Detail – St Helens Council & Langtree Funding of Parkside Site

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THIS FOLDER CONTAINS THE KEY SUPPORTING DOCUMENTATION TO THE PARKSIDE FEATURE

OLV INFORMATION REQUEST TO ST HELENS COUNCIL 13TH DECEMBER 2014

Please could you provide supplementary information appertaining to the previous  request as much of your response was from information already in the public  domain such as the councils website. I do understand the commercial reasons why some aspects are not in the  public domain and I will restrict my request to matters that obviate that  risk to the council and taxpayers. Further to your statement that the council are undertaking an acquisition on  the Parkside Side which I assume to be principally a land acquisition?  Please provide details of the exact area of the land and / or other aspects  of the asset intended to be purchased. If this is not possible then please indicate specifically why this is not  possible at this time and then indicate to the full extent you are able. For example is this the colliery footprint or a wider area or some variant  of this?   Given this is being undertaken with public funds, is generally public  knowledge, in the interest of the local public and the wider borough please  may I request you provide this information.

THE COUNCILS RESPONSE TO THAT QUESTION

Further to your follow up enquiry on 13 December 2013 I can advise you that the land in question has an area of 232 acres and its boundaries coincide with the land formally owned by British Coal in connection with its Parkside Colliery operation. I trust this is sufficient for your requirements.

OLV INFORMATION REQUEST TO ST HELENS COUNCIL 12TH JANUARY 2014  

In relation to the recently announced joint venture company between St.Helens council and Langtree in regard to the acquisition of the Parkside colliery freehold for which the council expended £6m of public funds. Please may I request copy of the business case and financial appraisal, supporting the evaluation and authorisation of that transaction?  Please include any supporting documentation including assumptions, business rationale and the anticipated benefit streams.

 THE COUNCILS RESPONSE TO THAT QUESTION

You will be aware that under the relevant Act in dealing with requests such as these the Council is obliged to in effect undertake specific steps in order that it may discharge the statutory requirements placed on it. Initially it must indicate as to whether or not it holds copies of the requested information in a recorded form, it must then go on to indicate whether or not it is willing to supply copies of such existing recorded information before finally supplying the relevant copies to the requestor. It should be noted that the above is subject to various statutory exemptions which may exist in certain cases and which may either prevent the Council from indicating whether such information is so held and/or in fact prevents copies of the relevant information from being disclosed.

Having now had the opportunity to discuss the joint venture proposal with relevant Council Officers, I can now confirm:-

1 – That no document exists which sets out the business case for the JV proposal;

2 – That no written financial appraisal/evaluation exists in respect of the proposed JV venture and

3 – That the authorisation for the involvement of the Council in the JV proposal was given by the Cabinet meeting of the Council which took place on 13th September 2013. The minute of the decision taken is set out fully below :-

Resolved that:

(1) Approval be given to enter into the creation of a Joint Venture Company (JVC) with the purpose of facilitating the
development, for economic uses, of the former Parkside Colliery site in Newton;

(2) The financial contribution set out in the report plus associated fees towards the capital cost of acquiring the site be approved;

(3) A loan on to the JVC as set out in the report to cover the balance of the purchase price, management fees, loan charges for a five year term and fees required to secure a planning permission on part of the site be approved; and

(4) External legal and financial advisers to advise the Council in this matter be appointed.

The above 3 responses fully deals with your request in terms of the statutory responsibilities placed on the Council. However, in order to seek to assist further, I would also now set out the following information which whilst not being specifically requested, is put forward in an attempt to aid your understanding of the JV proposal further.

The Council has expended £1.5 million towards the acquisition of the site as a contribution to its 50% stake in the site.

The remaining £4.5 million is a loan to the Joint Venture Company part of which covers the costs of acquisition and part of which provides working capital to take forward the redevelopment of the site.

The price paid for the site was a negotiated price which in the opinion of the partners in the joint venture represents value for money.

Further work needs to be done to establish the best way to achieve the maximum development potential for the site. However, on the assumption that a minimum of 1 million sq ft of business space could be accommodated
on the site the price paid is considered to meet acceptable investment criteria.

The anticipated benefits are new jobs created and additional business rates income for the Council.

 OLV INFORMATION REQUEST TO ST HELENS COUNCIL 13TH FEBRUARY 2014  

 I refer to your email dated 10th February 2014, attached below.

