The Cabinet Member for Economy and Property introduced the report which set out the works, progress and financial propriety in respect of the Cabinet approval at the meeting on 17 March 2021 to allocate capital funds to the low carbon refurbishment of the Master’s House, Sheerness.  She outlined the three recommendations that had been approved by Cabinet.  Following a tendering process, in a difficult market, the Cabinet Member said that a local Sheerness company had been employed to carry out the project and preliminary works had commenced.

Members were invited to comment and ask questions.

A Member sought clarification on the costs of the project so far and any further costs with regard to Phase 2 of the project.  The Interim Property Manager explained that as well as the £1.3m approved by Cabinet, there was an additional £234,750 Salix grant, but this would not cover all the costs.  With rising costs as a result of the Covid-19 Pandemic and Brexit, the contract needed to be re-evaluated otherwise it would have gone over budget.  The Member spoke on the priorities of the project and raised concern that community organisations might not be able to afford the rent.  In response, the Cabinet Member for Economy and Property reminded Members of the poor state the building had got into and that it had been un-fit for rental.  The project would allow the building to meet Energy Performance Certificate standards and to be accessible for all.  She welcomed the net zero targets and economic benefits of the refurbished building for Sheerness, through the rental and community opportunities.  The Member referred to paragraph 1.7 in the report and the option of terminating the contract, with the saving of £1.3m and suggested the funds be diverted to the refurbishment of Swale House instead.

In response to a question, the Interim Property Manager explained that there would not be a penalty if the extended completion date of 30 June 2022 was missed.  Salix, the grant funding agency, was aware of the timescales and price increases and had allowed extensions to the contract.  A Member asked about what work had been undertaken to look for potential commercial tenants.  The Cabinet Member said that there had been some interest in the project and that a number of different models were being looked at, with both short and long-term rental options.

A Member asked whether there would be an opportunity for start-up businesses to use the building.  The Cabinet Member said the layout and size of the rooms in Master’s House were ideal for small businesses.  She added that the pandemic had shown that small businesses needed space and ‘Locate in Kent’ had confirmed there was demand.  The Cabinet Member acknowledged the Member’s comment that buildings such as this would fall into disrepair if historical maintenance was not kept up.

A Member considered Sheerness was not an office-heavy environment and that there was already space available if needed.  He asked what would draw people to Master’s House and felt that if there was not enough commercial interest, the rent would be too high for community projects.  The Cabinet Member responded and said that all the different models were being explored.  There had been interest from different sectors and this was an opportunity for businesses who wanted to be local to Sheerness and it also offered flexibility.

In response to a question, the Interim Property Manager explained that the full revised contract had not yet been signed.  It was a complex contract and was with Swale Borough Council’s (SBC) legal services.   A Letter of Intent had been signed, which allowed a certain amount of money to be spent on the scheme by the end of January 2022 when the final contract would be in place.

The Cabinet Member for Economy and Property responded to a Member’s question and said that SBC would not be present in the building.  The Member raised concern with letting and rental, and that if a commercial rent was not achieved, this would go to community and charity groups instead who might not be able to afford the rent.

A Member asked that if the building was not fully let, was there another plan?  He did not consider there was a need for it in Sheerness and there was a risk that it could become ‘a white elephant’.  The Cabinet Member explained that there had been a tenant in the building whilst it had been in a bad state.  She hoped that market rents could be achieved, for either short or long-term and she did not think the building would sit empty.

In response to questions, the Cabinet Member said that research had been carried out in relation to office space in the Borough and the rent that could be achieved.

A Member spoke on the refurbishment of the building and said the new external fixtures should be sympathetic to the existing building and surrounding area.  He considered the function room should be retained for use by SBC for council meetings, rather than pay rent for a venue that the Council had refurbished.  In response, the Cabinet Member explained that Master’s House was within Sheerness Conservation Area and as such approval had been granted for sympathetic changes to the building with the addition of air source heat pumps, solar panels and new windows.  She said that the changes were mainly internal, rather than external.  The Cabinet Member acknowledged the suggestion in terms of the function room, but explained that this was dependent on the building management option that was chosen.

A Member referred to the tender process for the scheme.  He was concerned with the six-week tender period which he considered to be a generous time frame and that only one tender had been received, and suggested the project should have been re-tendered.  In response, the Interim Property Manager said that any further delay and the Council would have lost its grant funding for the scheme.  He explained that there was no market to dispose of the building and the tender process was extended as a result of the Covid-19 Pandemic and price rises.

In response to a question on the Master’s House garden and its potential use, the Interim Property Manager explained that this was part of a wider open space, fenced-off temporarily for health and safety reasons whilst the building was refurbished and it would be maintained and restored as a whole.

A Member spoke on other Members’ views on the letting aspects of the building, and on the other option of not restoring the building at all.  He considered it to be worthy of restoration and that it would have a beneficial use in the future.  The Member said that it should not just be considered as purely office space, but that there were lots of different ways that the space could be used.  In response, the Cabinet Member said the building’s use was flexible, with for example, space for workshops or start-up businesses.

A Member spoke again on the main drivers for the scheme and asked which was the priority for Master’s House, bearing in mind that the Council needed to recover its costs and concern over how many groups could afford to rent the space.  The Member considered the money would have been better spent refurbishing Swale House.  The Cabinet Member explained that short-term rental had higher maintenance costs for the Council and long term had less, as the responsibility would transfer to the tenant, and the costs would be clearer once the Council had decided which model to work with.  The Cabinet Member said that Sheerness had welcomed the investment in Master’s House and that there was a separate project for Swale House.  In response to a further question, the Cabinet Member explained that creatives would pay the market rent on the units, and the meeting and function rooms would be rented out in a different way, with charities still paying rent.

Some Members spoke positively about the work that was being carried out at Master’s House.

A Member said that small businesses were looking for premises like Master’s House to rent, especially since the Covid-19 Pandemic, and considered that this was needed in the Borough.

In response to a question on rents and tenures, the Director of Resources said that work was ongoing in terms of the tenures and types of management and so it was not possible at this time to comment on the cost or income.

The Cabinet Member explained that a decision would be made on one of the three management options within the next three months, before the building work was completed.

There was some discussion on a report coming back with an update on the management arrangements, bearing in mind that from May 2022 there would be a new Committee system in place and the Scrutiny Committee would not meet from that point.

Councillor Bill Tatton moved the following motion:  That the management options for Master’s House, Sheerness be reported back to the Scrutiny Committee or relevant new committee, dependent on timings, in due course.  This was seconded by the Chairman and upon being put to the vote, the motion was agreed.

The Leader and Cabinet Member for Finance advised Members that as part of the bidding process for levelling-up funding for Sheerness, the Council needed to make 10% investment itself, and this project showed that the Council had done that.  He welcomed the project in its own right and acknowledged the collateral advantage of the project to the bid.

The Chairman thanked the Cabinet Member for Economy and Property, the Head of Regeneration and Economic Development and the Interim Property Manager for attending the meeting for this item.

Resolved:

(1)      That the report be noted.

(2)      That the management options for Master’s House, Sheerness be reported back to the Scrutiny Committee or relevant new committee post May 2022, dependent on timings, in due course.