Asset transfer deal proposed to secure a future for the Courtyard

The Hereford Times has learned that the centre has pitched a 99 year asset transfer to Herefordshire Council as support for a bold £10 million expansion programme.

This week, the council confirmed that it would pay nearly £13,000 towards stage one of the expansion – effectively covering planning application costs.

The decision, made at cabinet level, came with the warning that not supporting the application would put at risk the financial sustainability of the centre once its reducing council subsidy is completely removed next year.

As revealed by the Hereford Times in October, the 30,000 square foot extension to the Courtyard offers the centre as a base for culture initiatives in county currently renting in the commercial sector.

Herefordshire Council is the freeholder for the Courtyard.

The subsidy provided to the Courtyard by the council will be withdrawn at the end of the 2015-16 financial year, with the centre responsible for its own financial sustainability from then.

In the past, the council has committed itself to subsidy deals worth up to £1,000 a day to The Courtyard.

In January 2014, The Courtyard agreed to a deal that saw its share of council funding fall annually to 2016 as follows:

- 2013-14 £208,867

- 2014-15 £189,705

- 2015-16 £130,543.

As such, the expansion is seen as offering the means by which the Courtyard can achieve that sustainability.

The stage one support represents the match funding Arts Council England would expect from Herefordshire Council for a successful application to the Arts Council capital funding programme.

Further consideration is given to support Stage 2 of the programme in the asset transfer of the Courtyard - subject to a  sustainable business case.

Arts Council England has agreed that they would consider the value of the asset to be considered as match funding in an application the Courtyard made to the capital funding scheme.

The council support, then, represents the final contribution - either financially or in kind – that Herefordshire Council will make to the Courtyard following the cessation of the subsidy.

In order to bridge the funding gap left by the subsidy withdrawal, the Courtyard is proposing its £10 million expansion, through which the centre forecasts that it can secure a level of income that ensures financial sustainability.

The Courtyard Trust is developing a business case to submit to the Arts Council England funding programme which will demonstrate how the increased revenue will manage that funding gap.

Arts Council England is said to be “monitoring the position” regarding the provision of support from Herefordshire Council, indicating that it is “mindful to consider more favourably” requests for funding from organisations that have “positive and qualified support and relationships” with local authorities.

The proposal for the funding for the expansion is that it will be financed by £5 million from Arts Council England matched by £5 million the Courtyard can raise through a range of sources  such as Trust/foundations, wealthy individuals, corporate, and public subscription.

Already, the Courtyard has established a fund raising committee targeted with raising that share and intends to make the stage one application next month.

If that application is successful, the Courtyard has asked the council for £12,705 toward the cost of the planning application - as match funding for project development grants to make stage two happen.

It is in order to support the stage two bid that the Courtyard is requesting the asset transfer on a 99 year lease - supported by necessary legal notices to protect the council’s interests and ensure the centre’s future in arts and related community engagement.

Herefordshire Council has continued to cut the level of subsidy paid to the Courtyard with the intention of it ending completely by 2016.

The financial support of £12,705 is over and above the budgeted subsidy for 2015/16, and will be met from existing resources within the Economy, Communities and Corporate Directorate.

Where the council has received a written commitment from the Courtyard that they will not be the recipients of any further support from the council  once the subsidy ends, the payment of the planning application fee is seen by the council as an “investment” in securing the centre’s future.

BACKGROUND – The Courtyard asset transfer

If the Courtyard cannot deliver its proposed capital programme, there may be implications for the asset transfer and the centre’s ability to achieve a zero subsidy business case.

The Courtyard will need to make a formal application for consent to undertake the capital works to the council as their landlord.

That consent will include conditions as to how the works can be carried out.

It would be standard for the Courtyard as tenant to meet the landlord’s legal and surveyors costs in considering such an application.

In this instance, the planning costs will be met by the council as match funding for the project development grant.

The asset transfer would be subject to the following conditions:

 - Responsibilities for repair and maintenance pass to the Courtyard.

- A covenant restricting the Courtyard’s use to its purpose as a community arts centre.

- There is an overage clause in the transfer agreement. At its simplest, an overage clause gives the vendor of a property the right to share in any subsequent increase in value that might occur as a result of planning permission being granted for redevelopment of all or part of the property.

- There is a Deed of Variation made to the lottery grant agreement transferring the lottery conditions to the Courtyard.

WHAT ARE THE RISKS?

- Should the Courtyard not succeed in raising the necessary funds for the project there is a risk that the future financial sustainability of the centre will need to be reviewed in relation to the end of the annual subsidy.

- Should the capital project cost more than £10 million, the Courtyard would need to rationalise the level of the project.

- Should the proposed capital scheme not get planning permission there is a risk to the future sustainability of the centre. Advice given in the pre planning application is intended to mitigate against this possibility.

- Should the Courtyard fail in its £5 million grant bid or raising the required match funding, the centre will need to rationalise the level of the project.

WHAT’S THE PLAN?

The expansion makes the Courtyard a “cultural hub” where groups and individuals involved in arts and culture initiatives rent office space side-by-side.

The hope is that this income, along with restaurant revenue from an expanded ground-floor cafe area, will be enough to fill the significant hole left when council authority funding is withdrawn.

As of October last year, the project timetable had an “open for use” target of 2017.

The scheme has already been well received across the county’s creative sector, with 25,000 square feet already covered by expressions of interest.

Work would see the building extended to the south and west, covering some of the current car park.

The ground floor would include an expanded seating area for the restaurant as well as flexible space that could be used for rehearsals or classes.

Upstairs will be two floors, divided into smaller areas that could be rented out.

An example given in October cited space for Hereford College of Arts graduates looking to set up in the area working alongside companies like the acclaimed 2Faced Dance who are already based at the Courtyard.