I am grateful for the information provided and the additional information you gave kindly supplied.

I understand your explanation of the Council’s obligations under the FOI which (as I understand it) is to (a) indicate if the Council does (or does not) hold a. document and (b) either supply the document or (if it does not wish to supply it) quote reasons for withholding it that are quoted in the FOIA..

However I would query whether the information the Council has provided amounts to a complete response to my request for information under FOIA.

My reasoning is as follows:-

1. My request was for a copy of the ‘Business Case’ and ‘Financial Appraisal’ supporting the creation of Parkside Regeneration LLP. By ‘Business Case’ I mean a document (or perhaps a series of documents) that captures the reasons for initiating the joint venture project. By ‘Financial Appraisal’ I mean a document, or document that captures the financial outlay, benefits and risks of the transaction that enabled the Council to form a judgment as to whether it was financially justifiable to enter into the transaction.

2. You state that the Council does not possess any written document that amounts to either

(a) a Business Case

or

(b) a Financial Appraisal.

3. However I am unsure how a public authority, under normal decision making processes, could have entered into such substantial commitment as forming a joint venture company (JVC), and granting a large loan with it, without having captured the rationale for entering into the transaction and the transaction’s financial merits in writing, in one form or another.

4. By way of example, I would have expected that prior to the Member’s decision on 13.09.13, Council officers might have done at least some of the following things:

a. Conducted some due diligence on the financial strength of Langtree and their ability to honour the obligations of the JVC or deliver the outcome of the JVC;

b. Assessed the market for likely development partners

c. Conducted a competitive procurement exercise (or have reasons for not conducting that exercise) for the selection of Langtree as the preferred partner;

d. Discussed alternatives to the JVC (for example, say, the Council acquiring the land in its own right

e. Recorded what the commercial aims of the JVC were to be, the timescale for achieving them, what the strategy for achieving them might be, and some contingency if they were not;

f. Perhaps entered into a service level agreement, shareholders agreement or heads of terms, with Langtree to implement the strategy;

g. Considered what future financial support to the JVC might be required;

h. Determined what the best balance of voting power for the Council within the JVC was to be and if it gives the Council sufficient control;

i. Determined the circumstances in which repayment of the loan might be triggered;

j. Obtaining independent valuation advice, from the Council’s point of view, on the land value

k. Obtained legal advice on the best structure for the JVC. .

5. All of the above are examples of what amounts, collectively, to usual steps of information gathering to make up a business case or conducting a financial appraisal. Together they form a ‘Business Case’. Admittedly all the information may not be contained in a single document. However they must exist in some physical form. If the steps were taken, they must have been recorded in writing at some stage to form an audit trail.

6. Council Members are obliged to take all relevant factors into account when making a decision (and the business merits of the transaction are a quite obvious relevant factor). Therefore it does not seem conceivable that some document(s), written or electronic, recording the transactions merits do not exist. If there are no such documents then the implication would seem to be that, either the Council gave no thought to business planning, so that Members came to their decision on 13.09.13 in an information vacuum, or alternatively that the Council did do some business planning but did not record it in audit trail.

If your answer remains the same (that no Business Case or Financial Appraisal exists) then that begs the question whether the Council have adhered to a fully thought out decision making process. It may well be a sound decision, but the documents need to be there to evidence it.

Bearing the above in mind I think it is reasonable for me to politely repeat the request anew and enquire if the Council’s answer to the enquiry remains the same. If it does not, I would ask the Council to disclose the existence of any written records, or physical evidence, the Council has that record the business case and financial merits of the transaction and provide copies of them to the extent that the law requires the Council do to so. If documents as I have described them exist, but the Council has reasons under the FOIA for withholding them, please kindly quote the reasons.

If the Council wishes to withhold a document it may that the reason is one of confidentiality. If the Council quote that reason please kindly clarify why the document concerned would remain confidential now that the JC has been formed, and the JVC’s ownership of the land is complete. My thought here is that there might be good reason for a document to remain confidential before the JVC was formed (say, whilst the JVC were negotiating a price with Prologis). However, it does not necessarily follow that the document concerned would need to remain confidential once the transaction is safely complete (as it now is).

