Queen Alexandra Hospital, ground leases of land at the Main Entrance and North Entrance

Concepts

• queen alexandra hospital
• portsmouth
• construction work
• main entrance
• north entrance
• portsmouth hospitals university nhs trust
• ground leases of land
• 46 -year ground leases
• portsmouth hospitals university
• overriding lease

Location

Queen Alexandra Hospital, Southwick Hill Road, Portsmouth PO6 3LY

Description

Portsmouth Hospitals University NHS Trust ("PHUT") has entered into a series of leasing agreements with Noviniti Dev Co 7 Limited ("Noviniti") in respect of a new retail use and lecture theatre and clinical space development ("the Development") at land at the Main Entrance and North Entrance at the Queen Alexandra Hospital, Portsmouth ("the Hospital") with Compass as Noviniti's initial tenant and retail operator. The contractual arrangements are structured as a land transaction exempt from the Public Contracts Regulations 2015 ("PCR") and the Concession Contracts Regulations 2016 ("CCR"). Noviniti has drawn down two 46 -year ground leases ("GL") of the site in exercise of an option agreement with PHUT. The GLs have break clauses in favour of PHUT after 2 years (so PHUT can recover the site if the Development is not commenced); after 6 years (so PHUT can recover the site if only one of the two entrances is completed) and 40 years from practical completion of the Development.

Total Quantity or Scope

PHUT has entered into an Agreement for Underlease in respect of the Main Entrance & North Entrance sites with Noviniti Dev Co 7 Ltd ("Noviniti") and Compass Contract Services (UK) Limited ("Compass"). Compass commits to accepting the grant of two 15 year underleases (with rent obligations to Noviniti) on practical completion ("PC") of the retail space. PHUT (as head landlord) will have insurance obligations owed to Compass and a repairing covenant for the retail space. PHUT will be required to step-in to take the underlease if Compass fails to do so on PC. PHUT must enter into an Overriding Lease (to become Compass' landlord) if Compass becomes insolvent or defaults on its Underlease, in order to maintain the rental payments to Noviniti. PHUT will enter into a 25-year Reversionary Lease (with rent obligations to Noviniti) to take effect from expiry of Compass' underlease. Some education space, research and development space and common parts will be delivered as part of the scheme.

Award Detail

CPV Codes

• 45000000 - Construction work
• 45213100 - Construction work for commercial buildings

Indicators

• Award on a basis other than price and quality.

Legal Justification

The procurement falls outside the scope of application of the regulations

Other Information

Please see Voluntary Transparency Notice of 23 December 2022 (reference 2022/S 000-036583) for details of option agreement and ground lease https://www.find-tender.service.gov.uk/Notice/036583-2022?origin=SearchResults&a... In relation to II.2.5. above, we have inserted "not applicable" as the requirement was not competitively tendered under the PCR/CCR" The Trust Board approved a decision to proceed with Noviniti on 25 January 2023 subject to a further approval on 29th March 2023 with documents to be signed immediately after that. The estimated value range in II.1.7 and V.2.4 represents rental to Noviniti (with an estimated value of approximately £13.2m (subject to RPI under the terms of the lease arrangements)) and projected operator turnover, subject to deduction of circa £330k per annum in respect of rental obligations to Noviniti). The rent that Compass has agreed to pay Noviniti is calculated on the basis of an expected level of turnover. In the event that the retail facilities do not achieve the expected level of turnover (whether as a result of some action the Trust has taken or otherwise) the Trust is liable to share some of the risk of this with the retail tenant. If Noviniti chooses to go ahead Noviniti currently anticipates that any development would begin at the Main Entrance site, with development of the North Entrance to follow. In the event that Noviniti chooses to proceed with the Potential Development, the 15 year underlease to Compass in respect of the ground floor of the Main Entrance site will be granted on completion of the development at the Main Entrance. On completion of the development of the North Entrance a replacement underlease in respect of the ground floor Main Entrance will be granted to Compass to take account of the build period of the work at the North Entrance so that the underleases to Compass of both areas on the ground floor effectively run for a period of 15 years from completion of the Development at the North Entrance. Compass is procuring a guarantee from Compass Group UK & Ireland Limited (the Guarantor) in respect of its obligations under the underleases at the sites in the event that Noviniti proceeds with the Potential Development and the underleases are granted. There will be some education space, research and development space and common parts delivered as part of the scheme which the Trust will occupy via a sub-underlease agreed with Compass.