Report to the Meeting of the Oxford Health NHS Foundation Trust
Board of Directors
For Approval
27 November 2013
MANOR HOUSE LAND SALE
Executive Summary
This paper provides an update on the status of the Tindall and Manor House land sale and considers the impact of retaining part of the Manor House site previously identified for disposal. This proposal is supported by the Finance and Investment Committee.
The Manor House business case was approved on the basis that the surplus site released as a result of the development would be disposed off generating a capital receipt of c.
£6.4m. This valuation was based upon the achievement of the following receipts for each site:-
Tindall £2.5 million
Manor House £3.9 million
The FY14-FY18 capital programme was approved on the basis that this funding was available to support capital investment.
Discussions at the Finance and Investment Committee (FIC) and Executive Director meetings have indicated that it could now be strategically advantageous for the Trust to retain part of the land on which the Sue Nicholls building is located rather than dispose of it as previously planned.
Retaining this part of the site previously identified for disposal would result in the loss of capital receipt of c. £2.15m, and would therefore require alternative capital receipt(s) to be identified or a reduction in capital expenditure of the same value. The capital programme has been reviewed to assess the potential for a reduction in capital expenditure in FY14-FY16 and opportunities have been identified for reduced investment to mitigate the loss of capital receipt. The proposal would result in an improved discounted cashflow, improved cash balances and have a neutral impact on the Trust’s financial risk rating.
Recommendation
The Finance & Investment Committee recommends to the Board of Directors that approval is given to retaining part of the Manor House site previously planned for disposal (as defined in this paper), subject to the loss of capital receipt being offset by a reduction in capital expenditure in FY14-FY16 and that the scope of the Manor House Project be amended accordingly to reflect this change on the basis that the underlying financial business case remains valid.

Author and title: Paul Dodd, Deputy Director of Finance
Claire Dalley, Director of Estates
Lead Executive Director: Mike McEnaney , Finance Director
[ A risk assessment has been undertaken around the legal issues that this paper presents and there are no issues that need to be referred to the Trust Solicitors.
]

Introduction
This paper provides an update on the status of the Manor House land sale and considers the impact of retaining part of the Manor House site previously identified for disposal. This proposal has been considered by the Capital Programme Board in October and November
2013 and is recommended by the Finance and Investment Committee (FIC) for approval by the Board of Directors.
Background
The Manor House business case was approved by the FIC and Board of Directors on the basis that the surplus site released as a result of the development would be disposed off generating a capital receipt of c. £6.4m, based upon obtaining the receipts identified below:
Tindall £2.5 million
Manor House £3.9 million
The FY14-FY18 capital programme was approved on the basis that this funding was available to support capital investment.
Discussions at FIC and Executive Director meetings have indicated that it could now be strategically advantageous for the Trust to retain part of the land on which the Sue Nicholls building is located (and immediately adjacent to) rather than dispose of it as previously planned.
Current Status and Options
BNP Paribas have been appointed to progress the sale of the Manor and Tindal sites, and a programme for the disposal, which reflects the potential to retain part of the Manor site is being developed. As part of their appointment BNP Paribas provided a market valuation of the sites. This valuation is substantially lower than the £6.4 million previously obtained and incorporated within the Whiteleaf Business Case. BNP Paribas identified that the original land value could be achieved if the Local authority reduced the required affordable housing requirement and section 106 contributions. The Trust has written to the Local Authority requesting that this be considered, and requesting a meeting to discuss. We await a response from the Planning Officer assigned to this case.
The District Valuer has been commissioned to review the land and provide a reasoned assessment of the market value, to provide a firm current position to support our discussions with the Local Authority. BNP Paribas have also been requested to provide to provide further evidence and examples to support our position.
As noted above, it is suggested that the retention of either part or all of the old Manor Site would be of a strategic benefit for the Trust. There exists the potential for the Trust to develop community care services within Buckinghamshire, and the old Manor Site is ideally placed to provide a Community Hospital base to support these services.
It is suggested that the Trust retain the land identified as area 2 (coloured pink) on the plan below. We have however asked the District Valuer to review the most suitable place to
“divide” the Manor site to enable us to receive best value from the sale of the unretained

area (coloured yellow)
The potential impact on the receipts anticipated by the Whiteleaf Development Business case of retaining this area of the site is summarised below:-
Business case predicted income
Estimated best case predicted income
Partial Retention of land (best predicted income) (area 2)
£2.85 million £2.85 million Sale of Tindall
Site
£2.5 million
Sale of Manor
Site
Total income
£4 million
£6.5 million
£3.58 million
6.43 million
Impact on planned income (reduction)
£1.5 million
£4.35 million
£2.15 million
Financial Implications
The approved capital programme for FY14-FY18 provides for capital investment of £65.6m funded as follows:

£m
CAPITAL PROGRAMME
PLAN Forecast Forecast Forecast Forecast TOTAL
FY14 FY15 FY16 FY17 FY18
29.5
9.1
9.0
9.0
9.0
65.6
ASSET SALES
OPERATING CASH FLOW
LOAN DRAWN FY13
PDC RECEIVED
CASH BALANCES b/fwd
12.7
9.2
4.3
0.7
2.6
-
9.1
-
-
-
-
9.0
-
-
-
-
9.0
-
-
-
-
9.0
-
-
-
12.7
45.3
4.3
0.7
2.6
TOTAL SOURCE OF FUNDS 29.5
9.1
9.0
9.0
9.0
65.6
The capital programme was underpinned by £12.7m of capital receipts, comprising Manor
House £6.4m and Park Hospital £6.3m (the latter was received in September 2013).
Retaining part of the Manor House land previously identified for disposal, and accommodating the potential maximum reduction in market value would result in the loss of capital receipt of c. £ 2.15 m as detailed above.
The capital programme has been reviewed to assess the potential for reduced capital expenditure and the following opportunities have been identified for reduced investment due to under-spends on existing schemes and reduced investment on planned schemes:
Scheme
Manor House
Value
£000
Reason
500 Projected under-spend/savings inc. SSB
(Peach Tree House)
Manor House
Eating Disorders
Windrush
300 Capex avoided through retention of land
1,100 Proposed scheme removed
300 Reduced scope/proposed investment
Marlborough House Reception
Inpatient wards
ICT schemes
Medical equipment
250 Reduced scope/proposed investment
790 Refocus investment on compliance risks
335 Various
100 Replacement programme not yet established
Various Estates schemes
Unallocated contingency
Total
273 Under-spends
259 Contingency removed
4,207
The revised FY14-FY18 capital programme is attached, including details of the proposed changes. The reduced capital expenditure would avoid capital charges of c. £300k pa.
A discounted casflow analysis has been undertaken to compare the two options: (a) Current
Plan – sale all of the land and use the receipt for capital expenditure purposes (b) Proposed
Plan – retain part of the land resulting in a reduced capital receipt off-set by reduced capital expenditure and capital charges.
The proposed option to retain part of the land results in a benefit to the calculated Net
Present Value (NPV) as shown in the following tables:

Current Plan - full receipt
Capital Receipt
Capital Expenditure
Net cash outflow
Discount Factor @ 3.5%
NPV
Year
£m
£m
£m
0
-29.5
-29.5
1.00
-29.5
1
6.4
-9.1
-2.7
0.9662
-2.6
2
-9.0
-9.0
0.9335
-8.4
3 4
-9.0
-9.0
0.9019
-8.1
-9.0
-9.0
0.8714
-7.8
5
-9.0
-9.0
0.842
-7.6
Total
6.4
-74.6
-68.2
-64.0
Proposed Plan - partial receipt
Capital Receipt
Capital Expenditure
Capital Charges reduction
Net cash outflow
Discount Factor @ 3.5%
Year
£m
£m
£m
0
-27.5
0.1
-27.4
1.00
1
4.3
-6.9
0.1
-2.55
0.9662
2
-9.0
0.1
-8.9
0.9335
3
-9.0
-9
0.9019
4
-9.0
-9
0.8714
5
-9.0
-9
0.842
Total
4.3
-70.4
0.3
-65.85
NPV £m -27.4
-2.5
-8.3
-8.1
-7.8
-7.6
-61.7
In addition, the proposed option results in a positive impact on cash balances across FY14-
FY16 as shown below, due to the reduction in capital expenditure being greater than the reduction in capital receipt:
Cash Balance @ 31 March
Current Plan
Changes:
- capital receipt slippage
- reduced capital receipt
- reduced capex
- capex slippage
- reduced capital charges
- working capital management
- cash gain in FY15
2014
18.8
-6.4
2.0
1.0
0.1
3.3
2015
18.8
6.4
-2.1
2.2
-1.0
0.1
-3.3
2016
19.4
0.1
2.3
Proposed Plan 18.8
21.1
21.8
The proposed option has a neutral impact on the Trust’s financial risk rating, remaining at ‘3’ under both options.
Recommendation
The Finance & Investment Committee recommends to the Board of Directors that approval is given to retaining part of the Manor House site previously planned for disposal (as defined in this paper), subject to the loss of capital receipt being offset by a reduction in capital expenditure in FY14-FY16 and that the scope of the Manor House Project be amended accordingly to reflect this change on the basis that the underlying financial business case remains valid.