I would add that the group I represent seeks merely to understand the reasoning behind the creation of the JVC to better understand its formation, powers, aims and aspirations. With that in mind I hope you consider, statutory obligations aside, that I have set out the information we seek in a reasonable way, and that it is reasonable for the group to seek information to enable it to understand the matter. I look forward to hearing from you.

Finally I would mention that the group may wish to place copies of FOIA replies (the replies, plus the requests) on to the groups’ website, for general information purposes. My understanding is that the Council’s replies to FOIA requests are themselves part of the Council’s published documents and are available to the public in the public domain. On that basis there is no particular reason I can see why the replies cannot be placed upon the website. However, I shall be grateful if you can advise, to avoid doubt, whether you agree with my understanding and you are happy for the replies to be displayed.

THE COUNCILS RESPONSE TO THAT QUESTION

Regarding your request set out below which seeks information on the Business Case (as defined by you below) and the Financial Appraisal (again as defined by you below) which members had available to them prior to making the decision on 13th September 2013.

I will attempt to answer your points fully below, although I would stress at the outset that you and your group should recognise that the decision taken by the Members on 13th September 2013, included a specific authority for the appointment of external financial and legal advisors. The role of the referenced advisors, was to seek to ensure that all of the necessary legal/contractual documentation which was subsequently entered into by the Council in this matter, was in a form which sought to safeguard in so far as it is possible to do so in the world of commercial developments, the position/investment of the Council.

Turning to deal with your request set out at 4(a) to 4(k) below inclusive:-

(a) Whilst no document records the fact, the Council were aware of the financial strength of Langtree through (i) previous dealings with them (primarily the stadium development) (ii) an awareness of the existing property portfolio of the company and (iii) an awareness of the current developments the company is involved in. Additionally the Council’s legal advisors did subsequent to the Member decision carry out due diligence checks with regard to the Land to be purchased as well as the JV company itself;

(b) The Council was not in a position to assess the market for development partners as Prologis and Langtree had concluded negotiations with regard to purchasing the site, and the Council was in fact offered the opportunity of becoming involved in the future development of the site by Langtree;

(c) The Council was not in a position as stated at (b) above to conduct a procurement exercise as in essence it was Langtree who were offering the opportunity to become involved in the project to the Council;

(d) Again the Council was not in a position to acquire the site on its own or indeed with another3rd party, as Langtree had already agreed an in principle deal to purchase the site from Prologis. In terms of the form of the JV, the Council and Langtree have received legal advice on the most appropriate form the structure of the JV should take, although this was not available at the time of the Member decision – see point (k);

(e) The aims of the Council for the site have for many years been to secure its redevelopment for economic purposes and this was the case when the 13th September 2013 decision was taken. Whilst not being specifically requested, I would confirm that since the Member decision the aims of the JV have been further set out as promoting a planning application for the site, providing infrastructure to the site and facilitating the redevelopment of the site to secure a commercial return whilst delivering economic benefits to the borough of St Helens. Regarding the timescale, no detailed timetable has been set out for the redevelopment, although it is envisaged by both parties that the JV will proceed to achieve its aims without any undue delay taking place. In terms of strategy/contingency, this will be developed by the JV itself;

(f) No agreements were entered into by the Council and Langtree prior to the date of the Member decision on 13th September 2013. Whilst not being requested, I can confirm that the Council has subsequently entered into various agreements which include a Memorandum of Understanding, the JV Agreement itself ,a Loan Agreement and the corresponding Legal Charge as well as a Property and Development Management Agreement;

(g) Should any future financial support be required, this will be for the JV to address should the situation arise ie No document exists which requires the Council to provide more funding to the JV;

(h) It was accepted at the outset by both Langtree and the Council that the JV should be run on the basis of equal partners in terms of voting power. For your additional information, I can confirm that the Council has since the Member decision sought and received legal advice to ensure that the subsequent agreements entered into seek to protect the position / investment of the Council

(i) The circumstances which trigger the repayment of the Loan were not specified at the Members meeting on 13th September 2013 and whilst they are clearly of a confidential nature were arrived at after seeking and considering external legal advice;

(j) No independent Land valuation advice was taken by the Council and

(k) No external legal advice was taken prior to the Members meeting on 13th September 2013 but by way of additional information, I can confirm that such advice was taken on the detailed form and structure of the Joint Venture prior to the Council finalising the documentation.

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