Agenda item

Report attached.

Members considered a joint report of Councillor Noordad Aziz, Deputy Leader and Portfolio Holder for Transformation, Education and Skills, and Councillor Kimberley Whitehead, Portfolio Holder for Culture, Heritage and Arts, updating Cabinet on the outcome of the recent tender evaluation process to appoint the operator for Accrington Market Hall and seeking approval for the grant of a lease of the Market Hall and Pavilion to the successful bidder.

Councillor Whitehead provided a brief introduction to the report, highlighting that this was a key moment for the Market Hall at the heart of Accrington Town Centre.  She confirmed that she had now met the proposed operator, as per the recommendation in the report, and had been accompanied by a representative from the night-time economy.  The business had indicated their support for the new operator.  The Council wanted the Market Hall to be a vibrant hub and it was anticipated that the preferred operator would bring the necessary expertise to realise the potential of this valuable asset.

Approval of the report was deemed a key decision.

Reasons for Decision

The Levelling Up Fund (LUF) had been announced at the 2020 Spending Review and had focused on capital investment in local infrastructure projects that required up to £20m of funding and built on prior programmes such as the ‘Local Growth Fund’ and ‘Towns Fund’.

In January 2022, Cabinet had given its formal approval in support of the Town Centre Stakeholder Board’s recommendations that the Council’s LUF submission should focus around the following three principal interventions, noting that at the time of submission, those listed at 2 and 3 below were not in the Council’s ownership.

1. Redevelopment within the Indoor Market Hall and outdoor pavilions along Peel Street – the intervention known as Market Hall.
2. Improvements and redevelopment to the block of properties at 43-59 Blackburn Road / 2-4 Church Street – the intervention known as Market Chambers.
3. Improvements and redevelopment to the block 61-69 Blackburn Road – the intervention known as Burtons Chambers.

There was a risk that the new Market Hall offering might not be a financial success as the Council did not have specific knowledge or experienced staff ‘in-house’.  This risk had been reduced by choosing to appoint an experienced operator to manage the proposed new and enhanced offerings within the Market Hall.

The Council had appointed CBRE through the Crown Commercial Service Framework as lead consultant for the procurement of operators for the Market Hall and Burtons Chambers.  CBRE had a specialist and very experienced team and were supported by property consultants Barker Proudlove (BP) who had a very knowledgeable team on market redevelopments.

The work procured from CBRE included:

• Reviewing the proposed product and identifying any key issues or concerns that should be addressed prior to procurement.
• Providing an initial assessment on the state of the market, competition and precedent developments that provided an opportunity for lessons to be learnt.
• Summarising the optimum models that could be considered, including viability and potential revenue models.
• Setting out the delivery method that was most likely to be suitable, informed by feedback gained from operators/potential operators, including a funding compliant procurement approach, explaining the team structure that would best support the procurement process.
• Presenting findings in a report that clearly set out recommendations for the operating model and procurement process.
• Undertaking a compliant tender/procurement process to identify a preferred operator for the Market Hall.

Due to the pressures on the Council’s in-house legal resources, additional support in drafting the proposed lease had been provided by the Council’s external LUF legal advisors, Womble Bond Dickinson.

Both CBRE and BP had reviewed the designs and requirements for the Market Hall and Burtons Chambers, identifying the optimum contracting models which would most likely attract a strong operator interest - these being a lease for the Market Hall and management agreement model for the shared office/workspace in Burtons Chambers.

It should be noted that in tendering out the provision for the offerings/management of the Market Hall to a new operator, the Council had accepted it would no longer have any involvement with the management, opening days/hours and day to day operations of the market hall, or in the range of trader offerings and which traders were provided leases.  The Council also accepted it would no longer have any involvement in the specific trader leases/levels of rent/service charges applied or legal involvement in the terms and conditions of such leases between the Market Hall operator and traders.

BP had managed the tender process to identify a preferred operator for the Market Hall.  The process commenced in October 2023, with a brochure setting out the opportunity, (provided as an Appendix to the report) which was circulated via press releases/social media/LinkedIn, posted on the Council’s website, through existing market traders and notices posted on the market pavilions.  Following this expression of interest period, BP had engaged directly with 10 parties who had expressed an interest, having 1 to 1 discussions and a number of accompanied site visits in November 2023 and January 2024.  The closing date for return of tenders had been set at the first week in February 2024.

Evaluation of the Tenders

The tenders had been based on information being provided across the following sections below to establish a shortlist for progressing.  BP had received and presented four submissions to review.  The Council and BP had concluded there was sufficient merit in the proposals to warrant a face-to-face meeting with all four organisations.

Section 1 – Covenant:

• Proposed Tenant;
• Guarantor;
• Deposit;
• Funding.

Section 2 – Strategy to maximise benefits for Hyndburn:

• Experience;
• Use;
• Opening Times;
• Social Value;
• Marketing Strategy;
• Market Layout.

Section 3 – Lease Term:

• Lease Term;
• Break Options;
• Rent;
• Rent Review;
• Incentive;
• Business Rates;
• Repairs.

