Arbour Square Police Station - approval of sale

Report: 11
Date: 7 April 2005
By: Commissioner

Summary

Arbour Square Police Station, Tower Hamlets, was previously earmarked for disposal but, as reported to the Finance Committee on 12 December 2002, was retained to meet expanding operational needs. Cost of re-occupancy was then considered too high, and the property has remained vacant and surplus to requirements.

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

A. Recommendation

That Members agree to the unconditional sale of the property known as Arbour Square Police Station and Magistrates Court to bidder ‘A’ as shown in exempt Appendix 1.

B. Supporting information

1. This property was originally identified as surplus to requirements following the relocation of the operational staff to Barking, and relocation of the Magistrates Court to Belmarsh, Woolwich.

2. The property was scheduled for sale by auction in July 2002. Owing to a change in operational requirements, and concerns over appropriateness of the disposal route, the property was retained and re-evaluated for occupational purposes. Following assessment, the cost of re-occupying the premises was considered uneconomic. The property remains surplus to current requirements and unfit for purpose.

3. The property has been marketed openly by external property agents for a period of two months, with advertisements appearing in the national property press. Best unconditional bids were invited.

4. Conditional bids (e.g. conditional upon successful planning permission being obtained), were not invited. Whilst conditional bids generally result in higher values, there are several major disadvantages:

• Funds would not be received until planning permission has been obtained by the purchaser (this would probably be the 06/07 financial year at the earliest)
• 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.
• A risk of the purchaser seeking to renegotiate (at a lower figure) at a later stage
• A potential downturn in the residential market. There is currently a high degree of market uncertainty, and recent surveys continue to show a significant stabilisation of national residential values. The Land Registry has reported a drop of 25% in transactions in the fourth quarter.
• 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.

5. Eighteen bids were received in the first stage of the tender. The top six bidders were then invited to make ‘best and final bids’. The results are shown in the linked exempt Appendix 1.

6. Two companies bid the same amount although the recommended bidder offered slightly superior planning overage provisions.

7. The recommended unconditional bid represents certain income receivable now. A forward-sale 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. A planning overage clause has also been agreed, allowing for potential additional receipts based on the size of the redevelopment permitted by any planning permission obtained by the purchaser at a future date.

C. Equality and diversity implications

1. There are considered to be no equality or diversity issues arising as a result of this disposal. The obligations of the Race Relations (Amendment) Act are met when disposing of any MPA owned property asset.

2. As this property will be a residential re-development, 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 the purchaser applies for planning consent for re-development.

D. Financial implications

The proceeds of this transaction have been included in the Property Services’ Capital Receipts’ budget 2005/2006.

E. Legal implications

1. Apart from normal property contract matters there are no specific legal implications to report.

2. Appropriate forward sale clawback and planning overage provisions are in place to protect the Authority.

F. Background papers

• None

G. Contact details

Report author: Alan Croney, Director of Property Services

For more information contact:

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

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