Full Statement from Bradford One – 7th August 2014
When Bradford One was established in 2013 the future of the former Odeon building was still uncertain. Its aim was, and remains, to work towards a viable and sustainable future for a building that means a great deal to the majority of people in Bradford. In December 2013, having acquired the building from the Homes and Communities Agency, Bradford Council invited Expressions of interest from those interested in finding a sustainable future for the building.
Bradford One’s vision for the former Odeon is as a live entertainment venue, with live music at its core but also offering larger stand-up comedy shows for which there is not currently a suitable venue in Bradford. However, what sets Bradford One’s vision apart is a recognition that the building needs to provide more than just a venue for touring acts. Its location, overlooking City Park and connecting the College and University with the city centre, demands daytime as well as evening use in a building open to local people and visitors.
When Bradford One was set up as a Community Benefit Society it was in the knowledge that the former Odeon has a special place in the hearts of Bradfordians. The aim was to create an organisation that everyone could be part of and that could be used to take the former Odeon into community ownership. This would mean that it was never again subject to the whims of business or changes in the Council’s priorities or favour. It would also mean that any profits generated would remain in Bradford, to be reinvested in the city and its people.
Bradford One was successful in making it through the first stage of the Council’s Expression of Interest process and was invited to go forward to the next stage in late March 2014. This stage asked for a great deal more detail about Bradford One’s plans, evidence of demand for the venue from both audiences and music promoters, and to provide a sound business plan that demonstrated that the planned renovation could be paid for and that the completed venue would be profitable.
Bradford One applied for and were awarded a grant of £90,000 from the Social Investment Business which not only provided the necessary funds with which to proceed but also provided a massive endorsement from a national organisation set up to support social enterprise in securing and developing community assets. This funding was then used to commission the specialist input needed to inform the Expression of Interest Stage Two.
A professional market research company was commissioned to gather evidence of demand for the venue from the catchment population and carry out an online survey to gather local opinion on the likely appeal of the proposed venue. This survey received nearly 1,300 responses in just six days, with over 90% of respondents indicating a preference to attend live music and other events in the new venue, rather than having to spend their money in other nearby towns and cities.
Bradford One also commissioned professional support to assist in the development of a detailed business plan, demonstrating where the capital to renovate the former Odeon would come from, and showing that the finished building would be profitable. This plan was developed and modeled using conservative assumptions in terms of the number of events, income from bar sales and income from ancillary uses and tested these assumptions against a number of challenging scenarios, all of which illustrated that the venue could and would remain economically viable.
As part of this research representatives of Bradford One met with the operator of some of Europe’s largest and most prestigious venues to seek their views on the demand for the proposed venue and explore their interest in being involved with Bradford One. However, the outcome of this meeting presented a huge dilemma as the operator confirmed that not only did they believe that the venue would be commercially viable but also that they would be interested in operating it, subject to certain conditions.
These were that they would retain all the profits, meaning that Bradford One would not be able to borrow any money to meet the cost of renovation, and that they would operate solely as a music and comedy venue with no other uses permitted, opening the doors when an event was taking place and locking them again afterwards. Whilst the interest of a major operator was encouraging it was decided that to go down this route represented a missed opportunity for Bradford city centre and would potentially deprive the city of millions of pounds of investment from the profits generated by the venue.
Bradford One submitted its Expression of Interest Stage Two on 30th May 2014, describing a vision for a renovated building featuring an open, glass fronted facade – reflecting City Park – and a venue offering a capacity of 2,500 (all seated) and 3,100 (part standing), with restaurants, café bars and conference facilities in a semi-public space, open to all and providing a much needed boost to both the daytime and evening economy of Bradford city centre. Not only would it be owned by the people of Bradford it would invest up to £1m a year into education, culture and enterprise in the city.
On 26th June officers from Bradford Council provided feedback on the plans and identified a small number of areas where they asked for additional information to support the business case including stronger evidence of demand for the student accommodation that forms part of the funding plan, stronger evidence of intent to use the finished venue from concert promoters and clarification of the basis for the bar income projections.
In the next few days Bradford One gathered the required evidence, securing letters of support from The Concert Promoters Association (representing all the major UK concert promoters), the Musicians Union and five of the UK’s leading agencies, representing many of the UK’s biggest acts. This information was submitted to the Council on 4th July, with the expectation that the outcome of their assessment would be announced the following week. Unfortunately, due to Council staff holidays, this was then delayed until the end of July.
Finally, on 5th August, the Council informed Bradford One that it had not met the Council’s threshold to progress to the next stage. The reasons given were:
• Insufficient evidence of the demand for conference and hospitality facilities in the centre of Bradford.
