Request for authority to dispose of additional surplus properties in 2010/11

Report: 09
Date: 21 October 2010
By: Director of Resources on behalf of the Commissioner

Summary

With the introduction of Corporate Real Estate principles, and further to the Finance & Resources Committee approval in February 2010 to the disposal of certain assets, this report recommends the proposed disposal of a number of additional properties during 2010/11.

A. Recommendations

That members

1. Note the 2010/11 Capital Programme Receipts budget of £20 million to be generated through the disposal of surplus assets, and the properties approved in principle for disposal by the MPA Finance and Resources Committee in February 2010, attached in Appendix 1 (Exempt).
2. Approve the additional two disposals proposed in 2010/11 attached in Appendix 1 (Exempt).
3. Note that those receipts generated in regard to the disposal of assets now estimated at £22.3m will be allocated against the approved capital programme, and note that Members will receive separate reports for approval in regard to those individual property disposals which exceed £1 million pounds in value in accordance with the MPA Standing Orders.

B. Supporting information

1. The Capital Programme for 2010/11 to 2016/17, as approved by the Finance and Resources Committee on 1 April 2010 details a capital receipts budget of £20 million, generated by disposals, for the financial year 2010/11. The timing of sales and subsequent receipts is dependent upon the roll out of the estate modernisation programme and Safer Neighbourhood programme, the Borough based consultation process, and commercial conditions. In accordance with MPA Finance Regulations, this paper has been prepared detailing those additional properties that will be available for disposal in 2010/11 and the estimated values of those assets.

2. All operational properties that are surplus to operational requirements and those residential properties with a value in excess of £1 million, are marketed and sold in accordance with the established MPA disposal procedures set out in the MPA’s standing orders. Sites are marketed for a minimum of four weeks, with advertisements placed in the national and local property press, and where possible a board placed on site. Previously, the MPA have sought best bids, unconditional upon the receipt of planning permission. The MPA will have an opportunity to approve the terms of each disposal over £1million on an individual basis. Arrangements for disposals of less than £1million are set out in B5.

3. Conditional bids (i.e. subject to the grant of town planning consents) are not usually invited as part of the disposal process, as there are a number of disadvantages to the MPA in accepting such offers:

1. There is no guarantee that the scheme as proposed will be granted planning permission.
2. If planning consent is not granted the purchaser will either seek to renegotiate the purchase price (to a lower figure) at a later stage, or may withdraw from the purchase altogether.
3. Any prolonged downturn in the commercial or residential market will affect a developer’s profit margin and may adversely influence a decision to proceed with the purchase.
4. There is a high degree of risk in accepting a conditional bid, where there is no certainty of realising the proposed purchase price.
5. Funds would not be received until receipt of planning permission and no certainty can be placed on the time scales to obtaining planning consent.

Previously, market conditions have generated offers that match or exceed “conditional” offers. However, the present uncertain market conditions, have seen such offers decline.

4. Any offers considered must reflect the MPA/MPS’s standard requirement for a 5 year forward-sale clawback clause; to enable the MPA to benefit in any uplift in value in the event that the purchaser subsequently sells the property at a price in excess of that paid to the MPA within the agreed duration. Where appropriate, planning “overage” is also put in place.

5. In accordance with the existing MPA Finance Regulations any disposals with a value up to £1 million are dealt with under delegated powers and reported retrospectively via the appropriate Estates Update Paper at the earliest opportunity. For the sites where the proposed receipt exceeds the delegation threshold a report will be presented to the Finance and Resources Committee at the appropriate time for approval.

6. In the case of residential properties with a value below £1 million will, under existing delegated authority, be sold at auction, with a number sold by private treaty. Properties sold by auction will be marketed by the auctioneer appointed to dispose of the property/properties, and will be listed for sale at a particular auction. Any proposed disposals of a novel or contentious nature would be reported to the Authority before the sale was finalised.

7. Reserve values are placed on each property sold in this way. If an offer is made at auction in excess of this reserve the property is sold and the purchaser will have 28 days to complete the transaction. Reserve values are based on two independent (ie excluding the auctioneer) valuations undertaken on behalf of the MPA and the reserve set is the higher figure. The Property Services representative in the room is in contact with the Director of Asset Management and has delegated authority to agree to offers within 5% of the reserve value, if appropriate.

8. To ensure best value the portfolio is sold by private treaty, the results of which are benchmarked to monitor / compare the results from the auction route. Such properties include sales to existing occupiers or those properties which have failed to sell at previous auctions.

9. In February 2010, the MPA approved, in principle, those properties detailed in Exempt Appendix 1.

Properties falling within the residential category relate to those properties currently occupied by operational police officers that will be released in year, and include a mixture of 2, 3 and 4 bedroom houses and flats. It would be inappropriate to list addresses for each property so a single figure has been included in the Exempt appendix.

