40/11

DECISION UNDER DELEGATED POWERS

DECISION CANNOT BE TAKEN BEFORE THURSDAY, 6 OCTOBER 2011

Title PROPOSED SALE OF THE FREEHOLD INTEREST IN 21 WHITCOMBE ROAD, NEWPORT,

Report Author REPORT FOR THE CABINET MEMBER FOR THE ECONOMY AND ENVIRONMENT

EXECUTIVE SUMMARY

1. This report seeks approval to accept of an offer in the sum of £205,000 in respect of the disposal of the freehold interest in the former transport depot, 21 Whitcombe Road, Newport.

BACKGROUND

2. 21 Whitcombe Rd is an industrial / depot site to the east of Whitcombe Road, , Isle of Wight. The extent of the property is defined by the red and blue edging on the enclosed, Plan 1.

3. The area outlined blue is owned freehold by the and is an area of steeply banked overgrowth, part of an old fuel store and a small unused field.

4. In respect of the remainder, edged red, this is owned freehold by the Council subject to a ground lease to the proposed purchaser, with an unexpired residue of a term of 99 years from 1 April 1992 established by a lease dated 1 February 1993. Rent is fixed throughout the term at £1 per annum. The areas outlined green on Plan 1 are sub-let back to Isle of Wight Council for a term of 99 years less 10 days from 1 April 1992, again at an annual rent of £1 per annum.

5. A large part of the area leased back to the Council was used by Wight Bus as a storage depot and drivers rest room. The Wight Bus service transferred to at the end of August so these areas are now surplus to the Council’s needs. The rest of the area leased back is used as office and storage by the Council’s Transport and Rights of Way teams.

6. The building outlined green and shaded yellow is let on a further sublease by the Council to a third party for £3,000 per annum. This was for a term of 3 years from 1997 and it is currently holding over on this agreement (continuing occupation on the terms of the original agreement even though this has expired). 1

7. The Council has been approached by the ground lessee of the site edged red who has requested to buy the freehold interest of the entire site including land in the Council’s ownership (red and blue areas).

8. The proposed purchaser has a special interest in the site because of its ownership of the ground leasehold interest in the surrounding site. It is therefore considered that it will be paying above market value due to the marriage value (the additional value generated when a leaseholder owns can join the leasehold and freehold estates) potential which owning both sites will offer (and has been reflected in the valuation advice).

9. Operationally the Council still requires an element of land at the Whitcombe Road site for the use of the Transport and Rights of Way sections. The area of land needed has however been greatly reduced following the transfer of the service to Southern Vectis. The ground lessee has recognised this need and therefore proposed that the Council lease back an area of the site sufficient for its purposes as shown hatched green on Plan 2.

10. The proposed purchaser initially offered a figure of £160,000 on the basis of the Council offering up full vacant possession of the site.

11. It is believed the purchaser intends to rationalise the remainder of the site, and may seek to build some new industrial units. If, however, it seeks to develop any residential units on the site (and Planning Services have indicated that any such application would be resisted) then there will be an overage clause included within the contract such that the Council would benefit from a proportion of any uplift in value.

12. Negotiations have resulted in a proposed transaction that will provide the Council with the following:-

• Capital receipt of £205,000

• The Purchaser will provide it its cost, accommodation sufficient for the Council’s use in the area hatched green on Plan 2. The Council will occupy this accommodation for 25 years at a rent of £1 per annum, on similar terms to the existing ground lease.

• An overage clause inserted into the sale contract to ensure that the Council will benefit from any potential uplift in value should, for example residential planning consent be granted for the site in the near future.

STRATEGIC CONTEXT

13. This transaction supports two of the Council’s key priorities as detailed in the 2011- 2013 Corporate Plan being:

o Regeneration and the Economy – particularly the ‘increasing inward investment’ theme. o Delivery of Budget Savings through changed service provision – particularly the ‘accommodation rationalisation’ theme.

14. The disposal is identified in the 2011/12 Capital Disposals Programme and the draft 2011/12 Strategic Asset Management Plan.

2 15. If this property is disposed of it will release a capital receipt into the Council’s corporate account as part of the annual capital receipts target.

CONSULTATION

16. This report has been shared with the Local Member, the relevant Cabinet Member and the Deputy Director of Economy, Tourism and Leisure, Wightbus, Rights of Way and the Strategic Manager for Highways and Transport. No significant concerns were raised by the consultees. Any further comments received will be considered when this delegated decision is taken by the Cabinet Member.

