MD2065 639 Enterprise and Community Centre – new operator

1. The 639 project has been funded as part of the Mayor’s Regeneration Fund (MRF), which was established following the disturbances of 2011. The 639 building was one of the key sites in Tottenham that experienced the worst effects of the disturbances. Subsequently the GLA purchased the building from LB Haringey, to establish an enterprise centre for the Tottenham Community. The building was sold with a covenant that allows only enterprise type uses on the site. In 2012 The London Youth Support Trust (LYST) were identified through a competitive exercise as the recipient of funding (in the form of the letting of the centre at a peppercorn rent and tapering revenue funding) to operate the enterprise centre over an initial 3 year period, which was subsequently extended by a further 12 months to March 2017. The GLA funded the capital costs of the refurbishment and a tapering revenue budget to support the running costs, which has enabled the project to become self-sustaining within its first 3 years notwithstanding an ongoing peppercorn rent arrangement.

1. The previous Mayor endorsed a forward strategy which would see continued delivery of enterprise support from the 639 building over the longer term. In line with this strategy (and mayoral approval) the GLA invited suitable organisations with the relevant skills and expertise to submit proposals (including a business case) for the renewed operation of the youth-focused Enterprise Centre at 639 Tottenham High Road from March 2017 onwards. However the decision to make any award was deferred prior to the Mayoral elections 2016 and until a preferred operator could be identified.

Approval history

1. The GLA purchased the building, which was formerly council offices, from the London Borough of Haringey at a cost of £0.553m, (approved under cover of DD791) including the relevant legal fees and stamp duty. An overage clause was agreed at the time of acquisition requiring the GLA to invest future sales receipts over and above £2m in enterprise and employability projects in Tottenham.

1. The GLA initially allocated £1.5m (DD790) capital for the re-design and refurbishment of the building. In turn to ensure the building was fit for its new purpose an additional £128K was made available (via DD 1112) and more recently a further £165K was approved (via DD1263), to deliver the Employability Lab.

1. The GLA also awarded £100k (MD1170) revenue funding to LYST, following a competitive exercise, to develop a business plan and then a further £500k revenue (MD1170) to support the operation of the centre over the three year period March 2013 to March 2016. It was intended that by the fourth year of operation, the project would be financially sustainable and no further public subsidy would be required beyond the continued peppercorn rent.

1. The previous Mayor under MD 1584 approved an extension of the lease to the London Youth Support Trust (LYST) for the duration of 12 months to March 2017, and permitted the GLA to undertake a competitive exercise to identify a new tenant/operator and grant a 7 year lease (at a continued peppercorn rent). The appointment was at that time to be subject to a further approval once a preferred operator was identified.

• Under the current contract, the 639 Centre promotes small and emerging businesses bringing together all strands of support to develop and sustain careers, from school leavers support and training, to subsidised premises, business mentoring and career development initiatives. A range of space is provided:
• Affordable office space (incubator space)
• Shared Workspace
• Conference and Board rooms
• Exhibition Gallery
• Cafe
• Tottenham's Living Room: a free-to-hire space for local business, community groups and organisations
• Pop-up shops.

1. Through partners who are based in the building, employment and training opportunities are provided including work experience, mentoring, volunteering (through Team London) and free business advice.

Brief for 639: from March 2017 onwards

1. The exercise to establish the grant of a new lease for 639 was seen by the GLA as an opportunity to review and redefine the Centre, and its existing partnerships and occupants. The primary ambition for 639 is to establish a thriving, financially self-sufficient enterprise centre, social hub and invaluable neighbourhood resource which reflects the character and social fabric of Tottenham.

1. Vital to the brief was that the Centre continues to deliver on its youth and locally focused enterprise aims. Organisations were invited to submit proposals in line with these stated aims, and supported by the GLA in the delivery of these plans and in attempts to raise any additional funds necessary to achieve this. The GLA will continue to require clear, demonstrable outcomes for young local people from disadvantaged backgrounds. The GLA is not directly funding the operation of the Centre beyond the continued offer of a 7 year (less a day) internal repairing lease, at a peppercorn rent. In an attempt to reduce the GLA’s future exposure to ongoing maintenance costs the lease sets out an arrangement whereby 50% of any surplus income generated (with a minimum guaranteed payment of £25K pa) are to be re-invested into a maintenance reserve fund.

