Request:
An authority press release only gave high level detail on the loan that the authority had taken up to purchase the freehold for the Quadrant East Building at £24.5 million.
Can you please supply further details -
1. The type of loan ie LOBO
2. The loan term in years
3. The current interest rate
4. Is this a fixed or variable rate
5. The annual cost to service this loan (2025 figures)
6. The total projected cost when the loan matures, principle + interest (2025 figures)
7. All external costs in the purchase of this building, including items such as external legal advice, third party negotiations etc
8. A copy or link to the authorities 2025 Property Plan / Strategy which would have been used to justify this purchase. I.e projected staff levels based on admin space availability across the authorities entire property estate
Response:
The decision to purchase the Quadrant East building was formally approved by Cabinet on 20 May 2024, under the Accommodation Review agenda item. Please note that this item was considered in a restricted session due to commercial sensitivity at the time.
The Authority does not have a 2025 Property Plan/Strategy linked to the acquisition of Quadrant East. The opportunity to purchase Quadrant East arose due to the Authority having a pre-emption right to purchase the building when the former owner and the Authority's then landlord decided to market their interest in 2024.
With regard to borrowing, the Authority does not undertake borrowing for specific individual projects. Instead, borrowing is managed strategically as part of the Authority’s overall capital investment plan alongside the treasury management strategy, in accordance with the Capital Financing Requirement (CFR), as outlined in the CIPFA Code of Practice.
The acquisition of the Quadrant East building contributed to an increase in the Authority’s CFR, thereby influencing the overall need to borrow. However, it is not possible to directly attribute specific borrowing to this purchase, as borrowing is undertaken to support the broader capital investment programme.
The Authority’s debt and investment positions are reported regularly to Cabinet through the Performance and Financial Management Report. The latest borrowing and investment details can be found in Annex 2, Section 5 of that report.
The September 2025 Cabinet report linked here https://democracy.northtyneside.gov.uk/documents/s30657/13%20-%20Annex%202%20forecast%20to%2031st%20July%20-%20Forecast%20Financial%20Summary.pdf
Request for Internal Review
The question on the £28.5 million loan to purchase Quadrant East was based on a press release by John Ritchie (Director of Resources) in which he stated it was financed by a loan.
Reading Cabinet Minutes after your reply I can see that as you replied, it was by the way of an addition to existing borrowing -
"1.5.5.2 Cabinet will be aware that the financing of the purchase of Quadrant East (£28.237m as set out in paragraph 1.5.4.4) adds to the level of borrowing".
"Strategic Asset Maintenance; £36.711m has been invested to date, of which £28.237m relates to the acquisition of Cobalt 16 as part of the MTFP project on Buildings and Asset Management".
-
Is it a reasonable expectation that the Director of Resources ensures anything that he quotes in the media is accurate, i.e. instead of financed by a loan, the purchase was made from Strategic Asset Maintenance funds?
- A question in my FOI request has not been answered -
The £28.5 million purchase of Quadrant East was made based on the building being offered for sale?
"The Authority does not have a 2025 Property Plan/Strategy linked to the
acquisition of Quadrant East. The opportunity to purchase Quadrant East
arose due to the Authority having a pre-emption right to purchase the
building when the former owner and the Authority's then landlord decided
to market their interest in 2024".
it is very difficult to accept that a £28.5 million spend was justified because a building was offered for sale, without any reference to actual need, which would be defined in a current Property Plan, does this demonstrate that due diligence was carried out before proceeding with the purchase, it also questions what is the brief of the MTFP project on Buildings and Asset Management", given this is a four year plan.
A Property Plan based on current and forecast staffing levels (stated as declining year on year by the authority) would identify assets that could be sold with the minimum of impact on community value. The capital generated could be used for repayment of debts, investment in projects that respond to operational priorities or generate new community value, or reinvestment into assets that are more profitable.
Response
-
The initial response was accurate, with the confusion arising from the requestors interpretation of the term “from Strategic Asset Maintenance Funds”. This term is based on how the Authority categorises its capital programme, with the purchase of Quadrant East falling within this category. There is no additional or separate “fund” as such – the financing of the transaction is from borrowing as set out in the relevant Cabinet decision. However, as the initial response sets out, the Authority does not undertake specific borrowing for specific assets. Instead, the Authority manages its overall Treasury Management activities, including taking out external borrowing, based on its overall need to borrow, referred to as the Capital Financing Requirement – this is the required term used in the Authority’s Treasury Management Strategy and the statutory Statement of Accounts. In conclusion, the purchase of Quadrant East was ultimately funded by a loan, albeit not a specific loan for that purchase.
-
The purchase of the building was not undertaken purely because the building was offered for sale. The Authority had an existing lease for Quadrant East that, at the time of the purchase, had over 19 years left to run. There was no exit clause within the lease, so had the Authority not taken the option to purchase the building, the lease would have remained in place (with the Authority as a tenant) for the remainder of the lease term. The statement that there was no Property Plan/Strategy in place for the purchase of Quadrant East prior to the building being offered for sale is true, based on the fact that until the previous owner decided to sell the building, the Authority did not have an option to purchase Quadrant East.
As part of the decision to purchase Quadrant East, due diligence and business cases were developed, reviewed and approved at the Authority’s Investment Programme Board and Cabinet.
The business case demonstrated value for money, added control over the cost to the Authority (especially that the Authority was no longer subject to significant inflationary lease increases), as well as control over how the building can be used and facility management arrangements.
Had the previous owner decided to sell the building to a different owner, the new owner would have become the landlord with the Authority continuing as a tenant for the remainder of the 19 year lease term. However, it should be noted that as part of the due diligence that was undertaken to establish whether the proposed purchase represented value for money, the existing lease was taken into account, as was the need for the Authority to retain a corporate building for the staff currently located at Quadrant East.
In terms of the wider Building and Asset Management MTFP project, the Authority is aiming to rationalise its overall estate so that it is fit for purpose for staff and users, as well as being financially viable within existing and future budgets.
In terms of future use of the building, the purchase of Quadrant East does give the Authority to option to sell the building in the future as the Authority is now the owner of the building, although it should be noted that there are no plans for this to be undertaken. Had the Authority remained in the previous lease, on expiry of the lease the asset would have reverted to the landlord, not the Authority in 19 years time.