BRITAIN FOR SALE

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A derelict hospital on London’s Hampstead Road, a Yorkshire golf club and a grade II-listed office building in Cheltenham. This disparate series of properties have something in common: all of them appear on a list of assets that the government has earmarked for sale.

This list, obtained through a Freedom of Information Act request filed by Property Week, reveals an array of land and properties that the overnment believes can help it to cut the public deficit.

The list owes its existence to a new strategy that is being formulated in the corridors of Whitehall, to centrally manage the disposal of all public property.

Since the beginning of April, the Government Property Unit has written to all ministries to ask for a full rundown of assets they plan to sell. Before that, the unit, led by “property tsar” managing director John McCready, demanded to sign off any sales that will raise more than £100,000 for the taxpayer.

The centrally held list is the first of its kind, and details assets from Cornwall to Perth. It signals a step change in the government’s approach to the disposaf of its vast portfolio.

From afar, it looks invaluable and covers thousands of acres of land, from railway sidings to pubs, and tracts of land bought by the Highways Agency for road schemes.

Properties range from the Mid Yorkshire Golf Club, which was bought as part of plans to reroute the A1, to the former headquarters of the Countryside Commission in Cheltenham.

Just because we want to sell it doesn’t mean there is someone who wants to buy it

The club is now up for sale at £1.5m through Smiths Gore, and DTZ is selling the Cheltenham block. Market sources suggest the 300 assets on the list alone could fetch £200m.

This is without including disposals planned by bodies such as the NHS, local authorities, or the regional development agencies.The assets’ values vary wildly.

There are around 50 tracts of land owned by the Department for Transport that could be sold without the GPU’s scrutiny – for less than £100,000.

Some of these assets may never even reach that stage. Government Property Unit director Stuart Ladds says: “Just because we want to sell it doesn’t mean there is someone who wants to buy it. When we put Bodmin Magistrates Court up for auction, we didn’t get a single bid.”

But others will bring new development opportunities to the market. Bob Dyson, chairman of north-west at Jones Lang LaSalle, says that, although the list is not accurate enough on the size of holdings, some of the assets are in prime locations for the region.

Twelve acres of national savings and investment land in Blackpool, for example, have residential conversion potential. DfT’s sites at Hollinwood in Oldham, meanwhile, are key to the area’s masterplan.

Dyson says: “There are myriad developers, both local and national, who would be interested in the commercial and residential opportunities. But the precise extent of the holdings must be known first.”

Surplus history

As a concept, of course, government disposals are nothing new. In the early 1990s, the peace dividend took the Ministry of Defence off a war footing and prompted it to sell land that had been kept to help for future conflicts.

Around the same time, the Care in the Community initiative encouraged the Department of Health to take elderly and disabled people out of expensive institutions and leave them in their homes.

This led to a programme of housing-led redevelopments of care homes, managed by English Partnerships. This time, sales are being driven by austerity.

On 4 April, it emerged that the UK’s nine regional development agencies were putting regeneration assets worth up to £500m on the open market, rather than handing them over to local authorities, which had promised to find worthier uses for them.

Since the Budget last month, the Homes and Communities Agency has accelerated its disposals programme. Land and regeneration chief at the agency Claire O’Shaugnessy says: “The HCA doesn’t want to hold on to land any longer than it needs to. If we’re not going to sell it now, we
have to ask: why not?”

On 31 March, the HCA published a list of seven sites to be released through “an accelerated approach to land disposals”. And the Ministry of Justice has announced plans to dispose of 86 freehold magistrates and county courts, despite public dissent at closures.

All these plans appear to be motivated chiefly by cutting the public deficit. And after a sleepy year and a half in office, the Government Property Unit has now stepped in to the ring.

The unit’s list of 300 properties for sale is almost certainly incomplete, but it will grow over the coming months. Ladds says they are just the tip of the iceberg.

Last Monday, for example, he met with the body in charge of selling disused railway land, the British Rail Residuary Board. There alone, a further 20 assets emerged as surplus.

He says: “We’re doing write-rounds to uncover what departments have to sell. “Generally, we don’t need to tell them what to sell. They’re doing it already.”

But never before has the Cabinet Office, which is charged with slashing overheads, taken such a keen interest in property. It may have raised £129m through disposals last year, but this is a small dent on the last administration’s ambition of raising £35bn in public sector receipts by 2020.

Ladds says an important step is for the Government Property Unit to ensure departments do not sell the wrong properties. “What we’re trying to do [through signing off disposals] is avoid the scenario where someone sells without knowing what they’re doing, and three weeks later says: ’I could do with a freehold’.”

Indeed, at the Public Property Summit last October, which was run by Property Week, McCready said the government’s default setting was to keep freeholds and exit leases.