The GLA initiated a two stage competitive application exercise managed by the TfL procurement team, inviting submissions from interested workspace operators to undertake the operation of 639. The opportunity was advertised by TfL’s procurement portal and via the GLA’s Open Workspace Provider Group (accessible to 300+ workspace providers).

1. 11. This was initiated (Part 1 – PQQ) with a pre-qualification questionnaire assessing baseline suitability of applicants. The GLA received four PQQs which met the criteria, and requested full tender documents (Part 2 - ITT) from all four prospective operators, inviting them to submit a business plan for the centre.

1. 12. Scoring and evaluation criteria for judging the submissions included:

1) vision and approach to 639 (50%)

2) experience of the proposed team, expertise,

and comparable projects (30%)

3) financial plan (20%)

4) supporting documentation (pass/fail)

Four submissions were received by the deadline and along with additional clarification material were assessed by an evaluation team comprised of GLA regeneration and finance staff, together with LB Haringey, with further input from TfL Procurement and GLA Property.

Preferred Bidder

1. The evaluation panel selected the London Youth Support Trust (LYST) as the preferred bidder, its bid having scored highest by reference to the evaluation criteria set out at section 1.13 above. LYST, the current operator of the building, is a youth enterprise charity that provides young people with the space and support they need to start a business. They support young people aged 18-30, particularly those who are economically disadvantaged to achieve financial independence through entrepreneurship. They provide across 4 centres nationally (2 in London) affordable premises for young business owners to work out of, alongside business advice and support.

1. LYST who are the current operators of the building, set out an intention to build on the work that had been undertaken over the last 4 years to deliver a steady stream of locally based business start-ups and offer enterprise support to the wider community and in particular applicants from disadvantaged backgrounds. LYST proposed changes to the ground floor space including co-working space along with hosting pre start support and early stage business support; better integration of café and workspace, with the utilisation of the kitchen for food entrepreneurs.

1. Unlike the other applicants LYST’s enterprise and employability efforts were targeted at the local community (100% local Tottenham) with business and individuals from one of following; long term unemployed, educational under achiever, ex offender, disabled people.

1. More so than other applicants, LYST’s projected targets against KPIs were well defined and realistic, with 20 start ups per annum being double the requested target for the centre. Furthermore this was supplemented by a wider enterprise programme which would support up to 350 individuals per annum.

1. Of particular interest to the GLA and LBH, was that LYST would continue their well established partnerships with coaching and mentoring organisations alongside significant new partnerships, as set out below.

Table 1

1. It is proposed that these partners would operate from an enhanced ground floor public facing space - which would help build the impression of a welcoming and busy centre. Existing links with the Spurs Foundation with regard to supply chain development work were seen as particularly positive.

1. LYST’s other delivery partners will begin to deliver training and support on the ground floor and ensure it is taking place regularly. The ground floor space will be converted to focus on pre-start support and early stage business growth and at the same time made visible to the outside community.

Table 1 Example of Ground Floor Space Usage

​​​​​​​LYST proposed an enhanced governance structure setting out an approach that supports the local business community to engage in key service delivery decisions.

1. Whilst comprehensive and robust financial information was provided; financial income targets were the most modest of the three potential operators However this was mitigated by an offer to reinvest a significant share of any residual income associated with the building back into the building and or service delivery; with a minimum of £12.7K to be invested per annum (£89K over 7 years). This offer has in subsequent discussions been improved significantly with an offer of a minimum of £25K per annum being invested into the 639 building maintenance reserve escrow account. In addition, the assessment panel were not convinced by how achievable the other tenders’ financial targets were.

1. The lease will oblige LYST to pay £25,000 per annum (reduced to £10,000 per annum in the first year) plus 50 per cent of net income (gross income less reasonable running and staff costs for the property) into an escrow account to be used for building maintenance, repairs, improvements and capital works. Any excess funds held in the escrow account at the end of the term of the lease will belong to the landlord absolutely and may be used by the landlord to repair the building and or promote enterprise in the Tottenham Area. The £25,000 sum will be paid annually in advance on completion of the lease and on each anniversary of the term. The additional payment will be paid annually in arrears within one month of each anniversary of the term and within one month of the last day of the term in respect of the preceding 12 months.

