Agenda item

The report was noted.

Members were provided with an update on the current situation with Swansea Bay City Deal portfolio private sector investment and contributions as included in the report circulated.

 

Members queried about the digital infrastructure numbers and in relation to the £14,600,000 investments from Virgin which makes up three quarters of the actuals to date in terms of private investment.

 

Members asked if that funding is work that would have happened anyway and for Pentre Awel’s investment projections for this year, how can it be expected that £20,000,000 investment can come this year as that is a considerable amount of money.

 

Officers explained that it wouldn’t be possible to answer the first question, but nobody expected that much investment to be accelerated as fast as it had been.

 

Officers felt that the model has benefitted the region. Officers explained that in comparison to other areas, they are doing well and have expanded and accelerated their digital infrastructure roll out. This is because they have organised regionally and having lines of engagement and employed staff in the local authorities supporting digital infrastructure.

 

The Virgin Media numbers of £7,000,000 of expenditure in the region was excluded by the City Deal Infrastructure team from the £14,500,000 as that was not a direct involvement with the City Deal infrastructure team or project so they excluded it from the assessment. The spend in the region was higher if you include that money, but for the reasons mentioned they could not include it.

Members referred to the fact that almost half of the actuals and projected private investments are virgin media related and members are aware that Virgin were already aggressively investing in this area for market share. Members queried whether City Deal was underselling itself.

 

Officers advised they didn’t think so when you look at the breakdown of the providers and localities and felt that City deal has been ahead of where they thought in terms of stimulating private sector market and done so to good effect. Officers advised it would get more difficult as the fully fibred areas dry up, however there will be an acceleration of 5g test beds and the IOT workstreams are fully on boarded.

 

Members were told that this is a better position than originally thought and is qualified in terms of claimable investment impacted from city deal and the digital infrastructure team.

 

Officers explained that the first tranche of funding for Pentre Awel is coming from private sector borrowing and they are going into the market to pull down some money for the core element of the site they are constructing at the moment. Officers advised that the funding of that will come from the occupiers that are going on to tenancy agreements within the Pentre Awel complex.

 

Members were informed that this first element may slip slightly because there is an intention to use the funding in the first place and there has been a slippage in the project, although the core element of the project is still on track for Autum 2024. The hotel and nursing care will need to break even on their own in terms of funding as it develops.

 

The Chair clarified with officers if the £20,000,000 is going to be borrowed from an investment company or bank and then paid back via the tenancies. Officers confirmed that was the intention and are talking to potential investors. There are also some discussions with the UK Government relating to grants being frontloaded and some of our own so officers will rebalance that as and when appropriate during the project.

 

Members asked if this funding would be necessary in terms of the final investment figure if we were able to be in a position where we didn’t need to borrow, would officers be confident that they would get the £110,000,000 private sector investment via the hotel and the rest of the scheme.

 

Officers advised that the key issue is getting the tenants in to occupy that space and how you would translate that income stream into a capital value. Now the funding is needed but there might be other ways of looking at the income streams. There are the various academic institutions coming in and the private sector and innovation elements of it and that is slowly picking up momentum.

Members asked about the campuses and Swansea Waterfront being red risks. Members asked if officers knew if in 2025 that there will be the start of the investment for the campuses, and will it be spread over a number of years? Members also wanted to know in relation to the hotel build and the rental income from the Kingsway.

 

Officers explained that the campuses have developed the least. Until the commencement date and the funding agreement is signed, they won’t know how much it has slipped by until they can start building. Jonathan Burns advised that there is a plan and he has spoken to Richard Lancaster of Swansea University who is overseeing this and has seen the investment plan but they can’t start this until they get the green light to start building.

 

Officers explained that a lot of the £15,000,000 of city deal funds is in phase one around Singleton and Morriston Hospitals and a lot of the private sector investment is around phase 2. They are in conversations with industry partners and officers are confident that once the green light comes and they start delivering then they will start to see it coming through.

 

Members were advised that the project lead of the hotel has provided an update to say that they are still in negotiations with private sector investors and multiple funding sources for the hotel. The ATG fitout of £1,000,000 is done but they are still negotiating with the hotel. An announcement is imminent, and they are having negotiations with hoteliers.

 

Members stated that there is a major issue with funding of the hotel.

 

Officers said that the industry still hasn’t fully recovered, currently the value is at £19,000,000 and they don’t know how much of it will be coming from private funding as they may not be willing to invest at that level.

 

Members said that there would always be a gap between there between a 3 and 4 star and the way that gap is made up and the funding arrangement for the initial build and then the lease afterwards would be done. Members were surprised that its not a red risk rather than amber for that reason.