• Insufficient evidence of the demand for additional student accommodation, creating uncertainty about the ‘timing and value’ of the capital receipt that would contribute up to 15% of the cost of renovation.
• Insufficient information about the impact of the proposed venue on existing, Council run, venues.
• Insufficient “evidence of intent by major operators to book the venue”.
• That projected bar income was unrealistic and that projected profits were “excessive”.
• That the cost of borrowing was higher than the Council could have secured.
At the conclusion of the feedback it was also suggested by a member of the panel that, should this assessment have been taking place three years ago, the Council would have been better disposed towards such a proposal but that in the “current financial climate” they considered Bradford One a risk. It was also remarked that the Council’s decision had been made solely by the panel of four officers, with no mention of external independent assessors. Bradford One asked for the feedback to be provided in writing and received the following on 7th August:
“The Council recognise that this is a high risk project and we felt that Bradford One’s proposal contained a number of high risk factors which were not sufficiently mitigated to assure the assessment team that it was appropriate to continue development of the proposal.
On criteria A – Market Assessment: The minimum requirement needed to progress to the next stage was to demonstrate more than reasonably the market demand for the proposed development based on a detailed market assessment with findings clearly evidenced with sufficient quantitative analysis
The evaluation team found the assessment for the demand on the additional accommodation, the impact on existing venues and the soft market testing with leading venue operators and promoters did not reach this threshold.
On criteria B – Business Plan: The submission had to demonstrate an above basic – reasonable thought out business structure and a good financial plan that indicates the project will be commercially viable.
The figures supplied could not meet the test of being a good answer because the evaluation team found a high level of risk in achieving a positive capital receipt of £2.5m from the student development and excessive revenues and profitability levels. Therefore the achievability of the plan was in doubt.”
Bradford One was perplexed by this assessment as the data provided in the initial proposal and/or in the additional information supplied in early July directly addressed these issues and is summarised below:
Bradford One’s original submission provided a detailed analysis of the potential market for conference facilities in the district. These figures showed that, whilst the conference market in West Yorkshire is a healthy one with more than 80,000 conferences taking place each year, this was skewed towards Leeds with 742 events per venue in Leeds and only 197 per venue in Bradford. As Bradford’s economy is 44% of the size of Leeds, and despite many large businesses being based here, conference expenditure in Bradford is only 6% of that in Leeds. This clearly suggested that there is significant latent demand in Bradford should the right facilities be available.
Proposals were asked to describe what proportions of their costs were to be funded from loans and other sources. As part of a strategy to reduce borrowing Bradford One identified the land to the rear of the former Odeon building as a potentially valuable development site capable of contributing a significant capital receipt to the cost of renovating the Odeon building. This would potentially contribute up to 15% of the capital costs of the scheme but, if omitted, would not necessarily threaten its overall viability.
It has never been Bradford One’s intention to develop or operate student halls of residence. The objective is to secure planning permission to develop the site to the rear of the building as student accommodation and then sell this site, with planning permission, to a developer creating a capital receipt of approximately £2m which would help meet the cost of renovating the Odeon.
This plan was developed based on the advice of one of Bradford’s leading commercial property agents who works with many major developers, several of whom have an interest in the student housing market. This strategy was also informed by the knowledge that the University of Bradford is increasingly aiming to attract wealthy overseas students who typically demand a better standard of accommodation than is currently available. Bradford One’s advice also suggested that developers are confident that there is an ongoing need for better accommodation, given the fact that two substantial existing facilities were nearing obsolescence.
Additional information submitted to the Council in early July also confirmed that a number of developers were interested in the proposed development but that they could not yet be identified for reasons of commercial confidentiality.
Impact on existing venues
This section asked for information on the “impact on existing venues in Bradford District (Alhambra, St Georges, Kings Hall)” including an assessment of “potential audience leakage” and “product crossover/displacement”.
The existing programmes on offer at both the Alhambra and St George’s Hall was analysed and a sample programme of current mid-scale pop, rock and stand-up comedy acts was compiled that did not draw on any of the programme on offer in either of the existing venues. It was also apparent that, of sixty music tours taking place at the time, only one was coming to Bradford district confirming that the intended programme for Bradford One was significantly different to that on offer in existing venues. The sample programme also illustrated that Bradford One would focus on stand-up comedy acts that would typically not visit the district but were more likely to play larger venues of comparable capacity such as the Manchester Apollo.
