College asks council for £3.5m loan for university centre
Money will be paid back within three years once land is sold
NEWBURY College is asking West Berkshire Council to borrow £3.5m so it can press ahead with its plans to open a university centre.
Councillors will hold urgent talks at an executive meeting tonight (Thursday) to discuss whether or not to approve the request.
The total cost of the centre is estimated to be between £5m and £6m and will be funded through a combination of government funds, commercial investment and capital funds from the college.
The college has already secured a £1.75m grant from the Thames Valley Berkshire Local Enterprise Partnership (TVBLEP) towards the construction of the centre.
However, that is dependent on the building being open to students in September 2020.
The college also plans to contribute the proceeds of the sale of two parcels of land to the project.
The first of these is expected to be completed by the end of this month, but the second is subject to planning approval being granted, which is not expected to be until 2021 at the earliest.
The estimated value of this land without planning permission is in the region of only £480,000.
However, with planning permission the land is expected to be worth more than £3.5m.
Therefore, a loan – up to a maximum of £3.5m – has been requested by the college to bridge the timing gap between the construction of the centre and the sale of the second parcel of land.
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A report circulated to councillors in advance of tonight’s meeting says: “The purpose of this report is to support the university centre development at the Newbury College campus by providing a loan to the college to help fund its construction.”
Council officers have recommended that the local authority enter into a facility agreement with Newbury College to provide the loan.
The college estimates that it will be able to repay the money within three years.
However, the council acknowledged that there was a “significant risk” that the planning approval and completion of the sale of the land could be delayed, which could prevent the college from repaying the loan within the specified timescale.
It added that “the ability of the college to repay the loan and the value of the land against which the loan is secured are both subject to planning approval being gained for development of the site”.
The college proposes that the loan should be secured by a legal charge on the eight acres of land to the east of the campus, which it intends to sell.
It will then repay the loan on completion of the sale of this land.
Council papers say: “The aim of this arrangement is to enable Newbury College to proceed with development of a university centre which will be of considerable benefit to the local economy while protecting the council’s financial interests.”
The loan can be treated as an investment by West Berkshire Council under the terms of its Investment and Borrowing Strategy, which was approved in March.
