Financing A Flagship Health Project

Wilky worked closely with the NHS Trust and the Ministry of Defence to create a unique new set of terms for financing the project.

These are based on a conventional lease, following government guidelines for best practice in the relationship between developer and occupier. But  they also incorporate the best features of PFI, Public Private Partnership and the Department of Health LIFT procurement structure, together with what the Valuation Office terms 3PD (third party developer) concepts.

The result is a modified commercial lease with special features. The developer is taking responsibility for hard Facilities Management throughout the 30 year lease. When the lease ends, the PCT and MoD will acquire the freehold of both land and building for a nominal £1 (The building will be handed over in NHS Estate Code Condition B).

Wilky believes such characteristics will prove popular with other NHS Trusts, GPs and private-sector health service providers

At all stages of the planning/cost exercise the scheme was tested against the Public Sector Comparator to ensure that, using standard government guidelines, the occupiers were saving money and reducing risk.

The Strategic Health Authority was able to support the Trust’s Business Case and specialist District Valuers confirmed the costs were competitive. A cost plan was agreed between Wilky and the Valuation Office, setting an optimum return for the developer’s capital employed. Thereafter the risk of subsequent cost variations remained with Wilky.  Thus the rent became cost-based, without the occupiers being exposed to overruns if the building cost more than anticipated.

To give the Trust and MoD certainty as to future costs, rent increases were linked to inflation.  This shares the risk evenly between developer and occupiers. Given that most government organisations have budgets which allow for inflation, the rent is effectively fixed until 2038.

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