London Borough Of Islington
Providing the London Borough of Islington with a complete review of its operational and investment property portfolio to establish a new book value for the estate.
- London Borough Of Islington
The BriefDuring 2006 and 2007 Cushman & Wakefield was instructed by the London Borough of Islington to provide a complete review of its operational and investment portfolio to establish a new book value for the estate and to start the process of ensuring that there were full and detailed records with regard to the property portfolio.
The SolutionOur remit was wide ranging and the final reports were split into three separate headings as follows:
• A review of the operational portfolio
• A review of the investment portfolio
• A review of the occupational portfolio in terms of the Councils future strategy for its civic buildings for the next ten years
Following these detailed investigations, two main work streams were identified. Initially, the public sector team was instructed to analyse and review the outcome of the occupational portfolio investigations in order to identify a reduced civic state. The intention was that the estate, which at that time was split between 61 individual buildings, would be reduced to four core buildings within the Borough.
Simultaneously, the Cushman & Wakefield investment team was instructed to prepare a portfolio of properties with a book value of £70 million for sale. The project was known internally as Project IDA.
The project required extensive investigation of the background to each of the properties in order to create a balanced portfolio which it was felt would meet current market conditions and ultimately achieve a successful investment sale. Although the portfolio centred upon the investment properties, it did nevertheless, contain a number of sites in which either the Council or public bodies sponsored by the Council, held occupational leasehold interests. This necessitated a careful and pragmatic sales plan which was developed between Cushman & Wakefield and Council Officers.
After careful consideration, an investment sale programme was set up as follows:
• A portfolio of some 60 individual sites had been identified which it was anticipated would realise in excess of £60 million at competitive tender.
• The portfolio would be put to the market in August 2007 advertised in the main property press journals and the national press inviting bids within 12 weeks.
• A full sales pack was prepared and an extranet site set up to which purchasers had access, through an individual code, so that the information rooms were available electronically and on demand. The extranet site was encoded so that we could monitor activity and visits to the site on a daily basis.
• At the same time, individual Council tenants and occupiers were given a period of six weeks in which to register their interest in purchasing their own buildings.
As a result of this first stage exercise, over 70 information packs were sent out and 30 individual tenants expressed interest in acquiring the units in which they were then in occupation.
At this juncture, the sales team effectively divided into two distinct parties, so that the main investment was marketed to purchasers who were interested in securing the portfolio, whilst a separate team dealt with the interest of individual occupiers. Individual occupiers were given a further period of 21 days to provide references and a bank reference confirming funds were available.
As a result of that second phase, we had in excess of 20 confirmed parties intending to bid in relation to the portfolio and 17 tenants who had met our minimum criteria and would be allowed to bid for their individual buildings.
We therefore went to the final and third stage of the marketing exercise, at which time best bids were invited from the individual parties as follows:
• Consortium bidders – Bids for the portfolio as a single entity with individual values for the 17 sites upon which occupiers had expressed an interest.
• Individual bidders- Bids from occupiers for single buildings within the portfolio.
We subsequently received 9 bids from occupiers and 5 bids for the entire portfolio. C&W prepared a detailed analysis to demonstrate the maximum sale figure through a blended bid of 7 individual sales and a sale of the remainder to Pearl Holdings.
This necessitated a detailed analysis of the offers as the bids for the entire portfolio of 60 properties contained an element of “additional bid” to reflect the value of purchasing a portfolio of properties in a single transaction. We were, however, able to increase the winning portfolio bid by a factor of 5% by including these blended bids so that in effect, only seven properties were removed from the portfolio.
Solicitors were instructed to complete the sale of the main portfolio to Pearl Holdings with a completion dated in September 2007, whilst simultaneously completing sales of the individual sites to the various tenants. We are able to confirm that, without exception, all sales were completed by November 2007.
ConclusionWe believe that this exercise demonstrates Cushman & Wakefield’s ability to “think outside the box” and provide blended advice to local authority clients which reflects the necessity of dealing with existing tenants in a reasonable and fair manner whilst simultaneously ensuring that the maximum financial benefit can be achieved for the authority itself.
This unusual sales procedure, which as far as we are aware, had not previously been tried, did not demonstrably undermine the main portfolio sale and we were able to work with the London Borough of Islington to ensure that sale proceeded in a manner which caused the least political aggravation and difficulties for the Council in terms of its members and public perception, whilst simultaneously giving local businesses the opportunity to purchase their sites at open market value in a fair and controlled manner.
As a result of that exercise, Cushman & Wakefield is now the Council’s sole commercial property adviser providing support services across the entire property portfolio including asset management, professional services, agency, development consultancy and management.