North Yorkshire Council
Executive
21 May 2024
Marketing exercise to procure a
short-term operator for Alpamare Waterpark
Report of the Corporate Director of
Resources
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1.0 PURPOSE
OF REPORT
1.1
To
update Members on the outcome of the marketing exercise to procure
a
short-term
operator for Alpamare Waterpark (the Waterpark);
1.2
To
seek approval from the Executive to enter into negotiations with
the preferred bidder to try to finalise acceptable terms for the
short-term operation of the Waterpark;
1.3
To
note the time constraints in achieving an aspirational summer of
2024 opening of the Waterpark; and in recognition of the time
constraints to seek approval from the Executive to delegate the
authority to enter into the potential short-term lease, along with
the agreement of any associated tenant incentives, to the Corporate
Director of Resources in consultation with the Assistant Chief
Executive Legal & Democratic Services, Corporate Director
Community Development, the Executive Member for Finance and
Resources, and the Executive Member for Culture, Arts and Housing;
and
1.4
For the Executive to note the intention to immediately commence a
review of the long-term options for the operation of the Waterpark
in the event the council is unable to finalise the terms of the
lease for the short-term operation with the preferred
bidder.
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2.0
SUMMARY
2.1 This
report provides details of the outcome of the marketing exercise to
procure a short-term operator of the Waterpark and seeks approval
to enter into negotiations with a preferred bidder.
2.2 The
council has aspirations of the Waterpark being operational for the
2024 core summer season, however there are obvious time constraints
associated with the achievement of this goal. In recognition of
these time constraints this report seeks authority for the decision
to award the lease, and the approval of any associated tenant
incentives, to be delegated to the Corporate Director for Resources
as the Council’s Section 151 Officer. Any decision would be
made in consultation with the
Assistant Chief Executive Legal & Democratic Services
(Monitoring Officer), Corporate Director Community Development, the
Executive Member for Finance and Resources, and the Executive
Member for Culture, Arts and Housing. This decision will be
recorded in a further report for these named
individuals.
2.3 The
report also outlines the council’s intentions should it be
unable to agree final terms with the preferred bidder.
3.0
BACKGROUND
3.1 The
Waterpark was constructed by Benchmark Leisure Limited (Benchmark)
pursuant to a £9m loan arrangement with Scarborough Borough
Council (SBC) and opened to the public in August 2016. The
site includes:
i.
Water
Park comprising an indoor wave pool, four slides, two outdoor
pools, restaurant and bar;
ii.
Changing rooms,
WCs;
iii.
Spa
on First Floor;
iv.
Adjoining
carpark.
3.2 The
Waterpark forms part of the wider North Bay development which
sought to achieve 55 acres of regeneration consisting of a
Principal Visitor Attraction (PVA), commercial development and
accommodation. The original Development Agreement with Benchmark,
which has now expired, dated back to 2002 and the premise behind
the agreement was that the developer could not take any profit out
of the scheme until the PVA was delivered. The PVA comprised
the Waterpark and the Open Air Theatre. The works to the
Open-Air Theatre were part funded from the first phases of the
North Bay development and were completed in May 2010.
3.3 In
September 2013 Scarborough Borough Council’s Full Council
approved the provision of a commercial loan to Benchmark of up to
£9m to fund the development of the Water Park with a projected
build cost of £14m; with the remaining £5m and any
potential cost overruns being funded by Benchmark.
3.4 The
works were completed in August 2016 at which point SBC granted a
35-year lease of the Waterpark to Benchmark including its
immediately adjoining carpark. The interest against the loan
was set at a commercial rate and loan repayments were made by way
of the rental payments pursuant to the lease. Only once the
loan was repaid would Benchmark be permitted to take any profit out
of the remaining North Bay development.
3.5 The
Development Agreement with Benchmark expired in March 2021 however
the loan agreement with Benchmark in respect of the Waterpark
continued. SBC subsequently enforced a loan guarantee from
Benchmark’s parent company which was settled in October
2022.
3.6 Due to
Benchmark’s continued failure to meet significant loan
repayments, North Yorkshire Council issued Benchmark with a
statutory demand, Benchmark subsequently entered into voluntary
administration and the council took possession of the Waterpark by
way of forfeiture in December 2023.
3.7 The
council has aspirations of the Waterpark being operational for the
2024 core summer season and, since taking possession, has been
reviewing its options to try to deliver this goal. To enable this
the council has instructed works through Align Property Partners to
retain the facility in a safe and operational state. Those
works are on-going and are due to be completed in late May / early
June 2024 to facilitate the potential summer 2024
opening.