1. More so than other applicants LYST presented sound contingency arrangements with at least 6 months revenue in place, and plans to expand the number of corporate sponsors who have over the last years been beneficial to the project. Taken together this demonstrates a sound understanding of financial management.

1. Strong efforts to access additional external funding were evidenced in the form of Big Lottery Fund application to fund wider programmes and additional programming/ coordination of activity within building and through enhanced partnerships.

1. In addition LYST have explored other areas of potential funding, which includes seeking corporate funders for specific projects and activities; the rental of meeting halls for events & parking fees; which should increase income streams.

1. In comparison to other applicants LYST made a significant attempt to address the issues raised within their presentation/ clarification interview. LYST’s Business Plan / Funding proposal was also considered more realistic, achievable and clearly benchmarked against current performance and activity.

1. In summary LYST scored highest as a result of the evaluation process and were awarded preferred bidder status. This is largely due to two factors: firstly, LYST provided the only submission that convincingly demonstrated an ability to orientate their enterprise support toward young people in the local community from disadvantaged backgrounds, and secondly, LYST were the only organisation that could convincingly provide a track record of delivering in this manner i.e. according to the requirements of the GLA specification.

1. In addition the quality and robustness of LYST’s financial submission whilst not the most financially advantageous to the GLA, was viewed as a more realistic and achievable proposal, supported by good accountancy capacity.

Enhancements

1. As part of further discussions with the LYST (as envisaged by the documentation provided to applicants as part of the competitive exercise) the business plan proposal for the next 7 years, less a day has been further enhanced.

1. Most notably LYST have made a partnership with the Trampery albeit a not for profit organisation which the GLA considers will greatly strengthen LYST’s ability to deliver its well proven business support model to young people from disadvantaged backgrounds. The Trampery is a social enterprise specialised in fitting out and managing buildings for small businesses. Since its formation in 2009 The Trampery has opened eight acclaimed sites in London including specialist facilities for software, fashion, travel and digital arts.

1. Under a Management Agreement with LYST, The Trampery will take responsibility for day-to-day operation of 639 Tottenham High Road, enabling LYST to focus 100% of its efforts on the primary business support role.

1. In addition to the work with the Trampery LYST will continue to work with existing partners as set out in table 2.

Of equal significance LYST’s financial offer has greatly improved with additional income profiled across the 7 year lease term. This year on year increase in rental income represents a growing surplus from the building. And as such LYST’s proposal to guarantee £25K per annum and to otherwise pay 50% of the surplus income (see 1.23) into a building maintenance reserve fund (to be held in an escrow account and administered jointly by GLA and LYST) is an increasingly attractive proposal.

1. The café will now be an integral part of the development and animation of the ground floor area with additional funding to develop the café into an incubation facility for fledgling food and beverage companies.

Next steps

1. GLA Regeneration are satisfied with the business case proposal and are preparing a grant award outlining the requirements of the business case. GLA Officers are also now working with TfL Commercial to prepare a new lease.

The LYST Operating Model. LYST support their clients for two years. The level of support varies depending on the individual's skill set. Normally a client needs more support in the first year, which then tapers off but increases again as a client comes to the end of their time. Additionally if the business experiences problems then there will be an intensive period of support.

Services – LYST will offer subsidised studios/workshops (rising to commercial rates over two years) alongside intensive business advice and support to clients, provided by a Centre Manager. The subsidised rent they will pay will be as follows:

• 0-12months clients will have a 50% rent subsidy
• 12-18 months clients will have a 25% subsidy
• 18-24 months clients will pay a commercial rent

Core Activities LYST aim to inspire and engage young people through outreach activities, providing affordable business space in enterprise centres, as well as advice, support and mentoring so developing the abilities of the young entrepreneurs to run a business. LYST’s primary services are:

• Subsidised workspace
• Extensive one-to-one support to aid personal development and prepare clients for self-employment or employment

• Outreach activities including pre-start enterprise training
• Development of business plan
• Business advice and personal support
• Support to clients to access the required financial support to enable them to get started
• Hot desking
• Specialist business training and mentor programme
• Networking and event opportunities
• Development of "what next" strategy if the business isn't sustainable

LYST Partners will provide:

• Employability support for those seeking employment
• Guidance to those seeking to move into education or training
• Performance Measures and KPIs

LYST have agreed the following measures to gauge progress, surpassing the GLA’s brief requesting 10 local business start ups per year.

