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Mergers and Collaborations - the Key Real Estate Challenges

on Friday, 08 April 2016.

The area reviews that are currently underway are being watched by all colleges in the sector, even if you are not in the first waves.

Positioning of your college is vital, so having a clear understanding of your own strengths and where you wish to see your college will help refine and hone that strategic outlook, and whether there are certain colleges with whom you would prefer to do business compared with others.

Some of the colleges we are dealing with are already addressing these issues. Irrespective of the merits of the Area Reviews, and of their political and practical consequences, it is clear that all colleges will have to adapt and face these challenges head on. Far better in our view to be prepared for the prospect of merger and collaboration, whatever form that may take.

As the purpose of the review makes clear, well-placed colleges will deliver a wide variety of the following key factors:

  • financial viability, sustainability, resilience, efficiency and the delivery of maximum value for public investment
  • meeting an area's educational and economic needs
  • strong reputation and greater specialisation
  • access to high quality and relevant education and training for all
  • responding to the reform and expansion of the apprenticeship programme

Your real estate will be a key component of any merger or collaboration. Key aspects to consider from a campus perspective include the below.

Understand What you Own
This is not as trite as it may sound, especially for those colleges with multiple sites. You should have titles where you know what the key estates issues are, viewing the quality of your estate as if it were being made available for sale. The key here is knowing what impacts on the site may make it more or less attractive for an alternative use. Do you operate from a site that is intrinsically valuable (or not)? Do the legal boundaries match with what you occupy in practice?

Understand the Value of each Campus and how it Fits into your Overall Strategy
It is easier to reconfigure or even sell properties that may be used as offices or general teaching space, than those where the capital investment and layout has specifically been earmarked for specialist course provisions, such as construction, engineering (of whatever sort) or hairdressing.
Understand the Value of your Business Partnerships
Understand the nature of your business partnerships and how valuable they are to your existing estate and future course provision.
Where you do have specialist teaching space, to what extent is that supported financially and strategically by other major businesses with whom you may be in partnership?

Your Local Planning Authority's Local Plan
Check where the local planning authority has reached in the preparation of its Local Plan. Each local authority is obliged to have an up to date Local Plan as part of the NPPF process but as of January 2016, only 84% of local planning authorities had published a Local Plan and only 68% had adopted one. The Housing & Planning Bill is looking to give further impetus to this process but generally this means that for those that have not yet been finalised, there is likely to be an opportunity for colleges to assess the extent to which surplus premises can be re-allocated for alternative, non-educational uses.

Identify Potential Issues
Having checked what you own is okay, consider the extent to which you might need to take action in order to remedy defects or issues that might impinge re-development or sales or an alternative usage. For example:

  • Missing or lost title information
    A buyer or lender needs to know what is there to which the property might be subject. If you have not got a full suite of relevant documents or the boundary does not legally adjoin the public highway then you might need to secure indemnity insurance cover. Often this will help solve the problem for a relatively modest cost, depending on the level of risk and value of cover to be required.
  • Do you have all relevant paperwork to hand?
    Whatever the process for any merger, collaboration or for making a site ready for sale, any other party interested in merging or buying a site will want to carry out due diligence, so it is good to be prepared. The usual sorts of information that goes into a seller's pack/due diligence pack includes title and associated documents, detailed replies to commercial property enquiries and associated documents, including, for example, asbestos reports and energy performance certificates. The more comprehensive and well-prepared such a pack is, the more organised and confident the college is able to appear. Ultimately, if a property is being readied for sale, the greater likelihood of you attracting better quality bids from potential buyers.
  • Are all footpaths private or public?
    If they are private, then consider moving them or stopping them up, if doing so might make a site more attractive to a developer. If they are already adopted, then there would be a formal process to consider, which would require further advice as to the process and tactics to adopt.
  • Are there any third parties occupying your campus?
    If so on what basis do they occupy and how quickly could you secure vacant possession if you needed to? It is important to check how someone occupies a site - long term interests cannot just be moved and even with impending terminations, where you might wish to exercise a break or a lease has naturally reached its end date, you may still need to consider the adverse publicity that can ensue if a longstanding/well-loved institution such as a nursery is asked to leave, however justified you may be, legally. Remember, too, that telecoms operators also have specific powers under the Telecoms Code, in addition to any landlord and tenant rights they may have.

Addressing the issues that impact on the fabric of your real estate at an early stage will put you in a stronger strategic position to face the challenges arising out of the Area Review.

For more information on how we work with colleges and their real estate requirements, please contact a memeber of our Real Estate team, or complete the form below.

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