The last few minutes of last week's Cabinet meeting was taken up with the Cabinet Member for Unwarranted Harassment and Finance, Don Massey reporting on a number of current issues; business rates, overspends, inflation etc. but the most interesting in view of the Bellway proposals for Broadway was his digression into the subject of ‘overage’. Councillor Massey said he had heard both Councillors and the public talking about the subject.
Overage is “not always practical” he said and explained that it is appropriate when selling land when the expectation is that values will rapidly increase. “The overage will give you [the Council] a percentage over a certain amount of the money you get.”
“Overage will actually reduce the amount you receive because the developer will actually calculate that, so you don’t [always] want an overage clause. The old Civic Centre is a good example where basically the amount we could have sold it for is shown by subsequent sell-ons recently where we actually got a very good deal and we would actually have lost money had we had an overage clause.”
“The people who negotiated that deal did a very good job.”
In simple terms if you think a developer might sell your land on you might accept a slightly lower price in the hope of picking up more money later but if you don’t expect it to be sold on then you get as much money as you can up front.
It must have seemed likely at the time of the sale that Tesco was serious about building a new store and would not be getting into the property business so going for the highest possible price was the Council’s priority.
Outside the meeting Cabinet Member Massey has said that the two subsequent sales (to Sports Direct and Bellway) “sold for significantly less than that paid by Tesco” in 2012. It seems unlikely but Don Massey is saying that Tesco and Sports Directboth took a hit on their sales. Without knowledge of the sales prices we can only give Massey the benefit of the doubt. His predecessor’s gamble in 2012 may have seemed reasonable at the time but maybe he (and we) lost.
The Tesco sale price might also have been unknown too because Bexley Council, secretive as ever, kept quiet about it. However buried deep in the March 2013 Auditor’s report all is revealed. It went for £25,326,000. The new Civic Centre cost £42 million.