Locking in land value and releasing capital.

30 Jan 2018

With school funding expected to be cut further in real terms, it is no surprise that head teachers and school governors are feeling the pressure of unpopular spending cuts. The biggest financial asset that any school has is its buildings and associated land, yet for many school management teams realising value from that asset is difficult to visualise or indeed bring to life.  Yet the Education and Skills Funding Agency (ESFA) website has a long list of schools that have done just that. 

Creating the opportunity

There are two categories of land belonging to schools, redundant land and land in use, such as car parks and playing fields.  Although the process for disposal of the land is the same, the governance for the disposal of in-use land is more rigorous.  Academy schools are unlikely to have redundant land to sell as the majority lease the estate from the local council.   Both types of land, however, are evaluated based on the planned benefit for improving the school from the investment of the funds raised. 

The first step is to identify the land that is most likely to be saleable by analysing the use of the entire school.  This will determine whether the school has sufficient space for the existing cohort, as well as for the forecasted requirements, in accordance with the areas guidelines for mainstream schools.  

Assessing the condition of the estate is a broad exercise that includes undertaking a valuation, and reviewing any leases and the age of the buildings.  An appraisal is conducted including how suitable the spaces are for the curriculum.  Preparing for change is fundamental.  Demographic data to help predict future intakes should be considered alongside new subjects that the school may wish to introduce, as well as subjects where the focus will change.   Of course certain subjects particularly sport or sciences have very particular requirements that will need to be factored in to the overall plan.     

Once this exercise has been completed, a strategic estate plan is created that highlights the land for sale and determines the investment that will be made for school improvement.  In the case of St Mary’s Primary School in Battersea this facilitated the construction of a new two-form entry primary school wholly funded by land sold to a property developer for residential development, with additional annual ground rent income generated for the school.

Playing field planning

The sale of playing fields is subject to stringent planning regulations.  The National Planning Policy Framework sets out the Government’s planning policies for England and how these are expected to be applied.  It provides a framework within which local people and their accountable councils can produce their own distinctive local and neighbourhood plans.  Sport England has also set out a policy relating to the loss of playing field land that requires any likely loss of a playing field to be replaced with equivalent or better quality and quantity. Prior to the release of land, Councils and Sport England need to be satisfied with the schools plan for improvement.

The process for disposal

The Secretary of State for Education has final sanction over whether the land can be sold. The Secretary of State will consider the overall balance of benefit of the disposal against expected gains, to pupils and existing community users.  Making the case for the sale is presented to ESFA using standard documentation to ensure a consistent approach to decision making.  The file needs not only to make a strong argument based on the school improvement plan, but must demonstrate that the due process for assessing ownership of the land has been evaluated.  For example if the land is leased from the local council, then permission has to be granted for the sale.

Delivering value

Once the approval has been granted then the real work begins.  Furthering the development opportunities and working collaboratively with owners and adjoining landowners to de-risk development schemes, ensuring that the valuation is met for the sale and in the case of a resultant construction or refurbishment project, that the programme of works is delivered require specialist skills and experience. 

Schools such as St George’s College negotiated a lease of use of the proposed new tennis facilities to the Tennis Association in return for funding, is an example of a school, that by working in partnership with technical experts, has realised value to allow them to transform their facilities.

Harry Flood, Director, Stanley Hicks, a Bellrock Company

Stanley Hicks, part of the Bellrock Group, has successfully completed on the sale of over £175 million pounds of land for redevelopment on behalf of schools and dioceses in the last two years. For more information contact us at  www.stanleyhicks.co.uk 

Follow the link to read the full article: Locking in land value and releasing capital.