Decision details

(i)  To approve the Phase 3 assets recommended for disposal, development or regeneration within the Asset Development and Disposal Programme as detailed in Appendix 1.

(ii)  To delegate authority to the Executive Director Growth and Prosperity, to progress and implement asset disposal, development and regeneration opportunities within the scope of the ADDP Programme (as outlined in Appendix 1). This decision will be taken following the required consultation with the relevant members and statutory officers. 

1.  The assets recommended for disposal, development or regeneration in Phase 3 of ADDP, as outlined in the confidential appendix are being proposed for approval following extensive engagement with relevant services to align with their transformational initiatives, localised service assets review and early market assessments, consultation with senior officers and relevant members to build on the intelligence gathered within the past 2 years and select the most appropriate set of assets.

The capital receipts from these disposals and developments are required to help fund the council’s Transformation Programme and Exceptional Financial Support (EFS) requirement. The rationalisation of the council’s asset portfolio will also reduce the future repairs and maintenance liabilities reducing the requirement for further capital and revenue funding. Lastly and perhaps more importantly it also releases assets that can support the city’s regeneration, supporting the work of the Southampton Renaissance Master Plan (SRMP).

It is important to safeguard the confidentiality of the assets in scope, and not to expose them to the market or put in the public domain before a full evaluation and decision-making process is concluded. This would detrimentally affect their marketability and the council’s ability to maximise the capital receipts. 

2.  The report also seeks approval for delegated powers to senior officers following consultation with relevant Cabinet Members to progress discrete asset disposals and asset development or regeneration opportunities within the scope of the ADDP. A thorough decision making and governance process is in place under delegated powers as outlined within the March 2024 Cabinet Report, (recommendation (iv).  The delegated powers process will ensure the council can take advantage of the market offers and ensure an agile, yet robust and transparent decision-making process.  

1.  Option 1. Do nothing:

The council maintains a sizeable asset portfolio containing c.330 corporate and operational properties, and a further 200 investment and commercial properties. Assets within the General Fund incur substantial maintenance and operational costs, including energy, insurance and business rates. If the council does not act now and aim to reshape or condense its portfolio of assets by either disposing of inefficient or ageing assets or redevelop and regenerate sites across the city, there is a risk that properties may fall into disrepair due to lack of adequate investment alongside not optimising growth opportunities. There is also a risk that the council will therefore be unable to meet its future investment requirements to address its ongoing maintenance liabilities for an oversized and ageing portfolio.

Over time these liabilities are likely to compound and would require continued significant financial investment, that would not be sustainable over the long-term. Doing nothing will also fail to meet the council’s capital receipts targets to ensure the financial benefits and fiscal stability of the Council.

Option 2: Gain individual disposal approval of assets from Cabinet/ Council.

Bringing individual asset decisions that meet the constitutional criteria in terms of financial or public interest thresholds one by one to either Cabinet or Council would add a considerable time burden and risk of abortive sales to this process.

Once an offer is agreed, the expectation within the market is that the majority of transactions would conclude very quickly to agree terms, finalise the due diligence, legal and financial transactions to move to exchange and completion as soon as possible thereafter, in a matter of days or weeks.

If the decision needs, to be ratified at this point (once the terms of sale have been agreed) through the Cabinet and/or Council, this would prolong the completion time, would potentially compromise the sale agreement as it would lose momentum and interest from the buyer, and the sale could collapse before the final decision is reached.

The value of the many individual assets left could now fall under the threshold for Cabinet decisions.

This approach is not sustainable when considering the volume and speed of decision making required for the assets in scope for disposals or development within a phased programme such as this.

Option 3: Disposal of assets identified in phased approach.

The Council approved an ADDP including Phase 1 and Phase 2 asset lists. This programme is now underway with disposal or development proposals being progressed under delegated authority, as stated in previous reports. Phase 3 is proposed in this report. Undertaking the disposals and development opportunities in a phased manner allows for a planned and managed approach in undertaking a wholescale review of the council’s sizable asset base. This option also allows the Council to retain assets that prove not viable for immediate sale following further market testing but will be able to yield enhanced value though regeneration initiatives which would align with the Council’s longer-term vision. 

Option 4: To propose an alternative list of assets

All assets are being reviewed in a phased manner. The phase outlined in this report is the next tranche of assets to be assessed. Savills have been engaged, and a marketing programme is in place offering market assessments for each disposal and exploring the right marketing strategy, through to completion of sale or proposing assets suitable for development schemes as appropriate.  To amend the list at this stage would cause delays in securing the capital receipts.

Therefore, the recommended course of action is to proceed with Option 3.