhouse Theatre, as well as the Council’s external legal and financial advisors, attended this workshop. The workshop focused on three procurement options: Competitive Dialogue, Restricted Procedure and the London Development Panel.

4.3 The preferred route by which the Council will procure a development partner is by using the GLA’s new London Development Panel (LDP). The LDP is a multi-supplier framework panel of Housing developers, procured by the GLA as a framework strictly in compliance with OJEU to deliver housing and associated infrastructure. The LDP offers an alternative to a full OJEU procurement by the Council.

4.4 The benefits of the LDP are that the framework panel consists of 25 pre-qualified high quality housing developers, procured specifically to address the unique housing delivery challenges in Greater London. The LDP removes the need to run a Pre-Qualification Questionnaire and full tender evaluation and as a result should result in a reduction in procurement costs. While all of the LDP members

will likely need to sub-contract specific elements of the scheme (for example theatre construction) this is permitted under the framework.

4.5 The GLA estimates that the procurement timetable can be reduced from a minimum of 6-9 months to less than 3 months.

4.6 The Government Procurement Service estimates that an average of £70k - £100k can be saved using a framework rather than undertaking a full OJEU procurement procedure.

4.7 Initial soft market testing has been carried out with an advertisement placed on the Council’s website. The soft market testing focused on i) procurement strategy and ii) delivery strategy and in particular focused on cash flow issues relating to the new arts and cultural facility as well as gauging market interest in the site. The results of the soft market testing have shaped the recommendations within the Cabinet report.

4.8 Set out below is the procurement timetable for the project:

Milestone Date

Workshops to complete the specifications for key requirements to be included in the tender documents

May 2013 to September 2013

Cabinet approval to commence procurement of a development partner

8th July 2013

Expressions of Interest sought 5th August 2013

Sifting Brief sent to bidders 19th August 2013

Submission of Sifting Brief Tender returns

13th September 2013

Evaluation completed and bidders shortlisted

7th October 2013

Invitation to Tender sent to bidders 14th October 2013

Direction of travel meetings 28th October to 15th November 2013

Scenario testing 18th to 29th November 2013

Submission of Final Tenders 13th December 2013

Evaluation completed 27th January 2014

Report to Cabinet on appointed developer, appropriation and making the CPO.

April 2014

Alcatel standstill period for containment of risk (10 working days)

May 2014

Contract Award May 2014

4.9 The challenge for the Council is to ensure that as many of the aspirations of the local community as possible are included in the development, with the requirements being secured through the development agreement that will in turn ensure they are delivered by the development partner.

4.10 In order to achieve this the following steps will be taken:

• The feasibility study will provide the bidders with guidance as to what the Council would deem as acceptable development on the Somerleyton Road site. The feasibility study will be developed further and key requirements clarified as part of the bidding process .The feasibility study has been to Major Cases and the key relevant policies around parking, affordable housing, sustainability, land uses, public/private amenity space, open space will be added to the feasibility study to provide planning guidance;

• The bidders will be required to appoint architects from a recognised panel of good designers, for example the Design for London framework;

• Specifications will be provided for the affordable housing, the arts and community facility (by Ovalhouse) and some of the non-residential uses;

• The Council will consider using the planning pre-application process as part of the bidding process;

• A detailed schedule of minimum requirements will be provided to the bidders along with a schedule of prioritised requirements; these will form part of the assessment criteria for the bids;

• Specialist theatre architects will be novated by the Council to work with the bidders, the successful development partner, and their appointed architects;

• The development agreement will include a clause that will require the Council, in its the capacity as landowner, to sign off the planning application before it is formally submitted to Planning; and

• The development partner will also be required to submit a comprehensive community involvement strategy.

5. Project Governance and Coproduction

5.1 The Council is committed to delivering the Somerleyton Road project in partnership with the local community. The process leading up to this Cabinet report has involved a range of people, learning, discussing and working out solutions together. The aim has been to run a transparent process where information is shared, different views are captured and there is a transparent process to decision-making.

