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SELECTED ISSUE
Health Club Management
2013 issue 7

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Leisure Management - Future-proofed funding

Funding

Future-proofed funding


Neena Dhillon takes a look at three new leisure sites in the UK that demonstrate how creative thinking can help deliver value in times of reduced government spending

Neena Dhillon
Affordable spas are increasingly being included in local authority leisure sites photo: shutterstock.com/holbox

The sheer scale of the challenge facing local authorities in the UK has been the subject of much national debate. Despite unprecedented pressure from central government to slash budgets, local authorities began 2013 with a new responsibility for public health – a remit that includes promoting healthier lifestyles and encouraging people to be physically active. Within this landscape, local authorities are turning to partner organisations that can secure funding for major leisure facilities without the requirement for significant capital expenditure or ongoing subsidised support.

Developers of leisure services are responding with solutions that both unlock financing and deliver leisure centres with the capability of standing on their own two feet – as the three ambitious projects showcased in this feature demonstrate.

INNOVATIVE THINKING


Client: Ramsgate Leisure Centre, UK
Supplier: Alliance Leisure

“With the current financial pressures on leisure provision, local authorities need to overcome two major challenges,” explains Sarah Watts, MD of Alliance Leisure, which has partnered with more than 30 local authorities and leisure trusts over the past 12 years. “First, the lack of direct access to sufficient capital investment. Second, many existing leisure sites are housed in old building stock, in urgent need of redevelopment.”

This month sees completion of one of the company’s latest redevelopment projects: a £4m extension and refurb of Ramsgate Leisure Centre in partnership with Your Leisure, Thanet District Council and lead contractor ISG.

Representing an enhanced replacement of Ramsgate’s ageing, standalone pool, construction has focused on the addition of a new-build to the council’s dry sports centre – now home to a 25-metre swimming pool, learner pool, day spa, group cycling studio and a toning suite – as well as the upgrade of CV equipment in the onsite gym.

The business case for this million-pound build has been based on savings of around £100,000 being achieved through the consolidation of two operations into a single site, as well as enhanced revenue streams being realised with the inclusion of commercial facilities that go beyond usual local authority leisure provision – namely, an affordable spa and suite of toning machines, called Your Feelgood Factory, for a maturing population.

Alliance Leisure raised the required funding from the city against Your Leisure’s commitment to pay back the investment over 20 years, using surplus revenues generated by the new facilities. Breaking down the figures, Alliance Leisure’s commercial director Paul Cluett explains: “The net revenue improvement of the development (at membership maturity) is forecast at £462,000 per annum. Through careful design and construction, the cost of building is £4.08m. Utilising our access to fixed-price capital over a set period, this results in an annual repayment of significantly less than the revenue opportunity, which will reduce the need for subsidy by the council.”

Although existing memberships to the leisure centre remain unchanged, a new level of membership – costing £55 a month – will cover gym, swim and classes, as well as use of the thermal spa facilities. It will also provide a 20 per cent discount on therapies given in one of the four spa treatment rooms. Spa-only membership (£30 a month) is also being introduced, as is a membership for the toning suite (£25 a month).

Alliance Leisure charges a fee for delivery as well as arranging funding. In some projects, as is the case here with Your Leisure, the company also partners with the operator to assist with ongoing sales and marketing.

“What’s innovative about this robust business model is the facility mix that we’ve been able to drive into old stock, at no extra cost to the council,” observes Watts. “We’re not building the same old thing – we’re thinking about the users of the future. Commercially-orientated additions such as a day spa in the public sector can create revenues, introduce new demographic groups and help with retention.”

Steve Davis, MD of Your Leisure, adds: “Increased participation in physical activity and the improved wellbeing of our communities will only be achieved if we offer modern, family-friendly services. This requires significant investment at a time when local councils are struggling with reduced finances.

“The Alliance Leisure model offers cost-effective project management and access to funding to enable facilities to be both upgraded and made more commercial, with improved revenues being used to finance investment.”

 



The centre’s new look will help attract a different demographic
UPFRONT PLANNING

Client: Waterlane
Leisure Centre, UK
Supplier: Pulse

Pulse, which has provided leisure solutions to the local authority sector for 25 years, recently completed the transformation of Waterlane Leisure Centre in Lowestoft, UK.

In the role of strategic leisure development partner to Waveney District Council and Sentinel Leisure Trust, Pulse delivered the £8m redevelopment project in 2012, having fully refurbished and expanded the partly dilapidated site. The leisure centre’s swimming pool, as well as a sports hall, squash courts and gym all dating from the 1980s, have been completely upgraded or replaced.