FINANCIAL / BUDGET IMPLICATIONS

17. If the recommendation made within this report is adopted the Council will benefit from a capital receipt in the sum of £205,000 and will retain a leasehold interest in the site for operational reasons for a nominal rent for a period of 25 years (it is estimated that this represents a notional saving of approximately £10,000 per annum).

18. Independent valuation advice has been sought and this supports the level of offer received for the freehold interest and the leaseback terms. Due to the proposed purchaser also owning the ground lease for the adjoining land (outlined red in Plan 1), it is unlikely that any offers exceeding that of market value would be received.

19. The Council will lose £3,000 per annum from the sublease of the office area. The Council will need to reflect this loss of rental income within its revenue accounts. (This ‘loss’ and the rent free ‘saving’ are reflected in the valuation provided by the independent surveyor).

20. The Council is consolidating its position on the site and in doing so will be occupying less accommodation overall which, in turn, will result in reduced revenue outgoings (NNDR, utility costs, and repair and maintenance). Whilst it is not possible to fully calculate these savings at present, they will offset the loss of rental income described above.

CARBON EMISSIONS

21. The rationalisation of the Council’s property portfolio is a central part of its Carbon Management plan and will contribute substantially to the target reduction of 6% per annum.

LEGAL IMPLICATIONS

22. If the property is sold, then once a sale has been completed, the Council’s only interest in the site will be the 25 year, occupational lease of the lower part of the site for a nominal rent.

23. The Council has the ability to dispose of property under Section 123 of the Local Government Act 1972 for best consideration.

PROPERTY IMPLICATIONS

24. It is considered that property implications are adequately covered within the main body of this report.

3 EQUALITY AND DIVERSITY

25. The council as a public body is subject to general and specific duties under equality and diversity legalisation and as such has a duty to impact assess its service, policies/strategies and decisions with regard to diversity legalisation - race, disability, gender, age, sexual orientation, and religion/belief. None of the identified groups are likely to be adversely affected against by this decision.

SECTION 17 CRIME AND DISORDER ACT 1998

26. There are not believed to be any specific crime and disorder issues arising from this decision.

OPTIONS

27. The following options are available to the Council:- (a) To sell the freehold interest for a sum of £205,000 with the agreed leaseback arrangements. (b) To sell the freehold interest and surrender the Council’s complete occupation of the site. (c) To retain ownership of the freehold interest, as existing. (d) To renegotiate with the proposed purchaser. (e) To offer the opportunity to the open market.

RISK MANAGEMENT

28. Under option (a) there is a low risk that the purchaser may lose interest in the purchase or not have the level of funding required. This is considered unlikely as the proposed purchaser has already instructed solicitors and consented to pay for the independent valuation fee.

29. Under option (b) the Council still has requirement and operational need for space at this site so there is a risk that the Council would not be able to identify suitable alternative facilities from which to deliver these services and so would not be able to deliver the services efficiently or effectively.

30. Under option (c), the Council has a diminished need for this site following the transfer of the Wightbus service. The Council is currently attempting to rationalise its property assets so keeping this as an underused or vacant site would not fall into line with this intention. The risk is that the Council would incur unnecessary costs associated with an underused or vacant site would still incur rates, insurance and property management costs.

31. Under option (d) through negotiation the proposed purchaser has already significantly increased its offer and this is in line with independent valuation advice received by the Council. There is a risk that further negotiation may result in the proposed purchaser withdrawing its interest.

32. Under option (e) Offering the opportunity to the open market may result in the existing bidder withdrawing its interest and only offers of a lower value coming forward. There is therefore a risk of withdrawal of the purchaser and/or not achieving a higher offer through the market.

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EVALUATION

33. Due to the decreased demand for this site by the Council and due to the proposed purchaser having a special interest in that it owns the surrounding land, it is considered that option (a) is the most appropriate course of action. Entering into further negotiation or offering the opportunity to the open market may result in the current bidder withdrawing its interest and potentially only lesser offers being made.

RECOMMENDATION

34. That the Council adopts option (a).

To sell the freehold interest for a sum of £205,000 with the agreed leaseback arrangements.

APPENDICES ATTACHED

35. APPENDIX - Site plans 1 & 2.

Contact Point - Jason Doughty, Estates and Valuation Surveyor  01983 823467 - e-mail: [email protected]

STUART LOVE COUNCILLOR GEORGE BROWN Strategic Director Deputy Leader and Cabinet Member for the Economy and Environment Economy & Environment

Decision

Signed

Date

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