Based on this, Bradford One concluded that the impact on programming for the Council’s existing venues would be minimal. In terms of ‘audience leakage’ Bradford One’s online survey suggested that most of the money being spent on live music by the target audience was currently being spent outside Bradford and that audiences in comparable cities across the UK were able to sustain a mix of mid-scale venues and an arena. Examples given included Leeds, Sheffield, Liverpool and Newcastle, all of which sustain three mid-scale venues and an arena. As Bradford lacks the latter it was concluded that audience leakage within Bradford would be minimal and that any loss of demand would be experienced outside the district.
Soft market testing with leading venue operators and concert promoters
Bradford Council asked proposals to include the “views and opinions of venue operators and concert promoters of the potential viability of the proposed venue” and “evidence of intent by major operators to book the venue”.
Bradford One was able to provide a letter from the operator of some of Europe’s major venues, which said they were:
“pleased to confirm our support for the concept of renovating the Bradford Odeon as a concert and entertainment venue, and our belief that venue could be popular and sustainable” and that
“we would be interested in exploring operating the renovated Bradford Odeon on behalf of the appointed team. Having looked at the market previously, we believe that a venue of a capacity in excess of 3,000 could be successful and sustainable in Bradford”.
The Chairman of the Concert Promoters Association (CPA) also wrote to Bradford One:
“Further to your correspondence, the CPA is delighted to learn of the proposed new live venue in Bradford. The CPA represents more than 50 promoters in the UK, from multi nationals Live Nation, AEG and SJM to equally important smaller promoters. Collectively we represent thousands of concerts and festivals each year and the addition of a major venue in Yorkshire certainly would be very welcome to the UK touring circuit and I believe would be widely used by the majority of promoters and artists.”
In addition the Musicians Union said that:
“We would fully support the opening of this proposed new music venue in Bradford. A venue of this size would put Bradford firmly on the musical map for national and international touring acts.
Independent venues are fiercely popular amongst industry personnel, artists and audiences alike: they allow fair, individually-negotiated contracts to be arranged between musicians and the venue without the uniformity and restrictions that might be expected from venues operating as part of a chain.”
The Music Managers Forum said:
“The Music Managers Forum represents over 350 of the UK’s music managers and over 1,000 live acts from Paul McCartney onwards. We are delighted to support your bid to add another music venue of the size that is sorely needed. Live venues are the very bedrock of the music industry and the creative industries in general and we are sure our acts will look forward to performing at Bradford One.”
One of the major agencies also suggested:
“The new venue in Bradford sounds like a very exciting prospect and would be an asset to the northern touring circuit. We would be interested in using the venue and don’t currently book into any venues of a similar size in the area.”
In calculating forecast revenue Bradford One was asked to provide estimates of income from beverages and to specify the basis of the figures used.
Bradford One explained in its proposal that it had taken as its starting point the figure quoted in the PRS report “Adding up the industry” which suggests an average spend per head of £12 as typical of a venue with a capacity of 2,500 to 5,000. PRS for Music is the umbrella organisation for songwriters, composers and music publishers and regulates the way in which music is accessed and used and this report provides its members with information about the likely income of venues.
Despite this Bradford Council’s feedback was that the figures used to estimate bar income were unrealistic whereas in reality Bradford One had used a figure 5% below the average spend per head to inform its revenue forecasts and to ensure its figures were entirely realistic for a venue of its size and location.
Proposals were required to include projections of profit and loss over a periodic basis and to apply sensitivity calculations based on a number of scenarios including changes in demand, volumes of attendance and interest rate movements.
Bradford One developed its forecasts based on conservative assumptions about the number of events that would take place (50 in Year 1, 100 in Year 2 and 125 in Year 3), and on revenue from bar sales only with no income coming from venue hires and ticket sales.
These forecasts were then subjected to the sensitivity calculations and in every case continued to show that the venue remained in profit. This would suggest that, even if the base assumptions were significantly ambitious, the proposition is still valid.
Bradford One is therefore extremely concerned that Bradford Council’s assessment suggests that Bradford One’s forecasts were based on excessive revenues and profitability levels, as this is quite clearly not the case.
The cost of borrowing
Proposals were required to include the cost of finance and the cost base used.
Council feedback suggested that the interest rates used in Bradford One’s forecast were significantly higher than the Council themselves could secure. Bradford One would suggest that comparing what the Council can secure, as a completely different entity, is irrelevant and that Bradford One used significantly higher interest rates to further sensitise its business plan against an unknown financial future in which interest rates may soon rise.
Bradford One’s scheme offers a viable, sustainable and exciting future for the former Odeon building, based on sound advice, research and analysis from external experts, and backed by significant public support. Bradford One is glad that Bradford Council is moving towards a solution for the building but is disappointed that it appears to be missing the opportunity to realise significant additional value for Bradford in the process.
If you have any questions or comments you would like to make about this decision, please contact us. Feedback from our members is vital.