SAFEGUARDS will protect Coventry taxpayers’ money used to subsidise plans for an otherwise ‘unviable’ boutique hotel at the ex-Evening Telegraph building, a leading councillor insists.
Jim O’Boyle, Labour cabinet member for jobs and regeneration at Coventry City Council, was responding to our story yesterday.
We revealed the latest details of council plans to prop up the ambitious scheme using taxpayer assets and student accommodation.
As we reported, more land where the council owns the freehold – near to the landmark Corporation Street 1950s newspaper building – is set to be released to the hotel’s developers or student accommodation providers on hugely extended and more valuable 250-year leases.
All leases around the total 2.6 acre site earmarked for the hotel and residential or student accommodation are set to be extended to 250 years.
Rental payments to the council on existing leases, of up to 89 years, will be written off, resulting in a further potential hit to taxpayers.
Instead of the money from the land sale going to council coffers as normal, it will go to developers to cross-subsidise the hotel.
A recent independent report by Cushman and Wakefield concluded the hotel faced significant unviability issues.
The additional measures are needed to complete the scheme and attract further investment, the council claims.
The amount of council taxpayers’ money involved – potentially millions of pounds – is being kept secret for commercial confidentiality, to be discussed in private by councillors on Tuesday.
But Coun O’Boyle says taxpayers’ money will only be released to the developers in a phased way if and when they deliver a successful hotel, under the plans to go before the ruling cabinet of Labour councillors on Tuesday.
He also said the land would be worth nothing to the council and city taxpayers if there wasn’t market interest and a willing buyer.
He said: “In principle the deal was agreed ages ago. It’s just taken longer due to agreement on various aspects of the deal in legal terms which I have left to experts plus an overall valuation of the land which will deliver the student accommodation at the back.
“What is happening is that the land at the back is pretty much worth nothing unless something is built on it to increase its value.
“In other words, as the accommodation comes online, following sale or income from it, that will be reinvested in to delivery of the hotel.
“Unless this accommodation is built and then used, it ultimately is worth next to nothing due to the current leases’ length and use.
“An escrow account is set up which will release money from the land as and when certain milestones on the hotel are reached. This is to ensure delivery of the hotel.
“If the hotel is not delivered, and I am totally confident it will, then money from the escrow account WILL come back to the council as per the agreement in the Heads of Terms.
“So, as that value is realised, the money which that generates will be reinvested into the hotel to make it viable and work. We have always understood that. It is just reaching that point which we finally have. As a council and cabinet member, I have been working on many other projects at the same time so it often comes to getting round to doing it. It is now done!
“This is all about bringing visitors which will both stay overnight and longer thus spending more money which is a boost to the local economy. This is on top of the jobs generated both by building the hotel and other developments but also the extra spend sustaining jobs in the long term. It also needs to be seen in the context of Corporation Street and the redevelopment of the COOP building bringing income, vitality and use to what would otherwise be an empty building. We agreed a long lease on that and forego a return from sale on that at the time for the long term benefits of the city and our economy.
“This is all about sustainable economic improvement and elevation in effect meaning jobs. That is why I chose the name of my portfolio being Jobs and Regeneration”.
A spokesperson for Far Gosford Developments Ltd, which as we reported already holds the leases on the majority of the 11 leasehold interests across the total land area, which includes derelict buildings around Lamb Street and Tower Street, said: “The funding package was agreed in principle two years ago and uses cross financing from the wider development of student housing on the land to the rear that includes the former workshops of the newspaper.
“The development of a quality hotel at the Telegraph building – which is a landmark site in the city – has never been commercially viable in isolation. We will generate funds through the commercial deal on the student accommodation while the council is extending leases on the land to make the development possible, which is common practice in the development industry. There is also backing on a regional level by West Midlands Combined Authority, which recognises the value in regenerating what is currently an unused and unloved building and sees the value on a wider Midlands level.
“The council is not putting any cash into the development and without this development, the council’s interest would have little value as it doesn’t have the right to use the land until the year 2106. In effect, therefore, possible value that may have arisen for future generations is being used today to boost the visitor economy and local jobs at a crucial time for the city.”
