Request for Authority to dispose of surplus properties in 2011/12

Report: 10
Date: 16 December 2010
By: Director of Resources on behalf of the Commissioner

Summary

The Corporate Real Estate principles adopted by the MPA / MPS in regard to the management of the estate including maximising the use of accommodation and minimising estate costs. This will result in a number of assets becoming surplus to operational requirements in 2011/12. This report seeks approval, in principle, to the disposal of a number of surplus residential and operational properties, during 2011/12 at a value equal to, or in excess of, the current estimated Market Value.

A. Recommendations

Members are asked to:

1. Note the Capital Programme Receipts budget of £40 million will be generated through the disposal of surplus assets generated through the corporate real estate approach,
2. Agree in principle to the list of surplus properties for disposal, included in the exempt Appendix 1,
3. Note the proposed disposal list in exempt Appendix 1 has received agreement from the MPA Estate Panel,
4. Note members will receive a separate report for approval in connection to those individual property disposals which exceed £1 million pounds or are of particular interest, in accordance with the MPA Standing Orders.
5. Note that, in line with the current policy, those buildings with an operational front counter will only be disposed of once an alternative front counter has been provided.

B. Supporting information

1. The Capital Programme for 2010/11 to16/17, as approved by the Finance and Resources Committee on 1 April 2010, details a capital receipts budget of £40 million, to be generated by disposals, for the financial year 2011/12. Through the introduction of a corporate real estate approach to property provision, a number of assets have been identified for disposal. Further properties may be identified for disposal at a later date and will be presented to the Authority as appropriate. In accordance with MPA Finance Regulations, this report has been prepared detailing those properties that are known to be surplus to requirements and available for disposal in 2011/12 and the estimated values of those assets.

2. The Corporate Real Estate approach has three key aims:

• Ensure that the MPS estate is fit for purpose and to enable high quality policing in London
• Optimise the efficiency of the MPS estate, making best use of accommodation and disposing of assets where appropriate
• Achieve cashable savings to ensure operational officer / staff roles are protected
• The disposal of redundant properties as recommended in this paper aligns with these aims.

3. 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 for private treaty sales. 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. In light of prevailing market conditions it is probable that offers going forward will be made on conditional and unconditional terms. The MPA will have an opportunity to approve the terms of each disposal over £1 million on an individual basis.

4. In accordance with the existing MPA Finance Regulations any disposals with a value under £1 million are dealt with by way of delegated powers and reported retrospectively via the appropriate Estates Update Paper at the earliest opportunity. Should a disposal with a value below £1 million have any unusual features or be of special interest, then the MPA will have the opportunity to approve the final sale.

5. 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.

6. Any offers considered must reflect the MPA/MPS’s standard requirement for a 5 year forward-sale clawback clause. This is 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 an agreed period of time. Where appropriate planning “overage”, enabling the MPA to share in the value of a larger than anticipated planning consent, is also put in place.

7. Those residential properties with a value below £1 million will, under existing delegated authority, be sold at auction or by private treaty.

8. 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. 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.

9. To ensure best value an element of the residential 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.

10. The properties currently identified for disposal in 2011/12 are detailed in Exempt Appendix 1 with property details provided within the summary schedules. The valuation figures shown in regard to the operational estate are based on indicative 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.

11. 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 here.

12. Subject to MPA “in principle” approval, a more detailed implementation plan will be developed in regard to the timing of the disposals to enable preparatory work to commence in this calendar year.

C. Other organisational and community implications

Equality and Diversity Impact

1. In line with corporate real estate principles; maximising the use of space and minimising costs, it is essential that those buildings provided for longer-term use (enabling the release of surplus assets) are fit for use, compliant and provide suitable accessibility. 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, already have an alternative provision in place or require alternative provision to be provided. Where new provision is required full community engagement will take place as part of the approvals process.

5. Prior to actual sale of buildings which previously had front counters the local community, stakeholder and MPA link member will be engaged and consulted, as appropriate.

Consideration of MET Forward

6. This report aligns with the strategic intent of Met Forward section 7, Met Support - in particular the Estates Programme. The recommendation is to dispose of surplus properties to meet the Capital Programme budget, reducing debt levels and also delivering future revenue savings by reducing running costs.

Financial Implications

7. The Capital Programme for 2011/12 to 2016/17 as agreed at the Finance and Resources Committee on 1 April 2010 details capital receipts budget of £40 million for 2011/12. Receipts are generated through the disposal of surplus assets, including real estate assets.

8. The total projected capital receipts detailed in the attached appendices are in line with the MPA budget for 2011/12. Property Services regularly review the estate to seek out further over-programming opportunities to ensure the Capital Programme can be supported.

Legal Implications

9. There are no direct legal implications arising from the recommendations set out in this report.

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. This report meets the requirement set out in the Financial Regulations, Part E, clause 10, which states, prior to the beginning of each financial year the Director of Resources shall submit to the Authority a schedule of proposed disposals for the forthcoming year with an estimated value of £1 million or more. Subject to approval by the Authority, this schedule will give authority for the Director of Resources to instigate the disposals process in line with the process set out in the remainder of Part F.

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. The table below notes the impact on the MPS of selling these buildings.

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 significantly improve the long term environmental / sustainability performance situation as a result of being built to present day standards.

Risk Implications

15. With continued general financial uncertainty and on-going difficulties in obtaining funding for both commercial re-developments and residential mortgages there is a risk that sales will fail to complete and / or values begin to fall below the figures reported above. Progress against meeting the budget figure of £40 million for the year will be continuous and any other opportunities to dispose of property earlier will be considered to meet the target.

16. The closure and sale of former public facing police buildings is often an emotive issue for local communities with strong lobbying against the sale via councillors, MPA / GLA members and MPs. There is a risk that sales could be delayed, or cancelled, if the lobbying is especially effective.

D. Background papers

• Capital Programme for 2010/11 to16/17 - MPA Finance and Resources Committee on 1 April 2010
• Estates Strategy - MPA Finance and Resources Committee on 21 October

E. Contact details

Report authors: Jane Bond – Director Property Services, MPS

For more information contact:

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

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