Proposals for the vacation of Tintagel House on lease expiry December 2011

Report: 12
Date: 23 June 2011
By: Director of Resources on behalf of the Commissioner

Summary

In support of the MPA/MPS Estate Strategy and Corporate Real Estate Programme in regard to the provision of accommodation for operational needs, this report seeks support to vacate Tintagel House and return the property to the landlord in readiness of the lease expiry date of 24 December 2011.

A. Recommendations

That members note

1. Note the terms of the MPA’s leasehold interest in Tintagel House, and the payment to be made at lease expiry to the Landlord in accordance with the terms of the lease, as detailed in Exempt Appendix 1, that will be met from specific revenue reserves;
2. Note the steps that have been taken to vacate the property – moving those in occupation to other MPS occupied facilities as part of the Corporate Real Estate (CRE) Programme;
3. Approve the surrender of the MPA’s leasehold interest in Tintagel House subject to the terms and conditions of the lease.

B. Supporting information

1. In Spring 2010, Management Board supported the development of the CRE approach to the provision of accommodation, including the proposal to rationalise office accommodation across the estate; focusing on improving the use of existing MPA facilities core to the estate.

2. The MPS have been in occupation of Tintagel House since 1960. The MPA currently hold a leasehold interest in building from Galaplace Limited expiring in December 2011, the details of which are detailed in exempt Appendix 1. The lease expiry is subject to the payment of the sum also detailed in exempt Appendix 1. This sum was negotiated between the two parties in lieu of any liabilities the MPA may have been liable for in 2011, based on the condition of the building in 2001. The MPA’s independent advisors provided advice in this regard during lease negotiations.

3. The lease was negotiated in 2001 and signed in October 2001, during a very strong property market when office supply in this area was limited and tenant demand was strong. An independent report commissioned by the Director of Property Services (appointed in 2002) concluded that the deal was favourable to the Landlord with restrictive alienation (subletting/assignment) provisions; unattractive rental and termination provisions and pre-determined termination payment. Consideration was given to the MPA’s options at that time, including the refurbishment of the property; options to effect an early surrender or remaining in occupation undertaking necessary maintenance and repairs only. It was concluded that remaining in occupation until 2011 and relocating terms to enable the release of the building at that time offered best value for the MPA. The introduction of an asset management lead approach to the MPA’s estate in 2002, couples with the MPA/MPS Estates Strategy first published in 2003 has ensured that due consideration is now given in regard to all leasehold assets to ensure maximum flexibility to the MPA/MPS. The use of external consultants in the negotiation of leasehold interests further ensures a commercial approach is taken at all times.

4. Since 2001, the MPA have entered into leasehold arrangements for Edinburgh House, Kennington, Empress State Building, West Brompton and refurbished facilities at Cobalt Square, Lambeth, New Scotland Yard and Marlowe House, Sidcup to provide the MPS with more flexibility in office provision.

5. Embedding the principles of CRE, the MPS are now increasing utilisation levels in these core buildings, relocating teams from Tintagel House into Empress State Building, Cobalt Square and New Scotland Yard. As such the MPS are in a position to vacate Tintagel House at the lease expiry in December 2011.

6. The financial benefits of proceeding on this basis are detailed in Section C, Financial Implications below. The MPA do have a right under the terms of the existing lease to enter into a further leasehold term with Galaplace Limited. Further details in this regard are provided under Exempt Appendix 1. As the property is surplus to operational requirements and the terms to which the MPA would need to adhere do not demonstrate best value in the current market, the Property Services team do not recommend proceeding on this basis.

7. MPA consent is requested to release the property on the expiry of the existing lease on 23 December 2011.

C. Other organisational and community implications

Equality and diversity impacts

1. Officers and Staff currently based at Tintagel House will be relocated to other accommodation within the MPA estate, including Empress State Building, New Scotland Yard and Cobalt Square, all of which are compliant with the Disability Discrimination Act (DDA) requirements and have access to other MPS facilities including Gym facilities; changing/locker room facilities; areas for prayer/quiet contemplation.

2. Travel times will be minimised wherever possible and suitable car parking provision is available for those requiring access.

Consideration of MET Forward

3. This paper aligns with the strategic intent of MET Forward section 7, Met Support, in particular the Estates Programme; demonstrating value for money in the use of the MPA’s estate.

Financial Implications

Capital

4. There are no specific capital finance implications as a result of this proposal. Works carried out at Empress State Building to accommodate teams relocating from Tintagel House have been reported separately through finance update and Contracts Planner and Contracts Update Reports.

Revenue

5. The total revenue spend on Tintagel House for 2009/10 was £3.735m. This includes the leasehold obligations detailed in Exempt Appendix 1 and an annual rental income of £400k pa from a third party occupier. A breakdown of the overall figure is detailed in Exempt Appendix 2. The reduction in liabilities is included within the 2011-2014 MPS Business Plan.

6. The relocation costs of vacating Tintagel House are also detailed in Exempt Appendix 2. Funding is in place to meet these obligations through a specific MPS reserve and Service Improvement Programme funding. There are no further revenue liabilities beyond December 2011 and MPS budgets within the 2011-2014 Business Plan reflect this proposal. MPS receives rental income of £400,000.

Legal Implications

7. The condition of expiry and termination of Tintagel House is set out in the terms of the lease, as summarised in exempt Appendix 1..

The relocation of staff and officers within the estate is within the power of the MPA/MPS.

There are no other direct legal implications arising from the recommendations within this report.

Environmental Impact

8. The anticipated environmental implications are tabulated below:

Risk Implications

9. The proposals support the MPA/MPS estate strategy and CRE principles to provide cost effective facilities for operational needs. The 2011 – 14 MPS Business Plan reflects the proposed vacation of the property on lease expiry; any proposal to retain the property will require additional revenue funding and new leasehold terms will need to be negotiated. There is no guarantee a landlord would want to offer a further leasehold term and may levy a premium to do so.

D. Background papers

• Finance & Resources Committee Estates Update Paper March 2011
• Finance & Resources Committee Central London Estates Strategy October 2010
• Finance Committee original approval October 2001

E. Contact details

Report authors: Jane Bond, Director of Property Services, MPS

For more information contact:

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

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