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Interim Assets Disposal Strategy

Cabinet Member: Cabinet Member for Croydon Renewal, Councillor Stuart King and Cabinet Member for Resources & Financial Governance, Councillor Callton Young

Officer: Executive Director Place, Shifa Mustafa

Key decision: yes

Minutes:

The Cabinet Member for Croydon Renewal informed Members that budget preparations were well underway, as had been discussed at a meeting of the Scrutiny & Overview Committee earlier that week. Three objectives were at the heart of the budget preparation; strengthening financial discipline to ensure the council lived within its means, ensuring the delivery of the best quality services which the council can afford, and limiting liabilities with a particular focus on property and assets. In relation to the last objective, the Cabinet Member stated that the report was an essential step towards achieving that goal.

 

It was noted that the council fully accepted the need to review all of the assets it owned and undertake asset disposal so as to reduce its borrowing requirement and focus on core business. To that end, an Interim Assets Disposal Strategy had been developed to support that work and covered commercial assets, such as the Croydon Park Hotel, and surplus operational sites. The Cabinet Member stated the Strategy would, in combination with the Corporate Asset Management Plan, ensure the best use of the council’s assets and complement the Capital Programme and the Medium Term Financial Strategy which were due to be considered at the following Cabinet meeting.

 

Following consideration by the Scrutiny & Overview Committee the report and Strategy had been updated in line with recommendations from the Committee including; ensuring ward councillors and Cabinet Members were consulted at the outset of the consideration of a disposal, the initial tranche of disposals were included in the Part A report, and additional information in terms of options considered for possible uses of Croydon Park Hotel had been included.

 

In terms of the options, including emergency and temporary accommodation, which had been considered in relation to the Croydon Park Hotel the Cabinet Member informed Members that he had seen the business case assessment for those options and was in agreement with the officer judgement that it would not be affordable and therefore viable option. To that end, the Cabinet Member highlighted the recommendation to appoint a tier one agent to prepare a marketing strategy and subject to approval manage a sales process for the Croydon Park Hotel with a report to Cabinet in September 2021.

 

The Cabinet Member noted that Members had raised that it was important that the council achieved best consideration whilst balancing the current economic climate with the timing of the disposals. It was noted by the Cabinet Member that achieving best consideration could be achieved by securing planning permissions on sites to add value to the asset. Additionally, he noted that Members had queried whether community led initiatives could be considered for the sites. The Interim Director of Homes & Social Investments advised Members that the approach to best consideration was set out as sections 6 and 7 of the report, which would include robust business cases. The process, it was confirmed, would include early consultation with ward councillors and Cabinet Members.

 

The Interim Director advised Members that the programme had been structured with “quick wins” at the start with assets which were larger liabilities for the council. More challenging assets would still go through the same process but it was recognised that additional work may need to be undertaken before they were put on the market, such as moving services to more appropriate settings. Members were advised by the Interim Director that the purpose of the Strategy was to deliver best value and to reduce the holding costs that many assets incurred, so as to deliver better value for the local taxpayers.

 

The Leader requested clarification on what achieving best consideration would mean, particularly in the context of the position of the council. In response, the Interim Director stressed that the business case was critical at the early stage of the process. As part of the process officers would be assessing the cost of retaining the building and professional valuation advice would be sought. On sites, Members were advised, invest to save initiatives would be considered which could involve seeking planning permission for the site. However, each site would be considered individually and investment would only be made where it was financially beneficial and could be made in a timely fashion. In terms of approach, the Interim Director informed Members that local agents would be used for used for the sale of some assets whereas tier 1 agents would be used for the large strategic assets.

 

In response to the Cabinet Member for Economic Recovery & Skills query as to the resource requirement to implement the Strategy, the Interim Director advised Members that the resource plan included bringing in commercial expertise to handle the sales and redeploying staff to support with other work, such as the Housing Revenue Account sites. It was stressed that commercial property sales was a particular skill that the council would seek to utilise in the short term to begin the programme and develop within the council to support the management and disposal of assets going forward.

