It is unlikely that a major capital application for National Arts Lottery would be successful, given the new ACE guidelines and Sheffield's success in capital projects in recent years. There are opportunities, however, to discuss potential project and revenue support with ACE both in terms of Arts Lottery funds and the Regional Arts Lottery Programme (RALP). A strong case could be made for funding the set up costs of education and business support programmes within the scheme, including capital (such as equipment) and revenue overheads (such as teachers, workshop leaders, co-ordinators and mentors).

There may be sponsorship available through the music industry but this is not assumed. Private sector funds should be sought, however, from PRS, PPL, MCPS and the Musician's Union.
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Capital Cost Plan
Capital building costs of £1.6m (net) as supplied by Monaghan's are assumed. A total capital budget, including building acquisition, design fees, telecoms and equipment purchases is assessed as being between £2.660m (net) and £3.125m (gross).
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Rent & Service Charges
The key aim is to ensure rents are as low as possible and generate sufficient revenue to cover building overheads. A balanced budget rather than the creation of profit is the key remit. Forecast base rents range from £4.00 to £4.50 per square foot per annum (ex VAT), resulting in inclusive rents of £6.59 to £7.09 with service charges included. Services charges are costed at £2.59 gross per square foot per annum. This compares to a current average of £3.91 (without service charges), with actual rents varying from £2.22 to £7.23.

Forecasts indicate a total rent roll of circa £114,000 at 100% let, including service charges and a sinking fund allowance. Following the development period, a transitional reoccupation rate is forecast from 40% to 80%, with a first year total rent roll of circa £60,000. The business plan is very conservative, and maximises occupancy at 80%, realising a rent roll of circa £87,000 by the second letting year. This rises to a 90% let, realising a rent of circa £102,000 by the end of the third year.
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Overheads
An operating budget of circa £89,000 per annum has been forecast. This includes all service charge items and management overheads. The full time employment of a Development Manager and Reception Administrator is assumed, but this will require revenue support in the first two years as occupation builds up. Thereafter the scheme will finance its own staffing and total overhead.
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VAT
The key issue is to attempt to maintain the current situation where no VAT is charged to tenants. VAT issues could have a crucial effect on the viability of the scheme, especially with regard to rental levels. Direct advice is required from a qualified VAT advisor or the Customs and Excise Office in the detailed planning stages.

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