Gadeon House, Grenadier Road, Exeter, EX1 3UT (Urgent Council Decision)

1)    That the Council make
available up to £7.5m of prudential borrowing to be fully
funded by the Royal Devon University Healthcare NHS Foundation
Trust across the lease term for ‘fitting out works’ at
Gadeon House, Grenadier Road, Exeter;

2)    The Council agrees to
grant a lease to Royal Devon University Healthcare NHS Foundation
Trust NHS for a term of 25 years; and

3)    The Council will appoint
Devon Contractors as required by Royal Devon University Healthcare
NHS Foundation Trust NHS to facilitate the building contract
fit-out works via a direct award under the Procurement Act 2023
(PA23) Schedule 5 13(a).  To mitigate
any procurement risk, and ensure that the requirements of PA23 are
met, the Council will publish a UK5 Transparency Notice prior to
award of contract via a UK6 Contract Award Notice which will be
followed by a mandatory 8-day standstill period.

To secure a long-term
tenant in a key Council Investment asset that has been vacant for
over two years and it will also support the ambitions of a
strategic partner.  The development of
the Pathology Laboratory also creates a wide ecosystem of jobs
across multiple sectors benefitting the whole of the South West
peninsula.

The office
accommodation has been openly marketed following vacant possession
over two years ago.  The Royal Devon
University Healthcare NHS Foundation Trust have expressed an
interest in leasing the available space at Gadeon House at market
value, but due to the intended use, have asked the Council to
provide a financial contribution in order for fit out works to be
undertaken.  Without the availability of
the prudential borrowing, it is highly unlikely the lease would be
taken up.

This decision will be
implemented immediately.

The Royal Devon
University Healthcare NHS Foundation Trust (RDUH) have sought to
lease available space on the Lower Ground and Ground Floor at
Gadeon House, Grenadier Road, Exeter from the Council to establish
a regional Pathology Laboratory.  Gadeon
House is held within the Council’s Investment Portfolio. The
RDUH will be providing £2.5m towards the costs of turning the
office accommodation into a laboratory and associated space but are
seeking a contribution of up to £7.5m from the Council to
complete the fit-out works.

In order to fund the
£7.5m the Council would need to secure prudential borrowing,
the repayment of which would be fully serviced across the duration
of the lease term. 

The lease with the
RDUH for a term of 25 years has a break clause option after 15
years and has been agreed at Market Rent. If the break option is
enacted this would require the RDUH to repay any outstanding
balance on the borrowing taken by the Council for the fitout
works.

The fitout works
required to facilitate the re-purposing of the space will be via a
direct award to Devon Contractors as required by RDUH.

The Council will enter
into a ‘Operated Healthcare Facilities Agreement’ with
RDUH that will ensure a range of building related services are
provided on site.