Annually 7 year period

• Numbers of businesses started 15 (20) 105 (140)
• Numbers of jobs created 12 (16) 84 (112)
• People assisted 350 2450
• Businesses assisted 50 350
• People moving into education or employment 15 (20) 105 (140)
• Business survival rates 100% year one,

50% year two

30% year three

The bracketed figures are stretch targets over and above the otherwise agreed targets.

The 639 tenant/operator (LYST) is supported to ensure development and delivery of service provision is in compliance with relevant Codes of Practice and in line with the requirements of the public sector equality duty to ensure that the following issues have been considered.

i) Operational Policies: the operation of the building has been assessed in terms of accessibility to ensure the minimisation of disadvantages suffered by people who share a protected characteristic. age, disability, gender reassignment, pregnancy and maternity, race, gender, religion or belief, sexual orientation
ii) Documents and publications: all documents produced have been encouraged to comply with Mayor of London branding guidelines, it being based on guidance from the Royal National Institute of Blind People. Where possible accessible formats will be available.
iii) Events: all events have been strongly encouraged to be open to all and, where possible, we will encourage people who share a protected characteristic to participate in any activity in which their participation is disproportionately low.

The 639 Tenant/operator (LYST) liaises with all sub-tenants and support recipients to ensure they share the public sector equality duty. This will be re-confirmed in future grant award arrangements to ensure delegation is clear.

The procurement process and documentation has followed best practice guidelines to ensure equality impact monitoring and equal opportunities are achieved.

The evaluation included a broad range of officers across the GLA group and included Borough representatives to ensure inclusive views.

The GLA utilised TfL’s online portal and the Works Space Providers network to advertise the opportunity and to ensure the widest range of potential operators were able to access details about the tender opportunity.

The ITT specification made very clear the need for an operator to work closely with a diverse community and to in particular support young people aged 18-30, particularly those who are economically disadvantaged to achieve financial independence through entrepreneurship. The operator will monitor inclusiveness with respect to target BAME and youth inclusion along with LYST’s stated target groups; the long term unemployed, educational under achiever, ex offender, disabled people.

a) key risks and issues

• Despite the project’s current promising financial trajectory, there is of course a risk that the current and future tenant/operators are unable to operate a sustainable financial model. To mitigate against this the tenant/operator will operate an open book accounting whereby the GLA project manager will be able to keep abreast of financial performance alongside operational performance on a monthly basis. The GLA and the enhanced board will advise on changes to scope, and on possible funding opportunities to keep operations within budget. A related risk would be around the identification of additional funding to subsidise the business support activity. The current tenant/operator has already successfully commenced fund raising to insulate the project from this.

• Further risk remains regarding the potential for costs associated with building repairs. This is somewhat mitigated by the significant recent investment in the building with very recent repairs to the building’s flats roofs and the new proposal for a building maintenance reserve fund. Over the last 3 years of the project maintenance costs have been minimal, and routine preventative checks and maintenance operations will continue.

• There is a risk that the new lease will not be in place once the current lease expires. Good project management systems are in place to mitigate against this

b) links to Mayoral strategies and priorities

• This proposal supports the Mayor’s attempts to be the most pro-business Mayor of London yet and his ambition to make sure that the good work that is done across the city on skills and economic development is properly joined up. The 639 project will nurture small independents and start-ups, and will build stronger partnerships between the private sector, public and voluntary agencies and the community.

• In line with manifesto pledges and emerging policy the project will support small business and protect business space. Proposals outlined here directly support the pledge to put London’s small businesses, start-ups and entrepreneurs at the heart of the London economy and London’s communities, and to support them to grow, innovate and create wealth and jobs.

c) Impact assessments and consultation;

We know from a previous interim evaluation that the 639 Centre has been established successfully, supporting new business creation in line with anticipated outputs, and has become financial sustainable.

• Occupancy rates have been high, averaging 84% over the first two years of operation
• Engagement with the community has been strong with the Tottenham Living Room attracting over 100 different user groups in the first two years, many using the space on a regular basis.
• The business support provided for entrepreneurs was highly rated by beneficiaries, reflecting the capability of LYST officers in providing support, and the economic impact assessment suggests approximately £1.40 GVA has already been created to date for every £1 of public funding invested, with potential for greater future impacts estimated to be around £4.50 for every £1 when incorporating expected impacts over the next three years. On this basis a future 10 year lease period would generate additional GVA in excess of £9.5m.
• The project is on a trajectory to meet most, if not all, of its stated targets.

