Agenda item

The Chairman noted that there was a confidential financial appendix to the report and if Members wished to ask any questions then the press and public would be excluded from the meeting.

The Portfolio Holder for Commercial Services including Income Generation advised that although the proposal was complex and technical, the essential points for Members consideration were quite simple.  He made the following points:

·       The Council had been asked by YTFC to help them financially through the Covid-19 crisis.  The club was a valuable asset to the public and the area and the proposal was of mutual benefit.

·       The proposal was for a sale and lease-back arrangement which was not unusual for businesses who wished to release cash or capital.

·       There would be no SSDC control over the management of YTFC.

·       The deal would allow the club to buy back the land and buildings when they were in a position to do so.

·       The investment met the Council’s criteria of 7% gross return on investment.

·       The analysis of risk had identified 4 scenarios which were detailed in the report.  If the club became insolvent, then the land and buildings would all revert to SSDC.

He concluded by recommending that the Executive supported the proposal.

A representative of the Glovers Trust Board said they were committed to achieving the best outcome for the football club.  The board was an interested party in the Asset of Community Value and they had to decide by 7^th January 2021 whether to invoke the 6 month period to submit a counter bid or to allow the present proposal to continue.  He asked if the Council would consider checks and balances as part of the agreement to ensure all monies were used in the best interests of the football club.  He also asked if it was contrary to the Council’s purchasing policy to buy a freehold property which was encumbered with a land charge, and, if so, who would be obliged to discharge the land charge?  He asked if council officers would conduct due diligence before any agreement to purchase was made? 

The Commercial Property Land and Development Manager and Chairman advised that due diligence would be done.  The Council would only proceed with the purchase of the land and property if it was free from a charge so that SSDC held the clean freehold title.  It was the intention that this was to be done before the purchase was completed.

The owner of Yeovil Town Football Club thanked the Council for considering the proposal and the supporters groups with whom he had discussed the proposals.  He said that he wished to be open and transparent in his communication with all groups.  He said that running a football club in the current Covid-19 crisis was very difficult and the proposal was in the best interests of the football club.  He said the finance would help the club to survive and thrive in the future to retain football league status and have a club which the local community could be proud of.  He confirmed that he was not seeking to recoup any of his personal investment in the club through the transaction. 

The Chief Executive said the Council had supported many businesses through the current crisis through over £40m in business grants and advice.  The potential purchase of the football ground was an investment in the land asset and not the football club.  It was a deal which would help the business whilst protecting the Council and tax payers interests.  He said that although it was an unusual investment and it was not without some risk, the Council would not be involved in the running of the football club.  There would not be any conditions attached to the purchase of the land. 

The Director for Commercial Services and Income Generation advised that the principles used in the investment proposal were based on those in the Council’s Commercial Strategy and it was a positive response to ease the financial pressure on the football club.  The Property Team provided an approach that gave the Council a significant property asset with the expectation of a reasonable return on the capital invested.  The purchase of the entire freehold and leasehold interests of the football club in an almost 25 acre site.  The current 999 year lease from SSDC to the club on the surrounding land would be extinguished and replaced with a 30 year lease on the whole property. Part of the purchase price would secure the release of restrictive covenants.  The outlying land had potential for development and if achieved, they may allow the club to buy back the land in the future.  A buy-back provision would be part of the arrangement and should the club fail then the whole area would be under the control of SSDC.

Councillor Peter Seib, as one of the Ward Members, said it was time that the Council solved some of the root causes of the club.  He said the Council had looked at all the outcomes and if not helped, then the club could fold very shortly.  The club had wider social aspects in the community and people were looking to the Council to solve the issues.  The offer protected the taxpayers interests and it did not have any unmanageable risks.  It was a commercially sound deal if the club thrived or not. 

During discussion, the following points were made by Members:-

·       Need to look at the viability of the club going forward and the profitability and the safeguarding of the risks.

·       It is a much loved asset but the club was loss making before the effects of Covid-19.

·       If SSDC already owned land around the pitch then it was a sensible proposal.

·       A thriving football club was good for Somerset as it was the only club in the football league.

·       It looked a good deal on paper but there were areas of risk.

·       The football club was a great asset to the area and SSDC should do what it could to support it but not by investing in it.  Other ways of support should be sought.  The business case was not proven at the moment.

·       The proposal should be considered as a land deal and not a rescue operation for a football club.

·       The risk was addressed by 4 scenarios set out in the report and each were answered from a risk point of view.  If anyone thought there was a risk not identified then they should speak out.

·       There were wider benefits of a sporting facility for physical activity and social inclusion and a wider economic benefit. 

In response to questions from Members, the Commercial Property Land and Development Manager and the Ward Member advised:-

·       There was a 7% return on the investment but the first year would be rent free so no return in that year, but this was factored into the proposal.

·       SSDC would be the owner of the property and would lease it to the club.  The club would have a reducing rent if development land was sold. 

·       The Council may never realise its investment if the club continued to pay its rent in perpetuity.

The Chairman of the Scrutiny Committee said they had looked at the report and raised many similar question to Executive members. They had considered the proposal as an investment and there were many supportive views on the benefits to the wider community.   He said that it was obvious that officers had investigated the issues well as questions were answered on restrictive covenants and due diligence because of the public interest.  They had asked about the Asset of Community Value and at the end of the debate, there had been no requirement to discuss the report in a closed session. 

The Chairman said that it was unusual to debate a commercial investment in public and at this point it was proposed that the District Executive discuss the remainder of the report in a confidential debate.  This was agreed by Members of the Executive and it was therefore:

The District Executive Committee discussed the report in closed session for approximately one hour and then returned to make final points and vote in open public session.

The Chairman said that allowing the discussion to take place in closed session had allowed a number of issues to be answered and resolved. 

Executive Members made the following final points:-

·       Thank the officers for answering Members questions during the closed session.

·       The officers explanation of the 80% / 20% purchase price had allayed previous concerns and grateful for the explanation. 

·       The investment does make sense but there was still a risk. Ethically, supporting the club was right.

·       Still have some concerns but fears around charges and covenants had been addressed.

·       A healthy debate had clarified a lot of issues.  Thanks to the officers.

The Director for Commercial Services and Income Generation advised that there was not sufficient time to present a final report to the Executive in January 2021 but she assured Members that the sale would not proceed unless all the covenants were lifted.

At the conclusion of the debate, the recommendations to approve the purchase of the property asset were proposed and seconded and on being put to the vote, were carried unanimously by Members of the District Executive.