Issue details

To consider an opportunity for the Council to purchase and lease back Plot 15/16 Faraday Business Park, Daedalus on the terms as set out in the confidential Appendix A.

This report sets out terms for the potential purchase and lease back of a property at Solent Airport, Daedalus.

The Council’s vision for Daedalus is for the site to become a premier location for aviation, aerospace engineering and advanced manufacturing businesses creating many skilled employment opportunities for local people, which is under-pinned by a vibrant an sustainable airfield.  This potential purchase and lease back supports this vision as well as complementing the Council’s existing commercial investments.

The confidential Appendix A sets out an analysis of the investment, financial information and heads of terms agreed with the owner to enable the Executive to decide if the investment property should be purchased.

The first phase of commercial development is now underway at Daedalus with the establishment of Faraday Business Park on the eastern side of the Solent Airport estate. When the Council acquired Daedalus in March 2015 the first building was under construction and this project has now been completed.

If the Council proceeds with the acquisition, it would do so with a pre-let agreement with a tenant to occupy the building, which has been built to their specification, providing an energy-efficient modern manufacturing facility with room for future expansion.  The company is currently located in the borough and has been trading since 1952, providing precision engineering services to the aerospace, oil and gas industries. The company has good covenant strength as a prospective tenant of the estate.

Originally it was intended that the company would acquire a long leasehold interest in the building when completed, however the opportunity has arisen for the Council to acquire building and let on an occupational lease basis, providing an ongoing revenue stream rather than a capital receipt. The business plan for Daedalus relies on an ongoing rental income from property to offset the ongoing running costs, and this property would contribute positively towards this objective.

Heads of Terms have been agreed in principle, which would allow UTP to occupy the building at the earliest opportunity and the Council to secure an important income stream for the Estate.