Maurice Drummond Section House – approval of sale

Report: 9
Date: 21 October 2004
By: Commissioner

Summary

The MPA previously authorised the sale of the Maurice Drummond Section House on 29 May 2002. Previously reported disposal plans were deemed inappropriate and proved unworkable by the MPA and MPS. Remarketing the property on an unfettered basis has taken place.

This report seeks MPA members’ approval to the sale of the MPA’s interest in this property for the sum outlined herein and to the named party in the exempt Appendix 1.

A. Recommendation

That Members agree the unconditional sale of the MPA’s interest in Maurice Drummond Section House to the highest named bidder as shown in exempt Appendix 1.

B. Supporting information

1. The property was identified as surplus to requirements following a review of Section House accommodation. It was then let to a Housing Association for three years until 2002, since when it has remained vacant. It is now beyond economic repair and modernisation (e.g. to provide en suite facilities and to meet disability, religious and gender discrimination legislation), and the rooms are no longer needed to meet MPS demand. The MPS also has no need for retained facilities (as previously reported).

2. The property has been marketed openly by informal tender over the last few months, with advertisements appearing in the national property press. Best conditional (subject to planning) and unconditional bids were invited.

3. Nine bids were received. After final bid negotiations the results are provided at exempt Appendix 1. One bid was rejected as it was received through an agent; and was not substantiated by proof of funding when requested.

4. A private developer has offered the highest unconditional purchase price, subject to contract. This bidder has received the full recommendation of the appointed MPA marketing advisers for the property.

5. Two bids, conditional upon successful planning permission being obtained, were received. Whilst these bids were higher than the recommended unconditional bid, there are several major disadvantages:

1. Funds would not be received until planning permission has been obtained by the purchaser (this would be the 06/07 financial year at the earliest).
2. A substantial degree of uncertainty regarding the timing and granting of suitable planning permission which could limit future development, and impede the progress of a planning application.
3. A risk of the purchaser seeking to renegotiate (at a lower figure) at a later stage.
4. A potential downturn in the residential market. There is currently a high degree of market uncertainty, and recent surveys have shown a significant stabilisation of national residential values, and in parts of London drops in both asking and transacted prices have been recorded in the third quarter.
5. Any prolonged downturn will affect a developer’s profit margin and may adversely influence a decision to proceed with the purchase. 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 purchase price quoted.

6. The higher, conditional upon planning bids, are not supported by appointed professional advisers to the MPA or the Director of Property Services.

7. The recommended unconditional bid, whilst lower than the conditional bid, represents certain income receivable now. A clawback clause has been agreed 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.

8. The property was marketed on an “Informal Tender” basis, and therefore “ best and final bids” were requested from the top four bidders. As a result some bids were enhanced from their original offers.

C. Race and equality impact

There are considered to be no equality or diversity issues arising as a result of this disposal and the local planning authority is also under a duty to consider these matters.

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.

D. Financial implications

The proceeds of this transaction have been included in the Property Services’ Capital Receipts’ budget 2004/2005. The previous plan, as reported, to link in other sites is no longer regarded as practicable or tenable, in best value terms, by the Director of Property Services. Previous linked disposals and retention of interests by the MPA are not budgeted and are considered to be unrealistic in current funding envelopes.

E. Legal implications

Apart from normal property contract matters there are no specific legal implications to report. Appropriate clawback provisions are in place to protect the Authority.

F. Background papers

None

G. Contact details

Report author: Alan Croney, Director of Property Services

For information contact:

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

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