Agenda item

[Report of the Director for Housing, Regeneration and Planning. To be introduced by the Cabinet Member for Finance and Strategic Regeneration.]

Cabinet is asked to approve the Commercial Property Portfolio review including the approval to pursue the acquisition of a number of third party industrial interests.

The Cabinet Member for Finance and Strategic Regeneration introduced the report which sought approval for the strategy for the commercial industrial portfolio, which aimed to ensure that the Council’s industrial portfolio aligned with the Council’s economic plans as set out in the Good Economy Recovery Plan and the Borough Plan. it also sought approval to take steps to buy-back 6 long leasehold interests and two Freehold interests in a total of 8 industrial properties. All potential acquisitions would be subject to third party agreements, the Council’s Acquisitions and Disposals Policy, and to be in accordance with financial thresholds and further analysis.

In response to questions from Councillor Gordon, it was advised that:

-           The cost per acquisition was provided in the open part of the report and the payback period was set out in the exempt report. As this was an umbrella report, further reports would be provided to Cabinet to seek approval for future acquisitions.

Following consideration of the exempt information  at item 28, it was

RESOLVED

1.        To approve the strategy for the commercial industrial portfolio as set out in the open and the exempt report which aims to ensure the Council’s industrial portfolio is aligned with the Council’s economic plans as set out in the Good Economy Recovery Plan and the Borough Plan.

2.         To approve that steps are taken to seek to buy-back 6 long leasehold interests as set out in the exempt report and two Freehold interests in a total of 8 industrial properties forming part of the Council’s commercial property portfolio, subject to agreement with the third part interests, and subject to the disposals and acquisitions policy criteria being met. All potential acquisitions to also meet the Council’s acquisition criteria set out in 6.12 below, and to be in accordance with the financial thresholds and further analysis required as set out in the Exempt report.

3.         To note that on provisionally agreeing terms to acquire each of the third party interests a full business case to be brought to Cabinet for approval to the acquisition within the agreed budgetary framework.

Reasons for decision

As part of the Council’s Asset Management Plan the commercial portfolio is under review to ensure that it is performing well financially and to ensure that it is possible to maximise its impact on the socio-economic well-being of the Borough. The industrial portfolio includes some established industrial estates and properties. This review covers eight of the industrial properties where it may be possible to increase the Council’s income and improve the Council’s ability to use these properties to support future economic growth and achieve planning aims, in particular in the Tottenham area.

Haringey is an established location for small and medium scale manufacturing activities. There is a strong demand for industrial properties nationwide and this sector of the property market is set to continue to be buoyant. The industrial property market in Haringey reflects this strong performance. This supports business growth and employment in the Borough.

Occupation of the Council’s industrial properties is mainly by independent businesses in relatively small spaces. This nature of occupation with relatively small unit sizes and high number of independent operators has been identified as a key advantage for the Haringey industrial property market. Another key advantage that makes Haringey a good location for industrial properties is the trunk road connections within the borough, which combines with its good public transport network.

The Council pays a significant amount of rent to its direct landlords as ground rent. The proposal to acquire the freehold interests in the industrial properties represents an opportunity for the Council to acquire full control of the properties and deploy the additional rental income into its Medium-Term Financial Strategy. Acquiring freehold interests and intermediate headleases would mean the Council would no longer pay ground rent.

Subject to further review, it may be possible for the Council to refurbish or significantly remodel and further develop some of the properties in future to increase the supply of industrial properties in the Borough and improve the quality of available stock. That level of investment may be difficult to make without holding the freehold interests.

Alternative options considered.

The alternative option to the proposed acquisition is for the Council to continue with the current position i.e., not purchasing the freehold and intermediate headlease interests. This option is the default position for the properties should it not be possible to acquire by agreement. It is not preferred, for the following reasons.

-      The acquisitions would give the Council more control over these properties which will enable the Council to protect the employment and industrial uses as well as give the Council the ability to invest in future to increase the industrial and its quality within the borough.

-      The proposed acquisitions meet the Council’s acquisition criteria and is considered financially viable.

-      The additional revenue income from ground rent savings has been included in the Council’s Medium Term Financial Strategy.

-      Lost opportunity for greater economic, planning and regeneration through future investment opportunities if the Council does not have full ownership of its portfolio.

However, the acquisition programme is subject to both negotiations and meeting the financial criteria and should this result in the inability of the Council to proceed with any individual acquisition, this option will need to be the default position and the Council would then need to work with the other interests to see whether the portfolio can be improved to support the Council’s economic growth and regeneration strategies.

Further information on the options is set out in the exempt part of this report.