Members also felt that the rental for the Kingsway should also be a red risk as well as they don’t know if the Kingsway will ever get filled up with all the other building going on currently.

 

Officers advised that the marketing campaign for the Kingsway is due to happen shortly. Indications are the opposite, catalysing the need for more office space. The Kingsway office space is considered to be high quality, collaborative space that is highly sort after.

 

Trinity St David have indicated that they already have got 90% occupancy earmarked for tenants for the Innovation Matrix which is amazing as they only have the seal structure up currently.

 

Officers advised that it is only heads of terms at the moment, and nothing signed but having that indication of tenancy agreements underway or working towards that is fantastic. It may be stimulating new businesses or industry into the region, but all those tenants will be announced as soon as they can be.

 

Members advised they were surprised that Homes as Power Stations was marked as green in the report as there are zero actuals for the first four years and the report is projecting £1,400,000 for this year. Members said that approximately half of the projects they are looking at is £1,400,000 out of £375,000,000 which makes up 60% of all private sector investment and they are significantly behind in terms of delivering all the actuals of private sector investment.

 

Members said that in a weak economy with high interest rates, not knowing what the future holds and with the construction sector being in a difficult place right now, members feel it is ambitious to believe that £375,000,000 within 8 years when so far only £1,400,000 has been delivered in 7 years.

 

Officers advised that the £1,400,000 is actuals and that there is a lag in the reporting as they have to gather reports and then the project lead is in the process of gathering those together for this financial year.

 

Lisa Willis advised that Homes as Power Stations is linked to capital builds and linked to funds that haven’t been launched yet. The projections for private sector leverage are towards the end of the program so the next 2-3 years and is on target.

 

There is a pipeline of developments through the local authorities, through the RSLS and the private sector. There is the supply chain mapping exercise that has been done and they are fully resourced now. They have already started the delivery of Homes as Power Stations programme. Even though business plans are approved, and they are confident that the private sector projections leverage will be as met. That has been re-profiled because there is a lag in terms of construction, but they are confident they will meet those figures.

 

Members wanted to clarify what gives officers the confidence that they will be able to meet these figures, given every build project has slipped and the costs for everyone has increased. With a weak economy and a fully booked construction industry, how will they have the capacity to deliver £375,000,000 in 8 years.

 

Officers explained that the Homes as Power stations isn’t a standalone building programme and is linked into the developments already projected and the aim of the project is to encourage the developments to look at renewable technologies. The housing developments would already be happening, the Homes as Power stations are sharing those lessons learned.

 

Members advised that the projected plan for Swansea North house building between Penllergaer, Loughor, Gowerton and Gorseinon was around 1500 houses back in 2019, up to now only 150 have been built. Members advised that quite a few of the larger builders are having problems currently building the vast estates and its only smaller builders who aren’t having problems who are managing to build the smaller estates.

 

Members believe that they need to be very cautious how the £375,000,000 is going to be spent. Members said that some successful retrofitting has happened in Clydach on Homes as Power Stations and maybe at some point in the future it may be worth looking seriously at whether retrofitting houses as well as building new ones.

 

Officers clarified that Homes as Power Stations is looking at new builds and the retrofit market and can provide an update for members.

 

Members feel that it is a big undertaking to get all this done in such a short space of time and all the issues they mentioned before in relation to the timeframe and the current situation of the economy, cost price increases and the position of the construction industry.

Members would welcome a report to provide assurances on the plans and to see how the retrofit process would work. Members also brought up that they may add site visits to the Forward Work Program.

 

Simon Brennan advised members that there is always an element of risk when you are relying on the private sector and all authorities are going through the LDP process currently and everyone has ambitious plans in terms of housing delivery whether they have to work with public sector partners, RSLS. Carmarthen and Swansea also having their own in-house housing as well.

 

Officers advised that it’s about connecting with the private sector and encouraging them to deliver. Officers explained that it is also about working in partnership with colleagues in planning as well and creating the environment for volume housebuilders to want to be engaged in the Southwest Wales region.

 

Officers advised that the demand is there for houses due to the work happening on the freeport and the general economic growth in the area and its about being able to reach supply and encourage contractors in. Officers commented that hopefully if they can see the economic growth then these house builders will be encouraged to build here.

 

In relation to retrofit, officers advised that there isn’t a lot of money available and its about proving concepts and then making sure there is a good pathway when other funding stream become available to encourage retrofit across the region.

 

Members suggested that we may need to lean on ourselves due to the way mortgage rates are increasing causing people issues in getting a mortgage as well as retrofitting in the authorities housing stocks or working with partners.

 

The report was noted.