Deputy Leader and Cabinet Member for Economic Development
To consider the attached report.
Contact Officer: Teresa Lane (01296) 585006
(1) That the Environment and Living Scrutiny Committee be thanked for its input to the review of AVE’s Business Plan.
(2) That the report on the performance of Aylesbury Vale Estates against the targets and commitments set out in the 2018/2019 Business Plan be noted.
(b) Reason(s) for Decision(s)
The agreement with AVE requires the Council to review performance.
(c) Alternative Options Considered
None as such.
(d) Relevant Scrutiny Committee
Economy and Business Development. That Committee considered a similar report at its meeting on 10 September, 2019 and its views were reported to Cabinet and were taken into account in reaching the above decisions.
(e) Conflicts of Interest / Dispensation(s)
As one of the Council’s Directors on the Board of AVE, Councillor Mrs J Ward declared a prejudicial interest in this item and having remained to answer specific questions about AVE’s activities, left the meeting during Cabinet’s deliberations.
Cabinet received a report also submitted to the Economy and Business Development Committee on 10 September, 2019, reviewing the performance of Aylesbury Vale Estates (AVE) against the Business Plan for 2018/2019.
Each year AVE prepared a Business Plan which was considered by the Scrutiny Committee and subsequently Cabinet. The Business Plan included a review of performance during the previous financial year. The Asset Managers’ report to the AVE Board for the period January to the end of March formed the basis of the review of performance against the 2018/19 Business Plan, together with the year end accounts. Both of these documents were submitted as part of the confidential agenda. The Asset Managers gave a presentation to Cabinet (during the confidential part of the meeting), which covered both performance against the 2018/19 Business Plan and a high level overview of progress against the current 2019/20 Business Plan. As far as the 2018/19 Business Plan was concerned, the key highlights were as follows:-
Strategy as set out in the 2018/19 Business Plan
The core aims were to increase investor revenue flows and support the Council’s economic development programme,
· The sale of high value land with low income for re-investment.
· Pay off existing debt in order to reduce the cost of finance.
· Reduce amortisation, which absorbed surplus income.
· Target a distribution of £600,000pa.
· Maintain current levels of occupancy.
· Retain tenancies at Hale Leys.
Sale of high value land with low income for re-investment
The sale of land known as Gateway Phase 2 and the sale of the front part of the Askeys site at Stocklake did not take place as originally anticipated. However the sale of the Stocklake site to Lidl had subsequently been and the sale of the Gateway Phase 2 to a housing developer was expected to be completed shortly.
Progress had been made in 2018/19 on preparing a small site at Adams Close, Buckingham for sale had also now been completed.
Pay off expensive debt in order to reduce the cost of finance
The capital receipt from the sale of the Stocklake site had been used to achieve this, albeit later than had been planned. The reduction in the cost of finance would help improve cash flow and in 2019/20 provide a degree of comfort to help AVE mange the new market and financial pressures which were emerging as a consequence of Brexit.
Reduce amortisation, which absorbed surplus income
This had been achieved in relation to the amortisation of the senior debt with AVDC. In 2018/19, AVE had made substantial repayments of debt.
Target a distribution of £600,000 pa
This had largely been dependent on the sale of the two key sites. As this had not happened, the distribution had been deferred. AVDC still expected to receive its 50% share of the distribution and also had planned for a distribution in 2019/20. This meant that there was an expectation that two distributions would be received by the end of 2020.
Maintain current levels of occupancy
In an important move, Cinram Novum had been secured as new tenants for the large Sony site. Work had begun to develop options for the long term future of the site. There continued to be strong demand for the units on the industrial estates following an extensive investment plan to refurbish units and improve services to tenants. At the end of the year the void rate had been 1.8%.
Retain major tenancies at Hale Leys
Nationally, the retail market had proved even more challenging in 2018/19. Clarks had relocated to Friars Square and Poundworld had gone into administration. However other key tenants, notably Boots, had been retained in the centre.
Concentrated efforts had begun during the financial year to attract different uses for vacant units. Negotiations had commenced for the conversion of the former Next unit to a Play and Stay and a restaurant, bar and roof top terrace. These negotiations had now been completed, with permission for change of use being granted. Construction work was now underway.
General Financial Performance
· The voids percentage by rental value across the whole portfolio was 6.9% at the end of March compared to a target of 3.8% in the Business Plan. Of this, the multi let industrial portfolio accounted for 1.8% of the 6.9%, with Hale Leys accounting for the rest of the voids. The refurbishment of the units had contributed to the uptake.
· Rent invoiced for 2018/19 was down 12% for the portfolio as a whole, Hale Leys accounting for much of this.
· The overall value of the portfolio had decreased, reflecting the challenging retail market that Hale Leys was facing. However the value of the rest of the portfolio had in creased.
· Debt had fallen in line with the Business Plan strategy and the loan to value ratio had decreased from the previous year.
The Economy and Business Development Scrutiny Committee had asked that the following comments be drawn to Cabinet’s attention:-
· Whilst impressed with the efforts to increase the take up of industrial units and the relationships built with tenants, and whilst appreciating the challenges currently existing in the retail market, the Committee had felt that in relation to Hale Leys, AVE could perhaps be more imaginative in their strategy for encouraging a better take up of units at the Centre by specialist retailers. In response, the Asset Managers referred to the innovative scheme to develop a roof top terrace at the Centre and the discussions to encourage the introduction of a food outlet at the High Street entrance, in the unit formerly occupied by Clarks.
· In appreciating that there was probably no easy solution, the Committee had felt that AVE might be more proactive in providing larger (15 – 20,000 sq. ft.) units. The Asset Managers noted the comment.
· The Committee had felt that perhaps more consideration could be given as to how it might be possible to achieve a better integration between the use of land for both Commercial and residential use. The Asset Managers referred to the options being given to the Cinram site which might open up this possibility.
· The Committee had commented that planners needed to respond more quickly to commercial/industrial demands, although it had been appreciated that the Council was actively trying to address this issue.
(1) That the Scrutiny Committee be thanked for its input to the review of the AVE Business Plan.
(2) That the position on the Business Plan as outlined in the Cabinet report be noted.
As one of the Council’s representatives on the AVE Board, Councillor J Ward declared a prejudicial interest in the above item. She remained to answer specific questions in relation to AVE activities then left the meeting whilst Cabinet deliberated on the Business Plan review.