Ref: PCC/D/2023/30
Executive Summary
The Police and Crime Commissioner (PCC) for West Mercia purchased a 2.8-acre plot of land off Holmer Road, Hereford HR4 9SW, in December 2018. The intention was to develop a joint police and fire station for West Mercia Police and Hereford and Worcester Fire and Rescue Service. However, in 2023, the partners officially decided not to proceed with this project. The land is now deemed surplus to requirement and is earmarked for disposal.
Various interested parties contacted the PCC. Following due diligence and negotiations, a proposal and bid from a local NHS Trust to acquire the land for a new medical facility was deemed the most viable proposition for the PCC. After the necessary due diligence and valuation of the land, terms and a sale price of £1.2m were negotiated and agreed between the two parties.
When the sale of this land occurred from Balfour Beatty Group Limited, as part of the Balfour Beatty freehold title the transfer included restriction relating to the maintenance of the access road benefitting the PCC.
The overall site owner Balfour Beatty is in the process of selling another part of the site. In order to facilitate this sale, the PCC is asked to provide a signed RX4 Land Registry form, verifying that Balfour Beatty has complied with the obligations to maintain the access road under the Transfer of the land to the PCC.
Proposal
For the PCC to:
- Dispose of the freehold of the land off Holmer Rd, Hereford, HR4 9SW to the interested party for the sum of £1,200,000 as per the conditions stated in this report.
- Approve estimated costs of £3,500-£7,000 for the conveyance of this asset.
- Approve the completion of a RX4 Land Registry form, subject to Balfour Beatty covering the PCC’s legal costs in connection with this piece of work, capped at £1,250 excluding VAT.
Approval Of
West Mercia Police and Crime Commissioner
Part 1 – Non-Confidential/Exempt Facts and Figures
Supporting Report
The 2.8-acre plot of land off Holmer Road was purchased by the PCC for West Mercia on 17th December 2018 from Balfour Beatty Group at the price of £850,000. The VAT was fully recoverable. The additional costs for the acquisition (Stamp Duty, Land Registry fee, legal costs and the two indemnity insurance policies required) were approximately £70,000.
In 2018/2019, the intention was to explore using the site for the construction of a joint police and fire station for West Mercia Police and Hereford and Worcester Fire and Rescue Service. However, both parties subsequently agreed not to proceed with the project. Since then, West Mercia Police has made the decision to remain in the existing Hereford Police Divisional Headquarters located on Bath Street and to refurbish and invest in the building. The land at Holmer Road is now surplus to requirement and earmarked for disposal. The existing Hereford DHQ site remains in use and has been maintained in good order.
The 2.8-acre plot of land off Holmer Road site is rectangular in shape, level and is currently grassed over. It is located on an industrial estate but most recently it was used as a sports field. The property is approached by means of a private, shared road from Holmer Road over which the owner enjoys a permanent right of access
This permanent right of access comes with a restrictive covenant benefitting the PCC which states that Balfour Beatty (or their successors in title) are to maintain the access road.
The legal representatives acting on behalf of Balfour Beatty Group Limited, have agreed to pay the reasonable legal fees of the PCC up to a maximum of £1,250 exclusive of VAT in connection with a RX4 Land Registry form for the transfer of part of title HE56380. This undertaking is payable whether or not the matter proceeds to completion. The amount of £1,250 was negotiated after obtaining a quote from the PCC’s legal representatives.
The exact price will be dependent upon the time incurred by the respective legal representatives. Should the completion of this piece of work take longer than initially projected, the PCC would be in the position of needing to cover the remaining legal costs, unless OPCC Estates can negotiate an uplift on the undertaking from Balfour Beatty Group Limited.
Valuation of the site
- No public marketing through an agent has been undertaken for this disposal.
This is a common approach for sites like this, many of which never to go to market, as there is a level of sensitivity with certain sales. When the site was purchased by the PCC in 2018 it had not been advertised on the open market.
With the disposal of the land, the PCC must obtain best value for the site. In order to ensure this, the site was valued by the District Valuer Services (DVS), an independent and established registered valuer with access to a vast amount of comparable data they can call upon. The report submitted by the DVS to the PCC contained a significant amount of comparable data and valuation modelling which is far more detailed than any local agent would be able to obtain or undertake.
The value was assessed in-house by the OPCC Estates team. There had not been any land sales within Hereford since the actual sale of this parcel of land back in 2018. Moreover, this land never went any further to be actively marketed.
There was significant local interest from both public and private sector parties who enquired directly to the OPCC about it.
2. Local Market Data
There are a considerable number of industrial sites across Hereford. The site at Holmer Road has changed in the last two decades from an area with heavy industry occupiers to one with more light industrial and retail warehouse businesses, including Hobbycraft and B&Q. There is a significant concentration of industrial units just in this area alone. Some companies have been in occupation for many decades.
Though the industrial market does evolve and change overtime, this location does still remain an industrial location within Hereford. Though this particular asset is a rare example of land that has not been developed in this location (having formerly been a sports playing field). Most market evidence concerns a number of brownfield sites across Hereford and, in particular, near to the railway station. The land here had been purchased for £850,000 plus VAT back in 2018 and that did appear to be the only sale of land of its type that has occurred in Hereford since that time.