The evaluation also recognises that the socio-economic and investment context in Tottenham has changed significantly since the outset of the project and that the future strategic direction for the centre needs to respond to the fact that:

• Unemployment has reduced, enterprise rates have risen, and a great deal of investment is taking place in Tottenham. This points to new opportunities for business start-ups and for local people accessing new employment, which the 639 Centre can support.

• Analysis of the riots published since the development of the 639 Centre project highlights the continued importance of supporting economic opportunities for local young people.

Having established a strong financial and economic argument and in view of the overwhelming support for an enterprise project to continue in this location from all consultees including importantly LB Haringey, the Sep 2015 IPB endorsed the retention of 639 for the ongoing provision of a Community and Enterprise

There are no direct costs to the GLA arising from the proposal to appoint the London Youth Support Trust (LYST) as the operator of the 639 Community Enterprise Hub in Tottenham for a 7-year lease/ grant period from March 2017 (notwithstanding the peppercorn rent arrangement). All costs associated with the proposed agreement will be borne by LYST.

As part of the original project specification, one of the major scoring points was the demonstration of being able to reinvest funds generated back into the Hub and/ or able to offer the GLA a profit share arrangement, which would help mitigate any potential risk of the GLA having to fund building maintenance costs during the 7-year lease period. The post tender negotiations have resulted in the LYST’s Business Plan proposal over the 7-year period being further enhanced, resulting in additional income and hence growing surpluses from the building. As a consequence of the increased income, LYST are proposing a guaranteed payment of £25,000 a minimum and to otherwise split the profit as detailed within 1.23 / 1.34 of this report).

Whilst the financial projections submitted in the Business Plan are favourable, there is the risk that they do not come to fruition and where the proposed self-financing model does not transpire. As identified within the risk section of this report, in order to help mitigate this risk, monthly finance performance monitoring will take place alongside the operational performance to review income streams and where required mitigating action can be advised and taken. It is also recommended that break clauses are included in the grant agreement / lease paper work in the event that GLA officers deem the project no longer viable. The proposed £25,000 payment to the GLA, any profit share arrangement and the monitoring arrangements will need to be formalised within the legal paper work (grant / lease agreement).

Section 30 of the Greater London Authority Act 1999 (as amended) (GLA Act) gives the Mayor a general power to do anything which he considers will further one or more of the principal purposes of the GLA as set out in section 30(2) which are:

(a) Promoting economic development and wealth creation in Greater London;
(b) Promoting social development in Greater London; and
(c) Promoting the improvement of the environment in Greater London

Section 333ZC of the GLA Act provides that the GLA may not dispose of land held by it for the purposes of housing and regeneration for less than the best consideration which can reasonably be obtained unless the Secretary of State consents. This does not apply to the grant of a lease for a term of not more than 7 years. If the term of the lease is more than 7 years, the GLA will need to ensure that it received best consideration for the grant of the lease or the consent of the Secretary of State is obtained.

In taking the decisions requested, the Mayor must have due regard to the Public Sector Equality Duty; namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010, and to advance equality of opportunity between persons who share a relevant protected characteristic (race, disability, gender, age, sexual orientation, religion or belief, pregnancy and maternity and gender reassignment) and persons who do not share it and foster good relations between persons who share a relevant protected characteristic and persons who do not share it (section 149 of the Equality Act 2010). To this end, the Mayor should have particular regard to section 3 (above) of this report.

Officers have indicated that that the contribution of in-kind funding to LYST amount to the award of funding and not a payment for services to be provided and must ensure that:

- the proposed in-kind funding is disbursed in a fair and transparent manner in accordance with the GLA’s Contracts and Funding Code;

- an appropriate funding agreement and lease is put in place between and executed by the GLA and LYST contemporaneously and before any commitment to the grant of the in-kind funding or lease is made.

It should also be noted that as GLA Land and Property Limited (GLAP) will be a party to the legal documentation, GLAP will also need to approve the proposed lease and award of in-kind funding (the letting of the premises at a peppercorn rent) in accordance with its constitution.