3.8 As the
council has never operated the Waterpark itself it only has limited
information available to it in relation to historic operating
costs, trading patterns, income, energy consumption, and operating
arrangements. We do know, however, that spiralling energy costs
have been a particular financial challenge for leisure attractions
such as this facility.
4.0 SHORT
TERM MARKETING EXERCISE
4.1
Following a review of the various legally compliant procurement and
disposal options available to the council, a short-term letting
arrangement was selected as the most viable option. The factors
taken into account in this decision making included:
·
the
aspiration to achieve a summer 2024 opening and the associated time
constraints;
·
the
lack of internal capacity and readily available expertise within
the council to run a facility of this nature internally, at short
notice;
·
the
potential financial risks and uncertainty associated with the
operation of the facility;
·
the
longer term opportunities that might be presented if the council
considers the Waterpark asset alongside the wider North Bay sites
that remain within the council’s ownership.
4.2
Consideration was also given to the fact that this facility was
never intended to be operated as a community asset or require
substantial public subsidy. The concept of the PVA, as
defined by the original Development Agreement, was to deliver an
attraction which acted as a major magnet for tourism, increasing
visitor numbers to the region and supporting the tourist economy,
as opposed to a community facility.
4.3 In April
2024 the council launched an informal tender for the short-term
operation of the Waterpark. The opportunity of a short-term
lease of 12 months, with an option to extend for a further 12
months, was advertised with the inclusion of the Waterpark’s
immediately adjoining carpark. In view of the short-term
nature of the opportunity, bidders were invited to put forward any
commercial landlord/tenant incentives as part of their bid such as
rent-free periods. The council would also retain
responsibility for any latent defects at the facility. The
council’s primary objective from the informal tender was to
achieve a summer 2024 opening of the facility whilst it developed
its long-term aspirations for the site.
4.4 Tender
returns were requested by 7 May 2024 and officers made arrangements
for interested parties to take part in site visits. During
the tender period a number of interested parties came forward, some
of whom represented experienced national and international leisure
operators.
4.5 As part
of the tender bidders were asked to submit financial and insurance
information, evidence of relevant experience of operating a
Waterpark, an operational business plan for the Waterpark including
a programme for re-opening by summer 2024, pricing structures,
booking system plans, reactive repair and maintenance proposals,
staffing structures as well as proposals to increase revenue.
4.6 The
predetermined assessment criteria which was issued to all bidders
confirmed that bidders were required to pass a financial assessment
as well as demonstrate that they could achieve the council’s
objective of a summer 2024 opening. The scoring criteria for
bids was then based on a 40% pricing / 60% quality assessment with
the latter focusing on the proposed operational business
plan.
4.7 The
Council has received Tender submissions that are considered in more
detail in the confidential appendix of this report. The
recommendation is to that one of the bidders is selected as a
preferred bidder and that officers take forward further discussions
to allow both the council and the bidder to determine if they are
able to agree suitable final terms of a short-term letting
agreement. This report therefore seeks authority from the Executive
for officers to progress those discussions. The details of both
bids are set out within confidential Appendix A.
4.9
There are obvious time pressures associated with the agreement of
terms in order to facilitate the potential achievement of a summer
2024 opening date. The Corporate Director of Resources has
delegated authority to enter into short term leases of this nature
however it should be noted that a decision to award the lease may
result in financial implications in the form of commercial landlord
/ tenant incentives. At the present time any such incentives cannot
be quantified with any certainty and, will be subject to further
dialogue with the bidder. This report therefore recommends that the
authority to enter into the lease, and to approve any associated
tenant incentives, be delegated to the Corporate Director of
Resources as the Council’s Section 151 Officer. Any such
decision to approve a lease will be made in consultation with the
Assistant Chief Executive Legal & Democratic Services
(Monitoring Officer), Corporate Director Community Development, the
Executive Member for Finance and Resources, and the Executive
Member for Culture, Arts and Housing.
5.0
LONG-TERM PLANS
5.1 During
the term of the short-term let of the Waterpark the council intends
to develop and take forward plans for its long-term
operation. The informal tender documentation set out that the
initial lease term offer is 12 months, with an option to extend for
a further 12 months depending upon the progress of those
plans.
5.2 In the
event that the council is unable to agree terms with the preferred
bidder, the Executive is asked to note that officers will
immediately review and progress options for the long-term operation
of the Waterpark.