5.2 Below is an illustration of the governance structure put in place for this project.

5.3 A Core Project Team has been established to oversee the development of the project. The members of this Core Project Team include the Council, Ovalhouse and Brixton Green. The Core Project Team has met on a weekly basis and meets once a month with the local Ward Councillors. It is envisaged that this Core Project Team will continue to meet throughout the lifetime of the project.

5.4 The purpose of the Core Project Team is to monitor the progress of the project (including monitoring and mitigating project risks and issues), to successfully deliver the coproduction of the project and to allow the discussions taking place with a range of people to shape the proposals for Somerleyton Road. Every month a note summarising the Core Project Team meetings is produced and shared to ensure that the decision making process is transparent and information is shared and publicly available. The Core Project Team is ultimately responsible for making the recommendations included within this report.

5.5 Key to this process is providing a range of ways in which discussions can take place. The table below sets out the engagement that has taken place to date and demonstrates the partnership approach to delivering the project.

5.6 The intention is to continue this thread of engagement and discussions throughout the lifetime of the project and the table below sets out how this will

Engagement Date Target Audience Facilitated By

Project Workshops

9th January / 23rd January / 7th February / 21st February

Ovalhouse / Brixton Green / Southwyck House TRA / Moorlands Estate Community Group / Carlton Mansions / Brixton Society / Mural Preservation Society / Network Rail / Social Life

LBL Planning / Arts and Culture / Housing / Regeneration

LBL and Pollard Thomas Edwards architects

Ovalhouse one-to-ones

January - present

One-to-one conversations with more than 50 local stakeholders.

Ovalhouse

Deliberative workshops facilitated by Social Life

March / April 2013

Open to All Brixton Green

Door to door discussions on Moorlands Estate and with businesses along Railton Road

March 2013 Brixton Green

Carlton Mansions Workshop

April 13 Carlton Mansions LBL

Exhibition 2ND May Open to All LBL / Ovalhouse / Brixton Green

continue in the shorter term to achieve agreement on the tender documents for the procurement process:

Milestone Date

Core Project Team and invited partners: Social Life presentation on workshop findings

May 2013

Core Project Team: Prioritise aspirations May 2013

Testing of aspirations June 2013

Core Project Team: Feedback to relevant partners on tested aspirations

July 2013

Core Project Team: Recommend the final draft of the Expression of Interest to ED and Lead Member

August 2013

Core Project Team: Recommend the final draft of the Sifting Brief to ED and Lead Member

August 2013

Core Project Team: Recommend to ED and Lead Member the tested aspirations and evaluation criteria to be included in the Invitation to Tender

October 2013

Presentation on final tender bids January 2014

6. Finance Comments

6.1 A development appraisal has been produced by EC Harris for option 1 – as set out in the attached viability report produced by Pollard Thomas Edwards architects (PTEa). The development appraisal supports the Council’s position that the project will produce a capital receipt which will, as a minimum, cover the project delivery costs outlined below:

6.2 The development appraisal contains a number of project cost assumptions, including the estimated costs to achieve vacant possession of the site.

6.3 The theatre will need to demonstrate that is has a sustainable business plan in place to ensure that it generates sufficient revenue to cover its running costs. Ovalhouse is in the process of producing this business plan and it will be

Item 2013 / 14 Cost

Internal Project Team Costs £86,000

External Project Team Costs (Legal and Finance)

£225,000

Site surveys £30,000

10% Contingency £34,100

Total £375,000

required as part of any grant funding bid to the Arts Council. As mentioned earlier in this report; the intention is that Ovalhouse will manage approximately 1,300 m2 of commercial space with an income sharing agreement with the Council. The management fee taken by Ovalhouse will form part of their revenue income feeding into their business plan.

