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Update on Port Edgar Marina and Sailing School

Culture and Leisure Committee
22 February 2012

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Purpose of report This report fulfils an outstanding remit to provide a progress report on the procurement process for selecting a marina operator willing to invest in the marina at Port Edgar. Summary In June 2011 the Committee noted that Edinburgh Leisures proposed infrastructure development plans for Port Edgar were no longer viable and that Edinburgh Leisures Board had taken the decision to make a planned withdrawal from the management and operation of the marina by the end of 2013/14. The Committee approved an alternative plan to advertise the lease of Port Edgar Marina and Sailing School to find a third party willing to invest in the marina. Approval is sought to obtain an updated cost estimate for essential harbour improvements and to offer the lease on the basis of a long ground lease. Edinburgh Leisure is developing a business case for a standalone sailing school which will be presented to its Board for approval. Main report As reported in June 2011, the condition of the marina, sailing school and other facilities at Port Edgar continues to decline. The current pontoon network and berths at Port Edgar marina have a life expectancy of between two and four years. Whilst Edinburgh Leisure will continue to carry out essential repairs to the marina, at present neither the Council nor Edinburgh Leisure has the funds for the major refurbishment that is required to maintain the operation of the facility beyond 2013/14. Following the Committees decision in June 2011, Council officers have worked closely with Edinburgh Leisure to assess whether the marina would be an attractive investment for potential marina operators. Advice has been obtained from property specialists, GVA, who have extensive experience of advising on 1

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the sale and purchase of marinas throughout the UK. This assessment was seen as a prerequisite to identifying an appropriate bidding process. 3.3 Approaches have been received from several marina operators interested in Port Edgar and informal discussions have taken place to identify key issues. An approach was also received from existing Port Edgar marina users who set up a development group to explore the possibility of taking over the management of Port Edgar as a community enterprise. In response, the Community Council facilitated a meeting between Council officers and the development group to further explore this option. In view of the interest expressed by commercial operators, the marina users development group decided to let the commercial bidding process run its course. The development group wishes to remain involved, however, to ensure the needs of marina users are understood. With this in mind, representatives of the development group were invited recently to attend a meeting with the Council, Edinburgh Leisure and property specialists GVA to discuss key issues. Stakeholders will be kept informed of progress and the project will tap into the wealth of local knowledge held by marina users and the wider community. Port Edgars attractiveness to investors: results of the assessment 3.5 The discussions with marina users, potential operators and marina property advisers have confirmed the following: 3.6 there is market interest in Port Edgar; the marinas potential for expansion to 500 berths is particularly attractive; however, the level of investment required to improve the harbour and land-based facilities may be a deterrent.

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Two steps can be taken to ensure that potential operators are not deterred by the level of investment required. First, a long ground lease of between 80 to 125 years is considered essential. Marketing Port Edgar on the basis of a long ground lease would be consistent with other ground leases granted by the Council for sport and leisure infrastructure projects. Secondly, as previously agreed by Committee, the lease would be limited to the existing footprint of the marina and sailing school, so that the Council retains the ability to develop surplus land at Port Edgar for housing when the residential property market recovers. This leaves open the possibility of investing any capital receipts in the marina, if the tendering process identifies a shortfall between the level of investment offered by potential operators and the scale of investment required. Further work required

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Clearly, the cost of any necessary harbour improvements, such as extending the breakwater, needs to be established with greater certainty than at present. It is recommended that previous marine engineering advice provided by Hyder Consulting in 2005 is updated to take into account subsequent wave modelling which Hyder carried out in 2008 and to provide an assessment of the current condition of the main harbour structures. 2

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A business case to retain a sailing school operated by Edinburgh Leisure is in preparation and will be reported to Edinburgh Leisures Board for approval and subsequently to Committee. If the business case is approved, potential marina operators would be asked to identify part of the marina site as the location for the sailing school. Procurement process

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Since Edinburgh Leisure plans to withdraw from the management of Port Edgar by March 2014, a new marina operator needs to be in place by the end of September 2013 at the latest, to allow a six month period for handover. Based on this longstop date, the procurement process will need to be initiated by spring 2012. As reported to Committee in June 2011, robust selection criteria will be required to ensure that bidders demonstrate the financial viability of their investment plans. The following selection criteria are based on those used during the Councils previous competitive dialogue with potential developers. The criteria have been refined, however, given that the selection process is for a marina operator rather than a developer. Affordability would be the first criterion. Any bidder failing this test would not be assessed against the remaining criteria, which are as follows: deliverability (including compliance with Planning guidelines, restrictions and risk); functionality; financial standing; legal structure; commitment to marina staff (including TUPE); engagement with stakeholders (including commitment to existing businesses and organisations at Port Edgar).

