Request for authority to dispose of surplus site in Richmond

Report: 12
Date: 5 July 2007
By: Acting Director of Resources on behalf of the Commissioner

Summary

This report requests authority for the disposal of the former residential quarters known as 361 – 367A St. Margarets Rd, Richmond, TW7 7BZ upon the terms and conditions outlined herein.

A. Recommendations

That Members approve the unconditional sale of the Metropolitan Police Authority (MPA) interest in 361-367A St. Margarets Road, Richmond to the indicated bidder for the sum shown in Exempt Appendix 1.

B. Supporting information

1. The property comprises a block of 11 flats made surplus to requirements by changes in the MPA’s contractual obligations for the provision of police staff housing, together with the revision of the MPA’s residential estate, and subsequent implementation of its approved residential accommodation strategy.

2. The property has been openly marketed through informal tender over the last few months, with advertisements appearing in the national property press. Best bids, unconditional upon the receipt of planning permission, were invited.

3. Fifteen bids were received in the first stage of the tender, including one conditional upon obtaining planning permission. These were then short listed to three for the second stage of bidding.

4. Conditional bids were not invited as there are a number of disadvantages to the MPA in accepting an offer which is conditional upon planning:

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 in this type of market, 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 timescales to obtaining planning consent

5. After receipt of the second stage bids, the original lead bidder declined to proceed after holding initial discussions with the Local Planning Authority. The second level bidder was then approached but after an initial expression of interest, also declined to proceed with the purchase. As a result, the third bidder was approached. The third bidder then reduced their initial second stage bid, but to a level which maintained their lead in the field. The final results of these protracted negotiations are attached in Exempt Appendix 1.

6. The recommended unconditional bid represents certain income receivable now and includes an overage clause giving potential payment to the MPA dependent upon the level of sales achieved by the purchaser. All bids received were made on the basis that a standard forward-sale clawback clause was included, to enable the MPA to benefit in the event that the purchaser sells on at a price in excess of that paid to the MPA.

C. Legal implications

1. Apart from normal property contract matters, there are no specific legal implications to report save as already noted.

2. Appropriate sales overage provisions have been agreed to protect the Authority.

D. Race and equality impact

1. There are considered to be no equality or diversity issues arising as a result of this disposal. The Local Planning Authority is also under a duty to consider such matters when a planning application is being reviewed.

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

E. Financial implications

The proceeds of this transaction have been included in the Property Services Capital Receipts budget 2007/08. In accordance with asset management practice and the agreed MPA/MPS Estates Strategy, funds released from the disposal of surplus assets or assets that are no longer fit for use, whilst being part of the corporate capital programme, are intended to primarily support recycling and re-investment in the estate.

F. Background papers

• Residential Estate Strategy Review – MPA Finance Committee 16 February 2006

G. Contact details

Report author: Alan Croney – Director of Property Services, MPS.

For more information contact:

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

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