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.

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