10. With the introduction of corporate real estate principles, the properties proposed for disposal have been realigned. Two properties planned for disposal in year will now be released for disposal in 2011/12; two additional properties have been identified for disposal in 2010/11 are detailed in Exempt Appendix 1 and summary schedules. The MPA Estate Panel supports the disposal of the two additional buildings.

11. A further capital receipt can be generated if MPA approval is given to the proposal detailed under Agenda item 18 of this Committee meeting; Westminster property - amendments to disposal.

12. The valuation figures shown in regard to the operational estate are based on a mixture of Discounted Replacement Cost and Open Market valuations. The valuation figures for the residential estate are based on market valuations. All valuations must be treated as guide values only; all values are subject to prevailing market conditions.

C. Other organisational & community implications

Equality and Diversity Impact

1. There are considered to be limited equality or diversity issues arising as a result of these proposed disposals.

2. Private treaty disposals are open market sales making the properties available to all members of the public.

3. In the event of residential redevelopment of the operational sites, the provision of key worker or social housing accommodation at a site will need to meet the requirements of the Local Planning Authority, as and when granting planning consent for development.

4. The police stations/offices referred to in the disposal programme either have no front counters or already have an alternative provision in place. Hence there is considered to be no direct Citizen Focus impacts.

5. No operational front counter will be disposed of without suitable alternative provision nearby that is compliant and provides at least equivalent facilities as the site being replaced. Local community, stakeholder and MPA link member to be have been engaged and consulted, as appropriate.

Consideration of MET Forward

6. This paper aligns with the strategic intent of Met Forward section 7, Met Support - in particular the Estates Programme. The recommendation is an opportunity to realise capital receipts and revenue savings by the earlier closure and disposal of two buildings than previously planned.

Financial implications

7. The Capital Programme for 2010/11 to 2016/17 as agreed at MPA Finance and Resources Committee on 1 April 2010 details a capital receipts budget of £20 million for 2010/11. Receipts are generated through the disposal of surplus assets, including real estate assets. Without these receipts, the Capital Programme will have to be reviewed and more projects deferred or stopped in order to ensure expenditure is contained within the available resources.

8. The revised list of properties in the attached Appendix will increase anticipated receipts to £22.3m, an overachievement, if delivered, of £2.3m against the approved budget.

Legal implications

9. The MPA’s powers to dispose of land are contained within s123 of the Local Government Act 1972. This provision states that land can be disposed of in any manner by the Authority, so long as the disposal is not for less than best consideration that can reasonably be obtained. However, the duty to obtain best consideration is not required where the disposal is for a lease less than 7 years, or alternatively the Secretary of States’ consent is obtained.

10. The MPA’s standing order under Part E, Financial Regulations, set out the internal governance arrangements for the disposal of surplus property. This makes clear that all properties with a value that exceeds £1 million or which raises questions of principle or financial policy, possesses unusual features or involves particular difficulty, or may arouse particular public interest/publicity, will need to be approved by the MPA. Whereas, un-contentious property disposals under the above threshold can be dealt with under the scheme of delegation by the Director of Resources. The MPA will also need to ensure all disposals are consistent with any agreed strategies in relation to property disposals.

11. The Financial Regulations under clause 10 also requires the Director of Resources to submit to the MPA prior to the beginning of each financial year, a schedule of proposed disposals for the forthcoming year with an estimate of £1 million or more. Whilst the surplus properties that are the subject of this report were not included in the original schedule, this report satisfies the requirement of notification to the Authority.

12. The terms of reference for this Committee enable Members to approve the recommendation set out in this report, as the committee has overall responsibility for the oversight and management of the capital and revenue budgets and other resources such as estates.

Environmental implications

13. There are not considered to be any significant environmental implications to these disposals.

14. Sales entailing potential refurbishment, conversion or redevelopment will create adverse environmental impacts during the construction phases. On completion of construction, however, the ongoing use of the buildings would probably significantly improve the long term environmental / sustainability performance situation.

D. Background papers

• MPA Finance and Resources Committee -Request for Authority to Dispose of Surplus Properties - 11 February 2010
• MPA Finance and Resources Committee - Request for Authority to Acquire Freehold Building in Richmond - 18 March 2010
• MPA Finance & Resources Committee - Disposal of Residential Property - Abbotts Close, Grice Court and Pondfield House - 17 June 2010
• Estates Update - Disposal of Lawford, Old Park, Rennets

E. Contact details

Report author(s): Jane Bond – Director Property Services, MPS

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Send an e-mail linking to this page

Feedback