Agenda item

Report of the Director of Placemaking and Housing.To be introduced by the Cabinet Member for Council Housebuilding, Placemaking, and Local Economy.

Proposal to dispose of vacant industrial unit at 3 Shaftesbury Road, N18 1SQ.

The Cabinet Member for Council Housebuilding, Placemaking, and Local Economy introduced the report, which sought approval for the disposal of a property held in the General Fund located at 3 Shaftesbury Road, N18 1SW.

It was noted that since the introduction of the Strategic Asset Management and Property Improvement Plan (SAMPIP) in April 2023, the Council had been implementing the plan and was initiating its Corporate Property Model. The recommendation to dispose of 3 Shaftesbury Road represented these improvements in action.

SAMPIP was used as a guide for best practice and to assess best value. All Council owned properties were under review so that each could be assessed, and various options explored including retention, investment, or disposal. In the case of Shaftesbury Road, the decision to dispose represented the optimum financial outcome for the property.

In response to questions from Cllr das Neves and Cllr Cawley-Harrison, the following information was provided:

• At the time of the purchase of the property, the market value assessments were deemed to have been robust.
• It was noted that it would not be in the Council’s interest to disclose details publicly around the expected value of the property, as it would be going through a competitive tendering process.
• In regard to wider engagement around the Strategic Asset Management plan, there would be more engagement with businesses across all properties and with the community in terms of what the needs would be.
• In terms of costings, the holding costs were outlined in the exempt section of the report.

Further to considering, the exempt information set out at item 26.

RESOLVED

1. To agree the disposal of the freehold interest in the Property known as 3 Shaftesbury Road, N18 1SW (and shown edged red on the plan in Appendix 1) on the open market and for a price that would represent best consideration, and

2. To delegate authority to the Director of Placemaking and Housing after consultation with the Leader and the Cabinet Member for Council Housebuilding, Placemaking and Development, to agree the final price and the contract terms for the disposal of the Property (subject to a minimum price threshold contained within paragraph 3.1.b). of the exempt report).

Reasons for decision

Following Cabinet approval in December 2019 (report attached at Appendix 2), the Property was purchased in July 2020 for General Fund purposes. The acquisition represented an important step in attempting to unlock ‘Phase B’ of the masterplan for the High Road West Scheme (“the Scheme”). The Council was required to demonstrate availability of alternative premises within the locality to allow for businesses to relocate and enable the latter phase (Phase B) of the development to be delivered, (see paragraph 4.4 below). Phase B comprises the part of the Scheme that is north of White Hart Lane, including the Peacock Industrial Estate.

[This information is contained in the exempt report]

The Property was marketed to light industrial businesses on the Peacock Industrial Estate between December 2020 and June 2021. Despite the proactive approach taken by the Council and discussions held with several interested parties, this marketing effort did not ultimately result in agreement on the part of any of the consultees to relocate to the Property. Terms could not be agreed with an occupier that would purchase the freehold of the Property in its entirety, and interest by smaller occupiers in taking up only a portion of the building (who also preferred owning freeholds) was limited, thus removing the option of putting forward a feasible and viable subdivision option for the Property.

After the decision to acquire the Property, in March 2021 Cabinet agreed a funding package from the Greater London Authority (GLA) to kick-start the part of the Scheme to the south of White Hart Lane (‘Phase A’). Phase A will deliver 546 new Council homes, a Library and Learning Centre and a public square, amongst other benefits. In light of the Council securing this funding, as well as the fact that the Council owned a high proportion of the land and property interests within Phase A in comparison to Phase B (minimising the extent of land and property interests to be acquired to facilitate its delivery) and the desire of the Council to deliver new Council homes for existing residents and those on the Housing Register as quickly as possible, the phasing plan for the Scheme was updated to prioritise delivery of this phase.

As a consequence, the delivery of Phase B was deferred (including the redevelopment of the Peacock Industrial Estate) and is now programmed to commence in 2026 at the earliest. Existing businesses on the Peacock Industrial Estate will therefore not be required to relocate from their existing premises for a minimum of three years, and it is feasible that businesses are unlikely to consider their relocation options until closer to this time.

In light of the above factors (more fully described within Section 6 of this report), it is now considered that the Property is not required for its original purpose at the present time. It is therefore prudent that the Council considers the future of the property based on commercial principles to reach the most financially advantageous position.

Since the Property was acquired in July 2020, a range of unforeseen macro-  economic and political factors and actions have resulted in a profound change in, at the micro level, UK property market values. Paragraph 6.12. of this report sets out a timeline of some of the main events to affect the UK economy and, by extension, how they have affected this property.

[This information is contained in the exempt report.]

An options appraisal has been undertaken. It considered refurbishment, redevelopment and disposal options and it concluded that a disposal on the open market would represent the optimum outcome for the Council.

Alternative options considered.

Retain the Property until the date that existing businesses within Phase B of the Scheme are required to relocate

The Council could choose to retain the Property until the time that existing businesses within Phase B of the Scheme are required to relocate. As set out in paragraph 4.5 above, it is not anticipated that this this will be required until 2026 at the earliest. The current focus of the Council is on the delivery of Phase A of the Scheme, reflecting the availability of GLA funding which is specific to this phase.

The Property was marketed to businesses within the Scheme. None of the business owners took up the option to purchase the Property as a whole and interest in taking up only a portion of the building was muted, thus removing the option of subdivision on a viable basis. While it is possible that more businesses may express concrete interest closer to the time they are required to relocate, the cost to the Council of holding the property outweighs the benefits of maintaining this as a relocation option.

The option to let the Property on a short-term basis, to mitigate holding costs in the period until Phase B comes forward, has also been discounted because of the uncertain period for which the property can be let allied to the upfront costs to enable beneficial occupation.

Lease the Property and retain as an investment

The current building needs works to enable beneficial occupation and an estimate of costs is contained within the exempt Cabinet report. Furthermore, holding costs would also be incurred during the pre-works period. Despite the still robust occupier market, it is difficult to judge the future net returns from a hold/refurbish/let strategy.

Redevelopment of the Property

The current building occupies 79% of the total site area leading to insufficient external parking/loading area for vehicles. New build industrial typically adopts a maximum 50% site cover, thus any replacement building would be significantly smaller than existing. This, allied to recent build cost inflation, increased interest rates and an outward movement in resulting investment yields, has decreased the worth to the Council for redevelopment purposes in comparison with the capital value that might be achieved by sale to an owner occupier or long-term investor.

5.6 to 5.11 This information is contained in the exempt report.