Land values often increase over a period of time, even if no works or alterations occur to the site. Therefore, the expectation was the land was worth in excess of £1 million. However, there was little evidence to substantiate what the final figure would be. Thus, the most appropriate and balanced valuation is that provided by the DVS, due to the vast amount of comparable data they hold, both locally and regionally, of achieved values in completed transactions rather than asking prices.
Interested Parties
There was interest from three parties in purchasing the site. These included a private developer and two public sector partners.
Two parties were not able or willing to meet the valuation cost of the site.
Wye Valley NHS Trust contacted the PCC via the Estates team. They were interested in acquiring the site for a new medical facility. After the necessary due diligence and valuation of the land by OPCC West Mercia Estates, the NHS Trust proceeded with conducting their own due diligence, which confirmed that the site is suitable and viable for the proposed facility.
The Trust requested for the valuation presented by OPCC Estates to be analysed by a registered valuer of the District Valuer Services. Based upon the independent Valuation and Report undertaken and provided by the District Valuer Services in June 2023, that valued the land at £1,200,000, both parties agreed to adopt this independent valuation proposed by the District Valuer Services. The NHS Trust obtained final board approval to proceed with the acquisition in the beginning of July 2023.
It is considered that the sale of the land off Holmer Road at £1,200,000 obtains best value for the asset. The offer is conditional on the NHS Trust conducting a ground survey of the land and confirming they are satisfied with the legal title and searches for the land. Given this, it is recommended that the PCC approves the disposal of the land to the Wye Valley NHS Trust.
The PCC will not be required to await the outcomes of any planning permissions submitted by the Purchaser nor any need to invest any funds into the completion of this transaction, apart from covering the Commissioner’s own legal costs of the conveyancing process. The NHS Trust will bear its own legal costs.
After the completion of the sale, the PCC will retain no interest in the asset.
Strategic Considerations
This decision supports the following element(s) of the Safer West Mercia Plan:
- Reforming West Mercia
- Reassuring West Mercia’s Communities
The decision supports the above listed objectives through the following:
- Prioritising greater resource towards frontline services
- Ensuring West Mercia’s estate is fit for purpose
- Ensuring better resource management by maximising value, effectiveness,
efficiency to meet demand
Benefits and their Realisation
Benefits include:
- Supporting a One Public Estate partner in realising the provision of a brand
new facility for the local members of the public - Maximised capital receipt from the disposal of the asset
- Mitigation of risk from liability claims in connection with unauthorised
members of the public using the land - Due to the lack of daily presence on site, there is a higher risk of people
trespassing, vandalising, or squatting on the land - By completing the RX4 Land Registry process, thereby ensuring the Land
Registry title register of an asset owned by the PCC is being kept up to date
and contains only covenants relevant to it directly.
Financial and Treasurer Comments
The asset was purchased by the Police and Crime Commissioner for West Mercia at the price of £850,000. The VAT was fully recoverable. The additional costs for the acquisition (Stamp Duty, Land Registry fee, legal costs and the two indemnity insurance policies required) were approximately £70,000.
It is considered that a direct sale to a public sector partner at £1,200,000 is achieving value for money based on the current available market information and that there will be a limited number of potential purchases for the site. There is a significant risk associated with continuing to hold the land and looking to sell at this value at a future date. The capital receipt will support the significant capital programme that is currently being delivered, and will therefore result in a reduction in the required level of Minimum Revenue Financing and Borrowing.
There will also be a small revenue savings from the sale of this plot of land as this will remove the need to maintain the landscaping on site.
Professional advice was obtained to confirm what the PCC’s tax and VAT liabilities would be should the sale of the asset go ahead. They have confirmed that as a S.33 body the PCC is not subject to corporation tax, which includes capital gains tax. The sale will form part of the 2023/24 partial exemption calculation in relation to the West Mercia’s VAT recovery position. West Mercia have not breached the exemption level, including years in which there have been previous sales of significant assets held. The Tax Advisors have indicated that the risk of this sale resulting in a breach is very low.
As part of the disposal there will be legal costs which would be incurred in the conveyancing process. Warwickshire Legal Services have provided an initial estimate for the conveyancing process between £3,500 and £7,000. The exact price will be dependent upon the extent of due diligence undertaken by the buyer’s solicitors. There is an additional requirement in connection with registering part of the title with Land registry relating to ensuring access to the site. Balfour Beatty Group Limited, have agreed to pay the reasonable legal fees of the PCC up to a maximum of £1,250 (excl VAT) as advised by a quote from West Mercia Legal. There is a minimal risk of actual costs being higher than quoted which would then fall due to the PCC.
Treasurer
17/10/23
Legal Considerations
By virtue of schedule 11, paragraph 14 of the Police Reform and Social Responsibility Act 2011 the Police and Crime Commissioner may do anything which is calculated to facilitate, or is conducive or incidental to, the exercise of the functions of commissioner. That includes entering into contracts and other agreements (whether legally binding or not) and acquiring and disposing of property (including land).
Public Access to Information
Information in this form is subject to the Freedom of Information Act 2000 (FOI Act) and other legislation. Part 1 of this form will be made available on the West Mercia Commissioner’s website. Any facts and advice that should not be made automatically available on request are not included in Part 1 but instead in a separate Part 2 report.
Officer Approval
19/10/2023