Public interest

The fallout from selling freeholds is, after all, a perennial headache for public property teams. Unlike private asset managers, they are competing with several conflicting priorities at once.

First, they must ensure they get best value for the taxpayer. Second, they must consider the importance of these assets to the public interest. And third, they must always remember that a potential change of political colour every five years could alter their strategy entirely.

A perfect illustration is the planned disposal of the National Temperance Hospital on Hampstead Road in north London. Health quango the Medical Research Council paid £28m to University College London for the development site in 2006, trumpeting plans for a medical centre of excellence.

It spent £800,000 on preliminary development and the plans progressed. Two years later, the council was approached by three not-for-profit sector bodies, mooting a £660m super-research centre behind the British Library.

Together, they chose a site that had been designated for social housing at Brill Place and ditched plans for the Hampstead Road hospital. Camden Council granted consent for their proposals on the condition that social housing would be provided elsewhere.

But in February, five years after it bought the site, the Medical Research Council is understood to have instructed Colliers International to sell it
to the highest bidder, rather than hand it on to the local authority for housing.

The sale has caused consternation among residents, who say the public land is not being used for the common good. In Kidderminster in Worcestershire, the opposite scenario is causing just as much upset.

Local police have taken over the disused Lea Castle Hospital for training exercises, in a seemingly resourceful attempt to sweat a public asset instead of renting buildings from the private sector.

But local residents have complained about being disturbed by the exercises, in which firearms practice has caused gunshots late into the night, without any prior public consultation. The NHS may have done better to simply have sold the site.

For town centre sites particularly, this conflict between replenishing the public purse and using land for the public interest is impossible to resolve.

On seeing Property Week’s list, Nick Jopling, executive director of Grainger, says: “You need the twinning of value to the taxpayer and delivery of residential stock in the interests of the taxpayer. That is a certain level of idealism that may not be applicable to this list.”

Much of the property fails to reach even these criteria. The government may own huge swathes of Britain, but much has no value at all. Of these, Richard Haynes, public sector partner at King Sturge, says:

“Large high-profile auctions could generate enough interest to ensure even less appealing properties find a buyer.” But unsurprisingly, the biggest prize for developers, and for the government, remains in large residential redevelopments.

The Ministry of Defence alone is believed to own around 1% of the whole country. It has set itself the target of raising £500m from property sales.

Unattainable target

This is far from easy. On a seismograph showing the Defence Estates’ yearly revenues from disposals, there would be a huge spike for the year 2008, when it sold Chelsea Barracks for just less than £1bn for residential use.

Now, beyond the Deepcut Barracks in Cambridgeshire and RAF Dawes Hill, there are few low-hanging fruit that are ripe for sale. Jopling says: “On much of this public land, I question whether a sale today is the best option. The trouble is, who are you going to sell it to?”

In an extreme case of the poor quality of the public sector’s holdings, the Homes and Communities Agency has just finished disposing of three plots of negatively valued land to the Land Trust.

The agency will have to pay a monthly fee for the former Haig and Cronton coalfields and Greenwich ecology park to be managed.

No consent

Attracting the interest of profit-driven housebuilders and developers is a trickier task still. Many say that selling sites without planning consent is uneconomical. The argument is that it is better to sell “oven ready” sites, rather than bin sites that have no short-term prospect of being developed.

James Leaver, public sector partner at Knight Frank, says premarketing work is vital: “Crystallising development potential through planning work can help speed up disposals.”

The government appears to be listening. Not only has it begun the long process of centralising its disposals strategy, it has also outlined a raft of new measures to help public land stimulate growth. One of them is “buy now, pay later” – a scheme that allows developers to defer payment for land until they have consent for development.

Bill Oliver, chief executive of listed regeneration developer St Modwen, says: “Simply selling land isn’t a short-term fix. There is no value in it until
the government gets planning. The market is at a pretty low level for development land anyway, and none of these sites have planning.”

Oliver says the public sector is better off selling sites on the condition that it receives other public assets in return. “If you just sell land, where does the money go? Into a bottomless pit. If you can provide a school, it’s much more visible.”

But a fundamental problem remains. It is the fact that the government is not a land-owner in the traditional sense. It does not simply sweat its assets and sell them on.

And developers looking for bargain-basement sites should be wary. St Modwen, for example, has been talking to the MoD about redeveloping Deepcut Barracks for more than half a decade. The site is valuable, but it must have vacant possession.

The MoD’s announcement in October that 20,000 British troops will be repatriated from Germany means the Defence Estates needs somewhere
to put them.

Despite the body’s £500m disposals target and the Government Property Unit’s best intentions, many of the low-hanging fruits look as out of reach as ever.