Request for authority to sell Turret House, Kingston

Report: 12
Date: 15 June 2006
By: Commissioner

Summary

This report requests authority for the disposal of the residential quarters at Turret House, 40 Albany Park Rd, Kingston Upon Thames.

A. Recommendations

Members are asked to:

1. Approve the unconditional sale of the MPA’s freehold interest in this property for the sum of £2,720,000 (Two million seven hundred and twenty thousand pounds) to the highest bidder shown in exempt Appendix 1.

B. Supporting information

1. As part of the implementation programme for the MPA’s agreed residential accommodation strategy, Turret House, a block of 12 flats, is now surplus to requirements.

2. The site has been marketed openly for sale by 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. Twelve bids were received in the first stage of the tender (with one party bidding twice on different bases). The winning bid at the 1st stage was a conditional bid, and therefore deemed unacceptable for the reasons outlined below.

4. In addition a bid was received which contained instalment payment terms providing approx. 60% of the offer price payable in 7 months plus a significant additional clawback payable upon receipt of successful planning permission. The loss of interest on the 1st tranche together with the uncertainty associated with planning clawback made this a less attractive offer and the decision was taken to go to a second round.

5. Five parties were therefore shortlisted, and a second stage of bidding called. Best unconditional offers were invited on the basis that funds would be paid on the date of completion of the sale, and that instalment payments would be unacceptable. This resulted in a different lead bid, on an unconditional basis, but with no planning clawback or sales overage. Consequently the two lead bidders were asked to bid in a third and final round of bids. The results of this final round are attached as Appendix 1.

6. Members will note that the highest bid now includes a substantial clawback payment upon receipt of successful planning permission. Although no such payment can be guaranteed, the anticipated likely clawback would be in the region of £560,000. This would bring the aggregate receipt to a higher level than both the “instalment payment” bid and the “conditional upon planning” bid received in the 1st round.

7. The recommended bidder, has recently acquired an adjoining piece of land, and their “special purchaser” status is reflected in the level of their winning bid.

8. When an off-market sale to the adjoining owner was originally considered, two independent valuations were commissioned on the basis of a special purchaser. The recommended bid herein is substantially in excess of both these valuations.

9. Conditional bids were not invited but three such bids were received at the 1st stage & one at the 2nd stage. There are a number of disadvantages to the MPA in accepting an offer which is conditional upon planning:

10. There is no guarantee that the scheme as proposed will be granted planning permission.

11. 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.

12. 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.

13. 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.

14. Funds would not be received until receipt of planning permission and no certainty can be placed on the time scales to obtaining planning consent.

15. The recommended unconditional bid represents certain income receivable now. If the purchaser does not obtain planning permission, and decides to sell on, a forward-sale clawback clause has been agreed, to enable the MPA to benefit in the event that the site is sold 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.

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, 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 for 2006/2007. In line with the MPA/MPS estates’ strategy, Building Towards the Safest City and Property Services’ Interim Operational Plan, receipts will be recycled and reinvested in the estate.

F. Background papers

None provided

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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