Sefton Council in "fag packet" industrial sell off

May 9 2008 By Ben Schofield

SEFTON council sold off its industrial estates in a deal worth more than £8m using “back of fag packet” calculations, a leading councillor said yesterday.

Labour group leader Peter Dowd is furious about what he believes were key mistakes which may have cost council taxpayers more than £4m.

The sale of the estates has sparked a major controversy because the current owners are next week planning to sell the plots on for £12m – a profit of almost £4m – just two months after completing the deal with Sefton.

The Daily Post can also reveal that when the plots were first marketed, council officials did not know even where the boundaries of the land lay and it was largely unregistered. Sefton also appears to have come back from the brink of seeking an injunction against the re-sale of the land.

The council has robustly defended the tender process it went through to get bids for the land, and claims the £500,000 annual interest the £8m is earning is bolstering the borough’s finances.

Council officers initially thought the estates – which are spread across the borough and which will be sold at auction next week in 66 lots – were worth £3m.

They are said to have been overjoyed at the prospect of selling them for more than £8m, but it now appears their value was grossly underestimated their value.

It is thought the £3m figure was arrived at after multiplying the combined ground rent of the sites by 20 to determine what the cur- rent occupiers would be expected to pay, were they to buy the sites.

But the council agreed to remove restrictive covenants from the deeds of the land to hasten the sale – something which significantly increases its value.

Councillors now say they were not told how that could affect their value.

Speaking after an urgent business meeting held in closed session, Sefton’s Labour group leader Cllr Peter Dowd told the Daily Post: “It wasn’t a valuation. It was back-of-fag packet. There was nothing to take into account about the potential future value. When they gave £3m, that was the business valuation.

“It wasn’t really a valuation – it was an assessment of the best value of the land if you did it as a valuation of the rent.

“It apparently didn’t take into account a range of other factors – what happens if you did not have any restrictive covenants?

“There wasn’t a detailed valuation done of what that land could have been.

“That valuation was maybe not true or realistic.”

Auctioneers Colliers CRE, who will handle next week’s sale, have put guide prices on the estates totalling £12.2m.

The District Auditor (DA) is examiningcurrently considering the matter to see if best value was achieved for residents by the sale, with his response due soon soon.

Southport’s Lib-Dem MP John Pugh had written to the DA to bring it to his attention.

Shortly after the news of the planned sale broke, Cllr Dowd called for Sefton to seek an injunction on Colliers.

But at Tuesday’s meeting offi- cers said the council would stand little chance of halting the sale.

Officers added that if the estates make their guide prices, Sefton would not be able to claim any of the profits.

Cllr Dowd also hit out at officers who pressed councillors into selling the estates without knowing precisely where the estates were.

He added: “What we did was put it on the market and spent nine months literally measuring everything up. Then we had to register it at Land Registry.

“We put something up for sale without precisely knowing what we were selling.

“I found that remarkable. We work on certain assumptions but we didn’t know what we were selling – all £8m worth.

“It’s a lesson learnt – we are not going to sell a stamp in the future without knowing where the perforations are.”

It is thought the council’s legal fees topped £100,000 for time spent surveying and registering the plots.

At an 11th-hour re-negotiation of the price, the vendors reportedly said they would walk away from the deal unless Sefton accepted £8.1m and removed the restrictive covenants from the land – though they would also pay the council’s legal fees.

Both Cllr Dowd and Mr Pugh believe the land should have been retendered once it was agreed to remove the restricted covenants.

Mr Pugh argued if what was being offered changed, the council were obliged to invite new bids.

Cllr Tony Robertson, ex-leader of Sefton’s Lib-Dem group, and who was also present on Tuesday, said it was “just one of those things that happens when you sell property” but conceded “maybe there’s a few lessons to be learnt”.