The Margate School says it has been forced to halt its involvement in a multi-million pound project with EKC Group and Thanet council over demands for rent and capital funding.
TMS partnered with the college group and council in a successful £6.3million bid to the government’s Levelling Up Fund to create a digital and education campus with studios, gallery, ‘Fablab’ café and workshops at the former M&S building in Margate.
The Margate Digital project, which now has delayed its expected opening date until September 2024, will include 2,000 sq m of industry-relevant training space which will focus on digital technology. TMS was due to take 500 sq m of this space to offer postgraduate and professional development provision together with expanded Fabrication Laboratory (FabLab) facilities.
The bid involved using £6,306,078 Levelling Up funding with EKC Group ‘match-funding’ £720,000 plus an additional further education budget for programme delivery and student support.
The M&S building, owned in a joint venture between Thanet council and Homes England, is to be let to EKC Group on a 10-year, nil rent lease.
But TMS director Uwe Derksen says the School is now being told to pay £30,000pa rent and provide a significant capital sum. He says the initial agreement did not involve a financial input and TMS was to provide its reputation, network and facilities and to bring in new courses, mentors, apprenticeships and start-up hubs as well as the expansion of the FabLab.
He said: “At the moment we have been forced to halt our involvement as the conditions of our agreed participation as per the funding bid have significantly changed.
“From partner we have now become a potential tenant with rent liabilities and also a new added condition of having to raise our own capital funding. Unless we are reinstated as partner we are simply in no position to participate.”
Mr Derksen says the current situation has also had an impact on The Margate School because the business plan and a loan had been partially based on the Margate Digital venture and funds had also been spent on a design consultant for the space in the M&S building.
He says once the Levelling Up money was granted TMS was relegated to a back seat, not invited to meetings and had to repeatedly email partners to get sight of the submitted bid.
He added: “The upshot is that there is a demand for rent and capital funds that was not in the bid. EKC now has the repair lease but say they need someone in there paying rent and that we need to bring our own capital funding, which I think is maybe £1m.
“They knew we were not in a position to do this and it seems we are now an inconvenience.
“We can’t do anything about it but it feels like a landlord putting up the rent to get rid of an unwanted tenant.”
The Margate School is now concentrating on its bid to prevent closure of its activities at the former Woolworths building in the High Street. The School must raise some £50,000 to continue running.
In a joint statement Thanet council and EKC Group say the government funding only covers capital costs so ‘any third party’ at the site must fund works for their own space.
They add that service charges, maintenance and management has to be paid for by EKC and the aim is to recover some of that cost through leasing space in the building.
Thanet council documents say that EKC Group’s business plan shows the eventual growth in student numbers will mean the project will start to break even by year eight or nine and they will be able to reinvest by year 10.
To support the project the nil rent lease was agreed and includes the ability for EKC “to sublet to provide a rental income to support the costs of running and maintaining the building.”
The later opening date, understood to be around 12 months behind original estimates, has been blamed on delays in finishing building works.
The joint statement says: “The Margate Digital project bid was developed by EKC Group in engagement with The Margate School (TMS), with Thanet District Council responsible for submitting the bid to government.
“By taking part in the Margate Digital project, The Margate School would be adding to their existing portfolio of activity in Margate.
“The Levelling Up Funds (LUF) must be used to pay for capital works in order to repurpose the building. EKC Group is providing significant match funding in the form of the fit-out of their parts of the building i.e. the interior spaces including electricals, heating, decoration and furnishings that will make it suitable for use.
“Because the LUF only covers the delivery of capital works, any third-party that takes a space within the building must also fund the fit-out of that space. Levelling Up funding cannot be used for equipment or other completion of internal spaces.
“The cost of ongoing service charges, and management and maintenance of the building is also EKC Group’s responsibility. As a public sector organisation, EKC Group doesn’t have funding in place to cover all of these costs and has therefore sought to recover a proportion of them through prospective lease arrangements for parts of the building.
“Since the bid was submitted, the economic environment has seen ongoing increases in inflation and the cost of living, and rising insurance premiums. Recent changes to the classification of Further Education Colleges by the Department for Education also have an impact. As a result the sums needed to cover these costs have increased.
“The council is engaged with central government, and is highlighting the challenges of increasing inflation and its impact on the cost of living and materials. The aim is to identify and mitigate the risks being posed to the project.
“Due to delays to the completion of building works, the proposed opening date for Margate Digital is likely to change. EKC Group proposes that the first cohort of students will now commence in September 2024. If completed earlier, the building may be used for other related activities.”
The LUF funding for the project must be spent by March 2025. When open Margate Digital is expected to cater for around 300 students.