6.0
ALTERNATIVE OPTIONS CONSIDERED
6.1 As part
of the review of the legally compliant options to achieve a summer
2024 opening, the council has looked at the options of operating
the facility in-house, to operate the service via external
operators under a management agreement, to manage the site through
property agents and to formally dispose of the site. None of these
options were achievable within the time
constraints.
7.0
FINANCIAL IMPLICATIONS
7.1
There may be financial implications associated with the short-term
operating proposals for the Waterpark in regards to any landlord /
tenant incentives that might need to be agreed by the council to
facilitate the proposals.
7.2 Any
landlord / tenant incentives explored through the further
discussions with the preferred bidder - along with the associated
assessment of potential financial implications for the Council -
would be subject to the approval and satisfaction of the Corporate
Director of Resources.
7.3 Any
decision to enter into a short-term operating agreement with the
preferred bidder would take consideration of the potential
financial implications associated with the final agreed terms, and
be agreed by the Corporate Director of Resources in consultation
with the Assistant Chief Executive Legal & Democratic Services
(Monitoring Officer), Corporate Director Community Development, the
Executive Member for Finance and Resources, and the Executive
Member for Culture, Arts and Housing.
7.4 It
should be noted that there would also be financial implications for
the Council associated with the need to retain the facility in a
dormant but operational state if final terms for the short- term
agreement cannot be agreed. There is therefore a balance required
to protect the longer term value of the asset for the future whilst
minimising the cost to the Council of supporting shorter term
operations.
8.0 LEGAL
IMPLICATIONS
8.1 The
council has wide powers to enter into leasehold arrangements under
the Local Government Act 1972. A land deal is not a
procurement of public works, services or supplies so sits outside
the council's procurement responsibilities under the Public
Contracts Regulations 2015 and its own Procurement and Contract
Procedure Rules. As the proposed tenancy is less than seven
years, section 123 of the 1972 Act allows the council to prioritise
the objective of reopening the facility as opposed to obtaining the
best monetary return.
8.2 The
council is however required to have regard to the UK subsidy
control regime which is reflected in its Property Procedure
Rules. The council and the preferred bidder are able to enter
into reasonable commercial incentives which a landlord in similar
circumstances might offer provided, no economic advantage is
conveyed as might constitute a subsidy pursuant to the
regime. There is a wide margin of appreciation for what a
commercial incentive might be in these circumstances. If
final terms can be agreed with the preferred bidder, they will have
to satisfy a subsidy control assessment and, it is proposed that
the delegation for the council to enter into a short-term lease is
subject to satisfying this condition.
9.0
EQUALITIES IMPLICATIONS
9.1 An
equalities impact assessment has been undertaken and identified no
negative impacts on people with protected characteristics. The
assessment is attached in Appendix B.
10.0 CLIMATE CHANGE
IMPLICATIONS
10.1 A
climate change impact assessment has been undertaken and is
attached as Appendix C.
11.0
REASONS FOR
RECOMMENDATIONS
11.1 To facilitate the
potential opening of the Waterpark for the summer 2024
season.
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12.0
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RECOMMENDATION(S)
For the Executive to:
i.
note
the outcome of the marketing exercise to procure a short-term
operator for Waterpark;
ii.
approve that
officers enter into negotiations with the preferred bidder with the
aim of agreeing final terms;
iii.
delegate the
authority to enter into the potential short-term lease, along with
the agreement of any associated tenant incentives, to the Corporate
Director of Resources in consultation with the Assistant Chief
Executive Legal & Democratic Services (Monitoring Officer),
Corporate Director Community Development, the Executive Member for
Finance and Resources, and the Executive Member for Culture, Arts
and Housing; and
iv.
note
the intention to immediately commence a review of the long-term
options for the operation of the Waterpark in the event the council
is unable to finalise the terms of the lease for the short-term
operation with the preferred bidder.
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APPENDICES:
Appendix A – Restricted Private and
Confidential Appendix: Preferred Bid Summary
Appendix B - Equalities Impact
Assessment
Appendix C – Climate Change Impact
Assessment
BACKGROUND DOCUMENTS:
Gary Fielding
Corporate Director – Resources
Northallerton
Report Authors – Kerry Metcalfe, Carol
Rehill
Presenter of Report – Kerry Metcalfe
Assistant Director Commercial, Property and Procurement
Note: Members are invited to contact the author
in advance of the meeting with any detailed queries or
questions
