PAPER B2

 

                                                                                                              Purpose : For Decision

 

Committee :   EXECUTIVE

 

Date :              5 NOVEMBER 2002

 

Title :               DISPOSAL OF THE FREEHOLD REVERSION OF THE SAFEWAY SITE, SOUTH STREET, NEWPORT

 

REPORT OF THE PORTFOLIO HOLDER FOR RESOURCES

 

 

 


SUMMARY/PURPOSE

 

1.             This paper recommends disposal by public auction the freehold reversion of the former market site in South Street, Newport, which is subject to a lease to Safeway Stores Plc.

 

BACKGROUND

 

2.             Safeway Stores Plc have the benefit of a 125 year lease granted in December 1987 at a ground rent of £30 per annum.  The tenants paid the Council £1,260,000 consideration for the lease in 1987 which has a user clause restricting the size of the development to 48,000 square feet for retail purposes with ancillary catering, bakery, storage, office, car parking facilities and also for a petrol filling station and restaurant.  The development is currently at capacity in respect of this user clause.  The Council as landlord can approve alternative uses and approval shall not be unreasonably withheld or delayed.

 

OUTCOME OF CONSULTATIONS

 

3.             This property forms part of the Council’s capital disposals programme which has been previously agreed by the Executive.

 

PLANNING IMPLICATIONS

 

4.             Whilst the lease has provision for restricting the size of the development site the Council, as Local Planning Authority, will retain some control of the site if the freehold reversion is sold.

 

FINANCIAL IMPLICATIONS

 

5.             The Tenants, Safeway Stores Limited, have indicated a willingness to purchase the freehold reversion of the property on a private treaty basis.  In order to fully test the market it is recommended that the Council’s freehold interest be offered for sale by public auction with an appropriately set reserve agreed by the Portfolio Holder for Resources.

 

LEGAL IMPLICATIONS

 

6.             There are no legal restrictions on disposal.  Section 123 Local Government Act 1972 requires disposal of land to be at the best consideration that can reasonably be obtained.

 

OPTIONS

 

7.             The following options are available:

 

(a)   Sell the freehold reversion by public auction.

 

(b)   Sell by private treaty.

 

(c)   Negotiate solely with tenants.

 

(d)   Retain the property.

 

EVALUATION AND RISK MANAGEMENT

 

8.             Sale by auction is the commonly preferred method of disposal of this type of asset, and it is the main arena for purchasers in the market who acquire assets such as this for investment purposes.  It also makes for a quick sale in a given time frame.

 

9.             This method contrasts with private treaty where a disposal can take a lot longer, as the marketing activity is spread over a longer period and the inherent risk that the target market is not reached.

 

10.        Negotiating solely with the tenant cuts out other potential purchasers.

 

11.        The costs of disposal by auction are slightly higher but this is usually offset by a higher sale figure.

 

12.        Disposal of the freehold reversion is consistent with policy to dispose of surplus assets.  The commercial market is such that the disposal at the current time is likely to be advantageous.

 

RECOMMENDATIONS

 

13.        Option (a) dispose of the property by public auction.

 

 

BACKGROUND PAPERS

 

Capital Programme and Asset Management - Acquisition and Disposal of Assets.

 

Contact Point : David Lovell, F 823266

 

MIKE FISHER

Strategic Director

Corporate and Environment Services

R R BARRY

Portfolio Holder for Resources