6.4 Opportunity Costs – the delivery strategy will result in a number of opportunity costs which the Council needs to be aware of:

•••• The aspiration to provide affordable homes at Target Rents rather than the policy position which includes affordable rents will result in a reduced land receipt to the Council;

•••• By agreeing to a revenue share arrangement with both Ovalhouse and the Community Development Trust, on the commercial elements, there will be a reduction in income to the local authority;

•••• Refurbishment and renovation of Carlton Mansions and the Nuclear Dawn mural will be a cost to the project; and

•••• Loss of revenue income from existing commercial premises.

6.5 Secretary of State approval will be required if land is disposed of for an amount that is more than £2 million less than ‘best consideration’, which is land defined by RICS as “the amount that would be received for a disposal of a property where the principal aim was to maximise the value of the receipt”. It seems likely that such consent will need to be obtained in the event that a long leasehold is granted at peppercorn rent to Oval House Theatre in order to help ensure the future financial viability of the theatre on the new site.

7. Comments from Director of Governance and Democracy

7.1 Section 120 of the Local Government Act 1972 empowers the Council to acquire land by agreement for the purposes of any of their functions or any other enactment or the benefit, improvement or development of its area.

7.2 Section 227 of the Town and Country Planning Act 1972 empowers the Council to acquire land which acquisition the Council believes will facilitate the carrying out of development, re-development or improvement on or in relation to the land or is necessary in the interests of achieving proper planning of the area where the land is situated.

7.3 Section 1 of the Localism Act 2011 introduced a new “general power of competence” for local authorities, defined as “the power to do anything that individuals generally may do” and which expressly includes the power to do something for the benefit of the authority, its area or persons resident or present in its area.

7.4 Section 111 of the Local Government Act 1972 enables the Council to do anything which is calculated to facilitate, or is conducive to or incidental to, the discharge of any other of its functions, whether or not involving expenditure,

borrowing or lending money, or the acquisition or disposal of any rights or property

7.5 Paragraph 32 of the Council’s constitution delegates authority to purchase all other assets (including land and property and whether acquired using compulsory purchase order powers or another power) from within existing revenue and capital budgets (where the scheme specifically includes the purchase of the asset(s)) up to £10 million is delegated to the Executive Director.

7.6 Local Authorities have powers pursuant to section 123 of the Local Government Act 1972 to dispose of land held by them in any manner they wish. However they cannot dispose of land, except by way of a short tenancy for consideration less than the best that can reasonably be obtained without consent from the Secretary of State.

7.7 The Secretary of State has issued a general consent. The 2003 consent permits local authorities to dispose of land held by them at less than best consideration where the:

a) the local authority considers that the purpose for which the land is to be disposed is likely to contribute to the achievement of the promotion or improvement of economic, social or environmental well-being in respect of the whole or any part of its area, or of all or any persons resident or present in its area;

b) the difference between the unrestricted value of the land to be disposed of and the consideration for the disposal does not exceed £2,000,000 (two million pounds).

7.8 The provision by the Council of financial support to the tenant may raise questions of state aid under Article 87 of the EC Treaty and the Council must be satisfied that the proposed actions are lawful. The specific ingredients of state aid under Article 87are: (i) aid; (ii) granted by a Member State or through State resources; (iii) favouring certain undertakings; (iv) distorting or threatening to distort competition; and (v) affecting inter-State trade. An “aid” comprises any form of intervention which has the same or similar effects to a subsidy.

7.9 In reaching a decision on this matter, members will be bound by the general principles of administrative law. Lawful discretions must not be abused or fettered and all relevant considerations must be taken into account. No irrelevant considerations may be taken into account, and any decision must not be such that no reasonable authority, properly directing itself, could have reached. Members must also balance the interests of the service users against those who contribute to the Council’s finances. Monies may not be expended thriftlessly, and the full resources available to the Council must be deployed to their best advantage. Members must also act prudently and in a business-like manner at all times.

8. Results of consultation

8.1 The Lead Member for Housing Strategy and Regeneration has been consulted on the report and the Coldharbour Ward Councillors have been involved in several of the project workshops.

Please see section 5.