Section 4 – Inspection, Joint PR, Conditions and potential TUPE:

• Inspection;
• Timing;
• Joint PR;
• Conditions;
• TUPE.

Individual meetings had taken place with each of the four organisations on 9^th and 23^rd April 2024, involving the Council’s Chief Executive, Executive Director (Environment) and BP.  These were not formal interviews, but had been used as a way to interrogate gaps in the initial submissions and for the Council to assess whether they could have a productive relationship with the organisations/owners.  The Market Hall would house small independent traders/businesses and while the Council’s only formal relationship with the operator would be that of landlord/tenant, given the importance of The Market Hall to the regeneration of the wider town centre with residents and stakeholders, a good professional relationship was deemed essential.

The outcome confirmed there were no concerns around the potential for working with any of the organisations, thereby allowing BP to progress further discussions and confirmation as to what was required in the final bid process.  Three final proposals had been received, with the fourth organisation deciding not to submit as the bidder felt there was insufficient detailed information being provided in relation to the Market Hall.

A final meeting between BP and the Council had been held on 20^th May, where each of the three submissions had been discussed in detail.  The Executive Summary provided by BP was included within the report and set out the rationale for the redevelopment of the Market Hall, Accrington.  BP’s conclusion stated as follows:

The current preference of the evaluation panel is to progress with Applicant 3, subject to agreeing detailed Heads of Terms.

The Council proposed to grant a lease of the Market Hall.  Section 123 Local Government Act 1972 generally required the Council to dispose of its land and property for the best consideration reasonably obtainable.  In this instance, the opportunity to lease the Market Hall had been publicly advertised and three bids had been received.  The proposed tenant had submitted the most financially advantageous bid, and as such, the disposal was considered to be the best consideration obtainable.  As the disposal was at market value, the grant of the lease did not constitute, or include, a subsidy for the purposes of the Subsidy Control Act 2022.

Having taken external legal advice,it appeared that the proposed lease complied with the requirements of the Accrington Improvement Act 1882, which prohibited the granting of market leases and the letting of market tolls and profits arising under that Act for a term in excess of three years.  Although the age and unusual nature of this legislation made it hard to be totally certain, the barrister consulted by the Council (Joanne Clement KC) had been satisfied that the Act applied to the granting of leases of individual market stalls and not to the granting of a lease of the Market Hall building itself.  Similarly, the proposed arrangements for calculation and payment of the rent did not constitute the sub-letting of a market toll and profits (which can be distinguished from rent in law).

With regards to the new shared office/workspaces venture for Burtons Chambers, the Council had been prudent in setting aside a financial sum to cover any potential financial liability which was contractually due to the operator under the Management Agreement during the initial start-up period.  Whilst the lease for the Market Hall was very different, it would be prudent for the Council to consider identifying some financial provision to support the new operator in initial promotion of the Market Hall’s new venture and also after the initial opening excitement had expired, possibly in years two or three.  There would also be some repair and maintenance obligations retained by the Council under the lease for the physical structure of the building, (external façade, windows, doors, roof, pavilion structure/roof etc.) even given the total redevelopment of the market hall through LUF funding.  It was intended that the majority of these costs would be recovered from the operator by way of a fixed service charge, but actual costs would vary from year to year and so there would be some financial liability if the Council was to meet all of its obligations in the lease.

Alternative Options considered and Reasons for Rejection

The Council could choose not to appoint an operator and manage the facility itself.  This was not recommended as the Council recognised it does not have specific knowledge or experienced staff ‘in-house’ to manage a market hall facility with an enhanced food/beverage and leisure offering on such a high-profile town centre project.  In agreeing to appoint an operator, the Council had acknowledged it would no longer have any involvement in the management of the Market Hall & Pavilion, range of trader offerings/which traders were provided leases, and no involvement in any trader leases, levels of rent/service charged or terms and conditions of such leases between the operator and traders.

The Council could choose not to identify financial provisions as suggested in Paragraph 4.7.  This was not recommended as it would be prudent for the Council to make some in-principle decisions to support the operator with promoting the new venture during the initial opening and afterwards to ensure its continued success.

Resolved                                 (1)   That Cabinet notes the report and supports the recommendation set out in Paragraphs 4.1 to 4.4 of the report, to appoint Northern Lights Group Limited (or a subsidiary company of the same set up for the purpose of the Accrington Market Hall project), as the Council’s preferred operator for Accrington Market Hall and Pavilion.

(2)   That Cabinet delegates authority to the Executive Director (Environment) in consultation with the Executive Director (Legal and Democratic Services) and subject to a meeting with the Portfolio Holder and operator, to then finalise and agree detailed terms and to grant a lease of Accrington Market Hall and Pavilions to Northern Lights Group Limited (or a subsidiary company of the same set up for the purpose of the Accrington Market Hall project), for a term of up to 15 years, together with authority to complete all necessary ancillary documentation in connection with the same.

(3)   That Cabinet notes the effects of entering the lease with the new operator for Accrington Market Hall and Pavilion as highlighted in Paragraphs 3.8, 4.7 and 5.1 of the report.