Decision Maker: Babergh Cabinet
Decision status: Recommendations Approved
Is Key decision?: Yes
Is subject to call in?: Yes
To review the options related to this transaction (previous report reference BCA/20/03 and EWCB on 22/08/22 applies)
To agree the preferred options
It was RESOLVED: -
1.2 Delegate authority to the Directors of Assets and Investments and Finance in consultation with the Portfolio Holders for Assets & Investments and Finance to review the final IFRS16 calculation and implement the headlease in accordance with this report.
REASON FOR DECISION
To bring forward the development of the new health centre and subsequent capital receipt.
Alternative Options Considered and Rejected:
1.3 Option 1 - Do Nothing
1.3.1 This will result in the sale and development of the land as a Health Centre not proceeding. The current sub-standard and dated facilities will be retained and used to best effect. This option has previously been discounted by Cabinet as Sudbury has an urgent need for improved medical facilities in the town.
1.4 Option 2 - Assura accept a shorter lease commitment from the HHGP
1.4.1 Assura are committed to delivering this development and have invested significant time and finances into progressing the scheme for in excess of 8 years.
1.4.2 Reducing the lease term from 25 years to 15 years creates a development with negative viability which Assura is unable to pursue. This is therefore not a viable option.
1.5 Option 3 - A headlease is entered into by NHS/ ICB with sub lease to HHGP
1.5.1 HHGP are prepared to commit to a 15-year lease, however for the development to be viable a longer 25-year lease commitment is required. A third party, with a substantial covenant, could therefore enter into an agreement to take a headlease for a term of 25 years simultaneous to a 15-year sublease being granted to HHGP.
1.5.2 The obvious third party to take a headlease in this situation would be part of the NHS. This has been explored by NHS organisations however primarily for accounting (namely the NHS adopting IFRS16 from 2022) and lack of appropriate policy reasons this cannot be progressed at the current time. The transition from CCGs to ICBs will enable ICBs to hold property assets in the future, which the CCGs were prohibited from doing, however whilst this is now permitted by legislation the policy framework is still to be developed nationally.
Any Declarations of Interests Declared: None
Any Dispensation Granted: None
Publication date: 11/01/2023
Date of decision: 09/01/2023
Decided at meeting: 09/01/2023 - Babergh Cabinet
Effective from: 19/01/2023
Accompanying Documents: