Agenda item

The Director of Development submitted for the Committee’s consideration the undernoted report:

 

“1     Purpose

 

1.1    The purpose of this paper is to provide an update on the capital costs associated with the proposed construction of a new Conference and Exhibition Centre which the Council is seeking to develop as an extension to the Waterfront Hall.

 

2       Background

 

2.1    The Waterfront Hall since its opening has enjoyed considerable success as a conference destination but in recent years has been losing market share in the business tourism sector. In particular it has increasingly lost out on a significant number of events from within the key market segment – the UK Association Conference Market. A Feasibility Study commissioned by BCC in 2008 indicated that the decline in market share was primarily due to the limitations of the venue, including:

 

·      Lack of sufficient exhibition space;

·      Inadequate breakout provision; and

·      Lack of banqueting space

 

2.2    Market share will continue to fall in the face of competition from newly developed and extended facilities such as Liverpool, Dublin and Edinburgh unless positive action is taken to enable Belfast to compete effectively for business.

 

2.3    The Feasibility Study identified the need for the following:

 

·      Exhibition space – meeting rooms (minimum 5) for up to 1000 people

·      Banqueting space – for up to 750 covers

·      Plenary – the existing auditorium to facilitate 2000+ people in conference mode

·      Registration and circulation space – to allow for full and safe movement

·      Ancillary spaces – kitchen services, storage, plant etc

 

2.4    In January 2011 the former Head of City Venues and Events was made aware of an opportunity to purchase part of the Lanyon Quay development which appeared to present an opportunity to meet the needs set out in paragraph 2.3 above.

 

2.5    The Development Committee at its meeting on 5 February 2011 gave approval to commission an economic appraisal and to make an application for funding to NITB. The Director of Development also approached the Department of Enterprise, Trade and Investment and NITB to establish if European Funding could be made available for the project.

 

2.6    DETI indicated that the Minister would be willing to allocate £10m of the Department’s ERDF funds to the project if this were to be matched from other sources and NITB indicated a willingness to contribute £2m from its Tourism Development Scheme. In order to draw down the full ERDF allocation, a contribution of at least £8m was required from the Council. Consequently the Appraisal team were asked to develop a business case based on an affordability limit of £20m.

 

2.7    At the outset the Appraisal Team (RSM McClure Watters) sought technical advice from the operators of the Dublin Convention Centre to establish the operational viability of the Lanyon Quay building. It was concluded at an early stage that this option would not meet the requirements of conference operators and an alternative proposal to construct the Conference and Exhibition facility in the space between the Waterfront Hall and the Hilton Hotel, over the service yard was taken forward as the preferred option. Robinson McIlwaine, the original architects for the Waterfront Hall, were engaged to do the preparatory design work and VB Evans, the original quantity surveyors, provided the associated costs.

 

2.8    In order to deliver a project within the £20m capital expenditure affordability limit the business case was constructed on the basis that some capital items would be provided through leasing of equipment and others through the operator fit out (eg kitchen facilities). In addition to this a compromise had to be made on total floor space (9150sqm) and ceiling heights (5m). A draft economic appraisal was subsequently submitted to NITB for consideration based on the above model.

 

2.9    In June 2012 SIB were approached by the Council seeking their professional support in the delivery of the project. Dr Bryan Gregory, the SRO for Titanic Belfast was engaged to head the Project Delivery Team. An expert team was put together to finalise the business case, review design proposals and the associated capital costs. The expert team includes:

 

·      TRS Consultants – International consultants on convention centre operational design

·      Kennedy Fitzgerald Associates – Architects

·      VB Evans – Cost consultants

·      Ekosgen Consulting – ERDF financing experts

 

3       Key Issues

 

3.1    Any proposal to construct the new facilities over the service yard will require amendments to legal agreements which exist between the Council and the Hilton Hotel which govern the use of this space and any development in this area. The legal agreements include provisions which stipulate separation distances, access to light and visual requirements with respect to the location of the plant.

 

3.2    To date the Hilton has been supportive of this option however should a new legal agreement not be negotiated this would leave the Council in a position of considerable risk and the potential that the project could not be delivered. In order to mitigate this risk the Project Team has now proposed an alternative ‘independent’ option should an agreement with the Hilton not be reached.

 

3.3    The Team also revisited original design and costs associated with the ‘Hilton linked’ option, the purpose of which was to establish the costs of an upgraded facility as a basis for further negotiation with DETI and NITB who had indicated they might be prepared to make a greater contribution to the project if required.

 

3.4    A detailed breakdown of the costs for the following had been circulated:

 

·      Original ‘Hilton link’ option

·      The revised ‘Hilton link’ option and;

·      ‘Independent’ option

 

3.5    In summary the key differences in the projected costs are due to the following factors:

 

·      Ceiling heights have increased from 5m to the industry standard of 7m

·      Total area has increased by 2100sqm to enhance circulation

·      Enhanced external finishes

·      Consequential improvements as a result of the introduction of new (Part E) Building Regulations in late 2012 equating to 10% of extension costs

·      Increased optimism bias (contingency sums)

·      Costs previously provided for in revenue projections have been fully capitalised (£2.45m)

 

3.6    The total revised costs of the two options are as follows:

 

·      Linked option - £28.6m

·      Independent option - £29.5m

 

4       Resource Complications

 

4.1    Following discussions with both DETI and NITB officials a full business case was prepared based upon a maximum projected capital cost of £29.5m. Following the decision by the SP&R Committee on 22 March 2013 an application has now been submitted for an ERDF grant of £14.5m and a further £4m from NITB’s Tourism Development Scheme. This leaves a Council contribution of £11m.

 

4.2    It should be noted these costs remain estimates and final costs will not be determined until completion of the full design and responses have been received to any construction tender.

 

4.3    The grant application is based on the maximum estimated cost in order to maximise the quantum and percentage of grant. Should the total costs reduce the contributions from the Council and funders will reduce proportionally.

 

4.4    The grant contributions are subject to approval of the business case by the NITB Board and the DETI and DFP Ministers.

 

5       Recommendations

 

5.1    Members are asked to note the content of this report.”

 

            After discussion, during which the Director of Development answered a number of questions in relation to the current Conference Market and the future management of the Centre, the Committee noted the contents of the report.