Purpose

Lease Surrender and Re-grant of premises within the Commercial Estate

Decision

The Cabinet Member agrees the delegation of authority to the Head of Commercial Estate, in consultation with Cabinet Member for Resources and the S151 Officer, to enter into a surrender of the leases held by a tenant, including the payment of a reverse premium and simultaneously enter into the disposal of a long leasehold interest, to a third party, for a term of years, both of which are yet to be determined.

As well as delegating authority to the Head of Commercial Estate, in consultation with the S151 Officer, to add this transaction to the capital programme. 

Reasons for the decision

The Council owns the freehold of a site, which is currently subject to long leasehold interests with just over 36 years unexpired. The current rent payable to the Council is modest and materially below market levels. Part of the property has been sublet by the tenant, while the remainder of the building is obsolete and requires significant intervention to support the vitality of the city centre.

The current tenant has relocated and has confirmed that it does not intend to undertake any long-term investment in the site. The remaining lease is too short to be of any interest to a developer. The existing leasehold structure therefore restricts the Council’s ability to intervene, improve or regenerate the asset.

The Council preferred approach is to regain control of the site to enable redevelopment by a third party through onward disposal of part or the whole of the premises. 

Although this involves a payment of a reverse premium, it would address the obsolescence, secure planning consent and enable redevelopment consistent with the Council’s city centre regeneration strategy, as outlined in the Council’s adopted Local Plan and Placemaking Plan.

Early exchange prevents the tenant from reconsidering or withdrawing their agreement, which would undermine the Council’s ability to progress the redevelopment opportunity.

Alternative options considered

A range of options have been considered, including short-term letting or “do nothing”, a joint-venture, as well as the lease surrender and disposal.