9. Organisational implications

Risk management:

Risk No Risk Description Mitigations RAG

1 Arts Council bid unsuccessful

The Council is to provide both officer and Member assistance to Ovalhouse in their application to the Arts Council;

The Council is in close liaison with the GLA to identify contingency funding should the Arts Council bid be unsuccessful;

Ovalhouse will be required to fundraise.

Amber

2 A funding gap between the cost of building the new theatre and the value of the Ovalhouse contributions

Heads of Terms drafted which include a cut off point

Amber

3 Unable to deliver all the communities aspirations

Open and transparent process as to how aspirations are tested and how the decisions are taken as to what can and can’t be included within the tender documents.

Amber

4 Not securing vacant possession of the whole site

The Council will seek to secure vacant possession of the site via negotiation however it will seek CPO powers as a contingency to be used if required.

Green

5 Delay in securing Secretary of State consent.

Include SoS sign off within project plan; Green

6 Site constraints limit development on the site

Initial structural engineers report produced;

Close liaison with Network Rail and TfL.

Amber

7 Developer failure

The development agreement will include appropriate step in rights to protect the Council’s position.

Green

8 Planning Risk

• Planning engaged;

• Major Cases to review tenders pre-submission;

Green

10 Equalities impact assessment: 10.1 A full EQIA assessment has been carried out for the Future Brixton programme

and the EQIA has informed the development of this project. 11 Community safety implications: 11.1 Community safety is a key issue for the Somerleyton Road project and is one of

the main drivers for change. 11.2 Crime and anti-social hotspots have been identified and a joint approach

between local stakeholders, the Council and the borough’s Community Safety officer have resulted in a number of mitigation measures being included in the proposals.

11.3 The partnership will continue to assess how development along Somerleyton

Road could continue to improve community safety in this part of Brixton whilst also working closely with any future development partner over site safety during the construction period.

12 Environmental implications: 12.1 The tender documents will include a series of sustainability requirements and

targets for both the construction process as well as the long term performance of the residential, commercial and community buildings.

12.2 An arboricultural survey will also be carried out prior to any detailed planning

work. 13 Staffing and accommodation implications:

13.1 The staffing and accommodation implications are set out in section 3 of the report and relate to the relocation of the Angela Davis depot and the Lambeth and Southwark Community Transport depot.

14 Timetable for implementation

14.1 Implementation of recommendations:

Recommendation Description Target Date

1 To note the feasibility study for Somerleyton Road. 8th July 2013

2 To agree the procurement of a delivery partner using the GLA’s London Development Panel.

28th February 2014

3 To delegate authority to the Executive Director Housing Regeneration and Environment and the Lead Member for Housing Strategy and Regeneration to shortlist the bidders at the sifting brief stage.

7th October 2013

4 To note the project delivery costs. 8th July 2013

5 To approve a budget to purchase the freehold interest in the property at 16-22 Somerleyton Road – subject to SAMG approval.

8th July 2013

6 To delegate authority to the Executive Director Housing Regeneration and Environment and Head of Legal Services to enter into an Option Agreement that secures the inclusion of the property at 16-22 Somerleyton Road as part of the proposed development site.

8th July 2013

7 To agree the making of a Compulsory Purchase Order to ensure delivery of the project as a comprehensive development.

8th July 2013

8 To note the draft Heads of Terms between the Council and Christ Church Oxford United Clubs trading as the Ovalhouse Theatre and to support their application to the Arts Council for grant funding to support the build costs of the new arts and cultural facility.

8th July 2013

9 To delegate authority to the Executive Director Housing Regeneration and Environment and Head of Legal Services to enter into a legal agreement with Christ Church Oxford United Clubs trading as the Ovalhouse Theatre to enable the inclusion of their site in the procurement of the developer for Somerleyton Road and the Ovalhouse Theatre site and to grant them a long-lease of the proposed new Theatre on completion of construction.

28th February 2014

10 To delegate authority to the Executive Director Housing Regeneration and Environment and Head of Legal Services to enter into agreements of intent or agreements to lease with anchor tenants.

28th February 2014