Barnet Cabinet special meeting, 11 August 2009
"The proposal [partial sale of its Pinkham Way land to the North London Waste Authority - which was later completed] will further support the Council’s priorities, by providing a site [on its retained land there] to relocate the parking of the Council’s refuse fleet and recycling facility, from the present location at Mill Hill Depot. The depot relocation will assist the Council to unlock the development potential of the existing Mill Hill East site…"
Review of Regeneration Functions,
[These are selected highlights, with our bold and large-type emphasis.]
... The Council has an ambitious regeneration agenda, with a number of large schemes which are at varying stages of delivery. Most of the Council’s schemes are housing-led, and most (although not all) seek to improve the condition and environment of council housing stock through replacement and refurbishment, funded in significant part by the introduction of homes for sale to the regeneration estates.Most of the schemes were designed at a time when the market for homes for sale was extremely buoyant. That is no longer the case. All of the schemes have been the subject of considerable effort over the last few years to address problems with viability and deliverability. In a number of cases these efforts have been successful. However, on the more complex schemes, viability in the current market is still a major problem.... Mill Hill is an innovative regeneration scheme, where the Council is using its assets and forward funding in a very commercial way to achieve significant long-term benefits.Recommendations
- At Mill Hill East, the early costs should be kept under careful review.
- The Council must also ensure that the major scheme risks at Mill Hill East, the provision of the new school and the relocation of the depot – are delivered in a timely and cost effective way, as failure to do so will have significant scheme and reputational costs.
... Barnet does not currently have a Property Strategy, an Asset Management Plan, or a comprehensive property database. An ambitious regeneration agenda, such as Barnet’s, suggests that it would be expedient for asset management information and planning to form part of the comprehensive and corporate strategic approach, ...... The Council does not currently have a strategic approach to communications and marketing on its regeneration programme, as a whole or on its individual schemes.
Mill Hill East [main part of report]Overall rating: AMBERScheme background and current positionThe land at Mill Hill East is located approximately 9 miles north-west of central London. The nearest underground to the site is Mill Hill East (Northern Line).
... The proposed development is anticipated to be built out over a period of approximately 10 years.
... There is also the opportunity if required for the Council to sell on their land holding, as at today. This would be at a discount to the potential land receipt that may be secured over time, and at greater risk, but could provide the Council with a significant, early land receipt. By taking this route, any potential upside will be lost, but likewise, the noted development risks and potential market fluctuations may be avoided.CommentaryMill Hill East is a new approach for Barnet Council. It is unlike the other regeneration schemes; the intention is not to use market-for-sale housing to cross subsidise the reprovision of affordable homes that cannot economically be brought up to decent homes standard, and to regenerate the neighbourhoods within which they are located through introduction of a better mix of tenure.
It is a more aggressively commercial approach: the Council is behaving as a developer, taking a long-term view and seeking long-term returns on its (not insignificant) contribution to the cash flow position of the overall scheme.This is a strategic property approach, which inevitably carries risks but the return will be proportionately high. It is the kind of entrepreneurial approach which is lauded as good practice by central government, and which the forthcoming general power of competence for local government, enabled in tLocalism Bill seeks to promote. The Council must, however, watch its reputation with its partners in the consortium.
Delays on matters such as planning or highways powers will be extremely damaging.The Council also needs to be sure that it is managing the risks associated with the relocation of the depot, and the provision of the new school effectively and efficiently.
... The Council also needs to watch its own costs against the scheme. Unlike the other regeneration schemes, the costs the Council takes out to fund its own project management are not 'hidden', they will be top sliced from any profit the Council makes. This is a good commercial discipline – as long as the Council is disciplined.
If the Council can manage these challenges, then Mill Hill East potentially provides a blue print for other opportunities in the future – not least the potential of Brent Cross /Cricklewood [our link] where the Council would do well to consider the longer-term benefit that would come from an equity stakeholder approach, rather than a traditional sale of freehold/long leasehold for shorter-term capital gain.