 

The Cabinet Member for Resources & Financial Governance noted that a Project Management Office (PMO) had been set up which would drive forward a large amount of the improvement work within the council and questioned whether there were links between the PMO and the work of the team supporting the asset disposals. In response, the Interim Director confirmed that asset sales would form part of the corporate programme management approach as it was imperative that there was only one version of the truth and in terms of asset disposal there would be monthly reporting to the senior management team.

 

The Chair of Scrutiny & Overview Committee (SOC) welcomed the changes made to the report in response to the recommendations of the Committee. It was reported that the Committee were generally satisfied with the proposed approach but, when the Committee considered the report, it was felt that there was insufficient detail in relation to Croydon Park Hotel to come to a conclusion on whether disposal was the best option.

 

It was noted for the Chair of SOC that there had been considerable public interest in the list of assets proposed for disposal and the inclusion of the tranche 1 list in the Part A report was welcomed. The Chair of SOC further stated the Committee had strongly advocated that ward councillors be involved in the process to utilise their local knowledge. As such, the Councillor raised that the future of Croydon Park Hotel was a concern for the residents of his ward and he welcomed being kept informed so he could inform residents of the process that had been undertaken to reach the decision to sell the asset.

 

The need to achieve best consideration when disposing of assets was raised by the Chair of SOC as the Committee had recognised that it supported the aim to reduce borrowing and interest costs to the council. In conclusion, the Chair of SOC requested that the final strategy be taken to scrutiny for consideration before adoption and took into account the lessons which had been learnt during the period of the Interim Asset Disposal Strategy.

 

The Cabinet Member for Croydon Renewal stated that he felt that scrutiny’s contribution to the development of a substantive strategy would be welcomed.

 

In response to the quick sale of properties identified in tranche 1, the Cabinet Member stated that the majority of those properties were empty, disused or soon to be disused buildings which were no longer required by the services, and so lent themselves to immediate disposal. It was stressed, however, that the business case and governance would be important elements to provide assurance to Members that due consideration was given to each asset and that best consideration was achieved.

 

The Shadow Cabinet Member for Finance & Resources noted that the purchase of Croydon Park Hotel had attracted comment and controversy since its purchase in 2018 and queried whether, given the council was looking to dispose of the asset, the council could accept that the purchase of a hotel was not a good idea.

 

In response, the Cabinet Member for Croydon Renewal accepted that the decision before Cabinet was a clear indication that the Administration did not feel that it was a sensible investment in the current economic and financial climate, especially as business cases had evidenced there were not alternative uses for the hotel. It was recognised that there were significant holding costs associated with the site. The recommendation within the report, however represented the necessary means by which the council could secure capital receipts which would support the council financially.

 

It was noted by the Cabinet Member for Croydon Renewal that the previous asset investment decisions were decisions which many local authorities had taken as a means to maximise revenue for the council and it was stated by the Cabinet Member that other asset investments, such as the Colonnades and Vulcan Way continued to generate net returns for the council. However, the council’s risk appetite had changed to reflect the circumstances it faced and as such the Cabinet Member was happy to recommend to Cabinet that it approve the recommendation to dispose of the Croydon Park Hotel.

 

The Cabinet moved the recommendation to Exclude the Press and Public (minute no. 28/21) to discuss the Part B report. The Cabinet made the decisions below in Part A following the discussion in Part B.

 

Leader of the Council delegated authority to the Cabinet to make the following decisions:

 

RESOLVED: To

 

1.     Approve the Interim Asset Disposal Strategy and note the first tranche of proposed sales which is set out in appendix A of the report

 

2.     Approve the proposed list of assets for disposal and to progress the marketing of the initial tranche of asset disposals as set out in appendix 3 of Part B of the report including specific approvals for:

 

                            i.     Valuation fees for the proposed disposals

                           ii.     Other cost of sales budgetary requirements as included in appendix 3 of the report.

 

3.     Approve the proposed approach for the disposal and marketing of the Croydon Park Hotel as detailed in section 8 of the report.

 

4.     Note the requirement for additional resource to successfully manage and achieve this major project.

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