Development Partner for Residential Mixed Use Development within Stockport Town Centre (part of Transport Interchange Facility and associated Green Space Park)

Concepts

• stockport
• sale
• manchester
• real estate
• smbc
• gmca
• development partner
• use development
• prospective development partner
• residential property

Location

Sale

Description

Stockport Metropolitan Borough Council (SMBC), in conjunction with Greater Manchester Combined Authority (GMCA) as co-promoters (with Transport for Greater Manchester (TfGM) leading from a delivery perspective) sought to identify a prospective development partner relating to the residential development element of the Stockport Interchange Mixed Use scheme. The scheme comprises redevelopment of the existing bus station within Stockport town centre, to create a mixed-use development that drives both financial and regeneration benefits from the site. The development partner is required to source equity investment and secure development funding, assist with design development, and implement residential property and asset management (incl lettings and tenants) relating to the residential development element. Following identification, the development partner and equity investor (if applicable) is now to enter into a Special Purpose Vehicle (SPV) with SMBC and GMCA (incorporated as an LLP).

Total Quantity or Scope

— Stockport Metropolitan Borough Council (SMBC) and the Greater Manchester Combined Authority(GMCA) as co-promoters sought via this procurement to appoint a development partner for a residential development (adopting a private rented sector commercial model and comprising circa196 units in a mixture of 2 bed and 1 bed units finished to a high standard) with provision for car parking spaces and commercial/amenity space beneath (the ‘Residential development’). The three main requirements were as follows and in the descriptive document made available electronically: 1) Source equity investment in to a Special Purpose Vehicle (SPV) and secure development funding sufficient to deliver the Residential Development (it was the assumption at the time of the procurement that the development partner would invest equity directly but the structure of the development partner's bid resulted in requiring an equity investor to provide the equity); 2) Adopt a collaborative working partnership with SMBC, GMCA and TfGM to progress design development and delivery of the Residential Development. To include identification and delivery of value engineering opportunities, maximizing gross development value and financial returns to stakeholders; and 3) Implement residential property and asset management via the SPV over a minimum term, including management of lettings and tenants. The LLP will appoint the Development Partner as a management services provider and, in due course the management services provider will appoint a letting agent: — the Residential Development is part of a Mixed Use scheme that also includes the development of a new state of the art transport Interchange, a raised podium creating high quality ‘green’ public space, enhanced connectivity to the town’s rail station and River Mersey frontage, together with a range of additional ancillary infrastructure (the ‘Scheme’), — SMBC and GMCA will invest ‘patient equity’ into the SPV collectively up to 10 000 000 GBP in order to ensure the viability of the residential development in order to ensure the viability of the residential development. The SPV will retain and operate the residential development for a term that is sufficient to allow for the capital appreciation of the asset and repayment with return of the patient equity invested by SMBC and GMCA over and above development partner returns prior to any disposal, — Transport for Greater Manchester (TfGM) are leading the delivery of the whole mixed use scheme and are responsible for funding the redevelopment of the Interchange and the other infrastructure enhancements, including the ‘green’ public space and improved connectivity proposals, SMBC and GMCA sought to secure the funding and ongoing management and operation of the residential development element of the scheme, through appointment of a development partner, — the strategy for the delivery of the the mixed use scheme comprises comprises the appointment by TfGM of a single works contractor (the ‘DB Contractor’) to undertake the design and build of the entire mixed use scheme. The procurement process for the DB Contractor was undertaken separately but in parallel to this procurement process. The development partner was expected to input into the design process with the DB Contractor as outlined below. This strategy was developed to address the key challenges faced and earliest buildability input and a single point of accountability for interfaces between multiple scheme elements were considered to be key, — the DB Contractor is appointed via a 2 stage procurement process. The first stage being the further development of the design (‘the preconstruction stage’). For the second stage, detailed ‘design and construction stage’, the DB Contractor will be appointed by TfGM under 2 separate contracts; for the interchange/park; and the residential development to reflect the potential requirements of the prospective development debt funder.

Award Detail

Award Criteria

CPV Codes

• 70000000 - Real estate services

Indicators

• Award on basis of price and quality.

Other Information

— further to II.1.7) and II.2.4, for the purposes of deriving a rate of return to be used in the developed business plan/financial model, the estimated scheme construction cost (which therefore excluded the costs for providing residential asset management services and the financing costs) was between 35 000 000 GBP and 40 000 000 GBP, and assumed patient equity requirement up 10 000 000 GBP. — further to V.2.4 the value stated relates to the estimated scheme construction cost at the time of the procurement (which therefore excluded the costs for providing residential asset management services and the financing costs — see below) and was between 35 000 000 GBP and 40 000 000 GBP. After completing a significant element of the preconstruction phase it has been identified that total costs have increased, although these construction costs are not yet finalised. This scheme cost is to be funded by a mixture of equity and debt funding sourced via the Development Partner to the SPV (with the operational costs expected to be met from revenue). In addition, SMBC and GMCA will provide patient equity to the SPV, which as a consequence of the increase in construction costs is now also anticipated to increase. Grant funding is also available to complete the funding package, — the development partner will be remunerated for their equity investment in the SPV via a preferential return based upon their proposed hurdle IRR included within their tendered solution. - the duration of the contract was included for 15 years, which was the current assumption based on an estimated 3 year design and construction period for the residential development, followed by a further estimated period of 12 years as there will be a requirement for the development partner to commit to a hold period in respect of the asset in order to allow for repayment. The contract hold period is now confirmed at 12 years from Practical Completion.