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As reported to Committee in June, a new Forth crossing is to be built to the west of the site and it is highly likely that Port Edgar will suffer disruption during the bridges construction. Construction work has now commenced with completion scheduled for 2016. Potential marina operators will be kept informed of the Forth crossing project programme as part of the procurement process for Port Edgar. Financial implications As reported to Committee in June 2011, procurement, marketing and legal costs associated with the proposal to lease the marina will be kept to a minimum and will be contained in the 2011/12 and 2012/13 Culture and Sport revenue budget. GVA was appointed through an existing framework agreement and the fees for the companys advice have been capped at 5,000. Hyder Consultings fee for updating its previous marine engineering advice will be capped at 10,000. Rental income from the existing tenancies to businesses and organisations based at the marina, totalling approximately 46,000 per annum, is accrued to the Culture and Sport revenue account. Any lease of the marina and sailing school may involve transferring these tenancies and the rental income they 3

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generate to the Councils new tenant. At this stage it is too early to say what income a lease of the marina would generate. 4.3 The outcome of the selection process, including provisionally agreed terms and conditions of the lease, would be reported to the Finance and Resources Committee for approval in due course. Equalities impact The work described above aims to achieve a positive impact on the quality of life for users of the Port Edgar marina and sailing school by finding a new operator for the venue. As described above, discussions are ongoing with local stakeholders to keep them informed of progress. The reports contents and recommendations are of some relevance to the second of the three general equality duties (ie to advance equality of opportunity) and should result in a positive impact on quality of life. For these reasons, the overall equalities relevance score is 2 (out of a possible 9). A full Equalities Impact Assessment is not required. Environmental impact There are no significant adverse environmental impacts from this report. A lease of the marina to a third party would result in investment in the physical infrastructure of the facility and thus have a positive impact on its immediate environment and quality of life for users of the facility. Conclusions Market analysis and informal feedback from potential commercial operators has confirmed that there is a market for investing in Port Edgar. More certainty, however, on the cost of essential harbour improvements and the length of ground lease would improve the marketability of the site, before launching the procurement process this spring. The future viability of the sailing school operating separately from the marina is the subject of a business case being developed by Edinburgh Leisure. Recommendations It is recommended that the Committee: a) approves expenditure up to a maximum of 10,000 on marine engineering fees to update previous cost estimates for essential harbour improvements, including an assessment of the condition of the main harbour structures; notes that approval was given in June 2011 to advertise for a third party operator of the Port Edgar marina through an appropriate OJEU procurement process agrees that this process should offer operators a long ground lease, as discussed in paragraph 3.6; 4

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notes that the terms of the lease to the third party operator will be reported to the Finance and Resources Committee for approval; and notes that a further report setting out Edinburgh Leisures business case for a standalone sailing school will be presented in due course.

Alastair Maclean Director of Corporate Governance

Appendices Contact/tel/Email

Stephanie-Anne Harris, Strategic Development Manager stephanie-anne.harris@edinburgh.gov.uk; tel 529 7911 Chris Tonks, Estates Manager chris.tonks@edinburgh.gov.uk; tel 529 7610

Wards affected Single Outcome Agreement

Almond Supports National Outcomes 12 We value and enjoy our built environment and protect it and enhance it for future generations and 15 Our public services are high quality, continually improving, efficient and responsive to peoples needs. Reports to: Culture and Leisure Committee on 28 June 2011 Culture and Leisure Committee on 14 September 2010 Culture and Leisure Committee on 23 June 2009 Planning Committee on 4 September 2008 Culture and Leisure Committee on 24 June 2008 Planning Committee on 28 February 2008 Culture and Leisure Committee on 20 November 2007

Background Papers