Agenda item

Report of the Executive Director of Corporate Resources and Customer Services

Further to Minute No. 73 of the meeting held on 7 November 2019, the Cabinet considered the report of the Assistant Director of Place (Economic Growth and Housing) which indicated that Asset Maximisation s a project within the Council’s Framework for Change, Public Sector Reform programme and that as part of this project, the Council’s assets will be defined as being required for operational purposes, having heritage value, being required for the economic growth programme or being available for disposal. The first phase of this review was completed in 2019. The site known as Land at Holgate, Thornton was identified as being not operational, surplus to requirements and therefore available for disposal.

On 7 November 2019, the Cabinet approved that Legal Services and Property and Facilities Management finalise an agreement for the disposal of the Council’s land known as Plots B and C, Holgate, Thornton and in 2020 an option agreement was entered into with the developer and purchaser, Forth Homes. This has enabled Forth Homes to commence technical due diligence work to inform a planning application for 206 dwellings on the site that was approved in June 2022.

As part of the negotiated deal with Forth Homes, the developer was required to bring on board a strategic partner. Forth Homes has agreed terms for a sale of the Council’s land to a larger housebuilder, Castle Green Homes (a management buy-out of Housebuilder Macbryde Homes, backed by Steve Morgan CBE, founder and former chairman of Redrow). The deal agreed between Forth Homes and Castle Green Homes effectively triggered an overage payment for the Council’s land, and therefore changed some conditions of the land sale previously reported to Cabinet.

The Option Agreement sets out the gross land value and allows deductions for abnormal development costs, Section 106 contributions (including affordable housing contribution required by the Council), external highway works and planning gain costs.

The Cabinet previously approved that Officers would be required to report back to Members when sale contracts and all financial issues were resolved. This final report now seeks Cabinet approval to conclude the land sale transaction for Plots B and C at Holgate, Thornton.

Decision Made: That:

(1)      as per the terms of the Option Agreement, approval be given for Forth Homes to appoint Castle Green Homes as their Nominated Strategic Partner for the reasons detailed within 3.4 of the report;

(2)      the Heads of Terms for the long lease of land on the north side of Southport Old Road, Thornton as detailed within Appendix 4 of the report be approved;

(3)      approval be given for the Chief Legal and Democratic Officer to complete the long lease and land sale agreements, to secure the capital receipt as presented at Appendix A of the report;

(4)      it be noted that the work undertaken by Property and Facilities Management to verify abnormal costs deductions and the agreed disposal price as set out in Appendix 1 of the report meets best consideration requirements in accordance with Section 123 of the Local Government Act 1972; and

(5)      approval be given to the land disposal receipt being paid in two equal instalments, being 50% on completion and 50% twelve months thereafter.

Reasons for the Decision:

(i)       The deal agreed will enable a comprehensive scheme to be brought forward. This will avoid the sterilisation of the Council’s land (Plot C – 3.15 acres) if Orchard Farm was redeveloped in isolation with highways access provided from Holgate Road.

(ii)        The developer will fund and deliver an off-site highways solution, which provides an appropriate access into the Council’s land at Plot A, unlocking this. This site will be brought forward in future years as a separate disposal.

(iii)      A final capital receipt is supported by an independent valuation provided at Appendix 2 to verify the Market Value of the site. All costs associated with progressing ground investigations and technical surveys have been passed onto the developer – the Council has not had to fund these works. The basis of the deal therefore meets with the Council’s duty to receive best consideration requirements in accordance with Section 123 of the Local Government Act1972.

Alternative Options Considered and Rejected:

Option 1 – “Do nothing”:

The developer has successfully appealed their planning refusal and indicated that they will exercise their option and develop out their consented scheme, utilising Holgate for construction and residential access.

Risk: by redeveloping Orchard Farm in isolation, Holgate Road would be the main highways access into the site, but there would be insufficient capacity on this road to support the redevelopment of Plot C – this would likely remain as farmland. The impact would be the Council taking the remaining Plots A and B to market (see Option 2). The Council would incur costs associated with technical surveys, planning and marketing fees and lose the value of Plot C.

Option 2 – “Council bring forward Plots A and B in isolation”:

The Council would appoint consultants to progress desktop surveys (ecology, highways and ground conditions) and prepare a planning brief. The Council’s remaining land would then be marketed to prospective partners – the deal to be conditional upon planning consent.

Risk: The Council would incur costs and staff resource to progress the upfront technical works and due diligence to take the site to market, including the appointment of property agents to market the land.

Option 3 – “Council buy out the Option Agreement”:

This would ensure that the Council had control of the whole site and would be free to take the site to the open market seeking a disposal or joint venture partner.

Risk: Option would mean that the Council would need to pay compensation for costs incurred to date in pursuing planning and loss of future development profit, in addition to a land value to reflect the 14-dwelling scheme proposed. This would not be financially viable.