Designed with the key objective of improving health and fitness participation in Lowestoft and beyond, the modern leisure centre now comprises a hotel-style reception, café, restaurant, two swimming pools, generous changing facilities, two-floor fitness suite, dance studio, cycling studio, children’s play area and a spa featuring a thermal experience and six treatment rooms. Membership – including gym, swim, classes and spa – costs £32.95; all other activities incur an additional fee.

Waterlane represents the largest single site project undertaken by Pulse, underlining that sizeable leisure developments conceived around sustainable and self-financing models are still attracting funding, in spite of the difficulties experienced by the banking sector. Of the £8m raised, Pulse provided £6m from its consortium of corporate banking partners; Waveney District Council contributed £250,000; £1.12m came from a Sport England grant; and a smaller amount was invested by Lowestoft Sixth Form College – one of the community neighbours to use the centre on a weekly basis.

But Pulse’s commitment to Waterlane goes beyond design, build and delivery. “We developed a proposal that allows for a total investment in works, equipment and services worth almost £12m over the next 20 years, while simultaneously enabling the council to reduce its financial support for the site,” says Chris Johnson, Pulse MD. “In addition to providing initial capital investment, we’ve incorporated a planned equipment replacement and facility refresh programme. This has ensured future funding requirements are assessed and dealt with from the outset, which aids business planning, budget forecasts and affordability.”

And it’s this future-proofing aspect that underpins the viability of this particular funding model: not only will the projected income from increased membership and revenue opportunities service the investment, but it’s also forecast to reduce Waveney District Council’s subsidy by 62.5 per cent.

Pulse will continue to work with the council over the next 20 years, supporting sales and marketing efforts to ensure that financial and operational targets are met. “We’re usually dependent on the commercial income generated by the facility to recover some or all of our investment in works, equipment and services,” adds Johnson. “This risk transfer keeps all parties focused on the long-term objectives.”

 



The £8m project was designed to drive local participation
PUBLIC-PRIVATE COLLABORATION

Client: Moberly Leisure Centre, UK
Supplier: Willmott Dixon

A groundbreaking scheme that demonstrates how the private sector can collaborate with the public sector to design and fund community facilities, Moberly Leisure Centre in London’s Queen’s Park is currently awaiting full planning approval, with completion expected in spring 2016.

This new £17m, multi-use leisure facility is being made possible thanks to an innovative land deal between Westminster City Council and Willmott Dixon’s development division, Regen. Given a gross development value of £60m, the deal will see sales receipts from 120 new homes – built by Regen on Kilburn Lane and Caird Street – being allocated towards the funding of a new leisure centre.

Brian Brady, managing director for residential at Willmott Dixon Regen, explains more: “Local authorities are increasingly looking at ways of using their assets to facilitate new public amenities, such as leisure centres, in joint ventures with private sector companies that have an interest in the residential redevelopment of that land. As public funds diminish, these partnerships help deliver high quality public facilities – directly benefiting local communities and representing good value for taxpayers – through the sale of new homes.”

Under the current planning proposal, the ageing Jubilee (Caird Street) and Moberly (Kilburn Lane) Sports Centres, which are less than a mile apart, will be demolished and replaced with a new, consolidated leisure centre at the Moberly site, measuring more than the two existing facilities combined. The £17m project will accommodate a 25-metre swimming pool, teaching pool, sports hall, health and fitness suite, exercise studios, health spa, boxing hall and a gym. Moberly will be the location of 80 of the new homes developed by Regen, with the remaining 40 positioned on the Jubilee site on Caird Street.

In response to public consultation, however, a smaller facility at Jubilee will be introduced as a replacement to the existing sports centre. “While the two locations are within easy walking distance, feedback from local people indicated that the existing Jubilee Sports Centre is an important hub for the community,” says Brady. “The new, smaller facility aims to retain this community aspect, providing flexible space. The proposed three-court hall will be able to accommodate different sports and exercises classes, and we’ve planned for changing facilities and a meeting area too.”

Regen, which believes elements of its funding model are unique, will work both as a developer and contractor on this project. Westminster City Council will benefit from the sales value generated when the housing is sold, land receipts, and two new leisure sites.

“Few councils are in the position of being able to build multi-million pound sports facilities in the current climate,” observes Westminster councillor Steve Summers. “But together with Willmott Dixon, the creation of a £17m centre for residents of Queen’s Park will be done at no cost to the taxpayer, representing incredible value for money.”

And for Regen, this type of land arrangement between the private and public sectors has the capability of being applied to a range of similar schemes, in which ageing community assets undergo much-needed modernisation or replacement thanks to a creative solution that unlocks value and generates funds.

 



Moberly Leisure Centre: The result of an innovative land deal

Originally published in Health Club Management 2013 issue 7

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