Nottingham City Council has revealed plans to dispose of a portion of its investment property assets in response to mounting financial pressures.
The Council faces a budget gap of over £50 million for the 2024/25 financial year, driven by rising demand for social care services, increased homelessness presentations, and inflation.
The asset disposals are a core part of the Council’s broader “Asset Rationalisation Programme” and Improvement Plan for 2024. The sale of these properties, which range from offices to light industrial workshops, is expected to generate substantial capital receipts, which will be crucial in helping the Council bridge its financial shortfall. The Council has been granted up to £66.143 million in Exceptional Financial Support (EFS) from the Government, allowing them to use capital resources, including from asset sales, to fund key services. This includes £25 million for 2023/24 and £41.143 million for 2024/25.
Key Points of the Disposal Plan:
- £36 million savings target: The Council is tasked with making over £36 million in savings between 2024 and 2028 to set a balanced budget, as legally required.
- Significant investment needed: Many of the properties earmarked for disposal require significant capital expenditure, particularly to meet statutory requirements such as Minimum Energy Efficiency Standards (MEES). Some properties face fines if they are not brought into compliance with new regulations by April 2028, which could further burden the Council’s finances.
- Risks of retaining assets: Retaining the properties presents a risk of rising capital expenditure for repairs and maintenance. Additionally, the Council may face void holding costs due to vacancies in certain properties, while new energy regulations could render some properties unlettable without substantial investment.
According to the report, produced ahead of the Executive Board Meeting next week – many of the assets proposed for sale have been reviewed using a detailed decision matrix, considering factors such as condition, energy performance, and financial liabilities. The decision to dispose of each property was based on these metrics, and the results have been endorsed by senior officers across multiple departments, including Strategic Assets & Property and Finance.
Protecting Against Risks:
The Council has outlined a series of measures to mitigate risks related to the disposal process:
- Early marketing efforts: Properties will be marketed early and aggressively to generate interest and achieve the best possible sale prices.
- Specialist expertise: A team with extensive experience in commercial property transactions will be brought in to facilitate the sale process.
- Pre-disposal legal review: Legal due diligence will be carried out early to avoid delays in the sale process.
- Auction potential: For certain assets, an auction process may be employed to ensure quick, unconditional sales.
Despite the potential revenue losses associated with these sales, the Council has already made provisions in the budget to offset any immediate financial impact.
Financial Implications:
The disposals are expected to generate much-needed capital receipts that the Council can use to pay off borrowing and fund other critical projects. These receipts will also be used to repay the Government’s Exceptional Financial Support, ensuring that the Council meets its financial obligations.
However, there are risks. A delay in the sale process, or changes in the commercial property market, could lead to lower-than-expected receipts. The Council also acknowledges that some assets may require further due diligence, which could uncover issues that may delay sales or lead to decisions to retain certain properties.
Council Priorities:
The decision to sell these assets aligns with key outcomes from the Council Plan, including:
- Financial Stability: By selling surplus properties, the Council aims to reduce its financial burden and redirect resources to more urgent services.
- Keeping Nottingham Working: The sale of office and industrial spaces may provide opportunities for new businesses to invest in the city.
- Carbon Neutral by 2028: Although this decision does not directly impact carbon production, the Council’s broader objectives include meeting stringent energy efficiency standards, which have influenced the decision to dispose of non-compliant properties.
The Council’s legal and finance teams have been involved throughout the planning process to ensure compliance with all statutory requirements. All asset disposals will adhere to a procurement-compliant process, with the appointment of sales agents and other consultants to facilitate the sales.
While the appendix containing the full list of properties slated for disposal remains exempt from public view due to commercially sensitive information, the Council has reassured residents that local councillors in affected wards will be informed about the disposals.
