Central Estate Programme – Counter Terrorism and Organised Crime Hub

Reference code: 
PCD 335
Date signed: 
22 March 2018
Authorisation name: 
Sophie Linden, Deputy Mayor, Policing and Crime

Executive summary

The Metropolitan Police Service (MPS) has been at the front line in protecting both London and the UK against Terrorism (through Counter Terrorism - CT) and Organised Crime (OC).

In 2016, MOPAC and the MPS made the decision to construct a new building at Paddington Green to co-locate all CT functions (DMPCD 2016-36 Redevelopment of Paddington Green police station).  Since then economic factors in the property industry have changed and the nature of the threat has seen a number of attacks on the Capital and Manchester from both Daesh inspired and far right groups. The Mayor remains committed to investing in MPS counter terror capability.

The terrorist attacks last year and the shift in threat have highlighted the urgency for a long-term single site. Meanwhile the fact the property market has changed has presented an opportunity to purchase Empress State Building, Earls Court (ESB) through the acquisition and on-shoring of the holding company enabling the conversion of the existing lease into a freehold.  This enables investment into the building and secures its future into the long term. Purchasing ESB and holding it as a freehold offers better value for money than signing a 15-year lease. This frees up revenue spending to be focussed on better value support to the front-line rather than spend on rent. These savings on rent increase the longer the length of the lease. It supports the ambitions of the MOPAC Police and Crime Plan to protect Londoners from both terrorism and increasingly sophisticated organised crime; whilst it also supports the objectives to rationalise the MOPAC estate and improving the quality of accommodation. This rationalisation provides the opportunity to bring CT functions together, replacing the earlier Paddington Green proposal.

Shortly after taking office in 2016, the Mayor asked Lord Harris to review London’s state of readiness for a terrorist attack following a number of horrific events elsewhere in Europe.  Lord Harris’ report published in 2016 made 127 recommendations. Since then there have been a number of attacks and it has been acknowledged that the Police and the security services responded well.  Lord Harris has since reviewed the proposals set out in this paper and has strongly recommended that all CT and Organised Crime teams are brought together.

The investment in a single CTOC Hub will also bring London into line with the rest of the country. Other regions such as Manchester already collocate CT functions and this will bring London in line with that delivering a modern fit for purpose accommodation and technology. 
 

Recommendation

The DMPC is asked to:

a.    Approve the structured transaction, the detail of which is set out in Part 2, for the acquisition of 100% of the issued shared capital in Empress Holdings Limited (and its subsidiaries), the ultimate owner of Empress State Building (ESB), from EC Group Holdings Ltd (a wholly owned subsidiary of Capital & Counties Properties PLC (Capco)) for a consideration of £250 million, plus £10 million which will be paid in the event certain security conditions are met, as set out in Part 2. The transaction costs of the purchase will be up to £4.3 million.

b.    Approve entering into two twenty year leases of land adjacent to ESB, each at a peppercorn rent, and with a landlord’s option to terminate (as set out in Part 2), together with options to purchase the freehold interest in each lease for £1 if stipulated conditions are not met within defined timescales (as set out in Part 2).

c.    Approve further capital expenditure of £147.3m to fund the consolidation and improvement of the Central Estate as per the proposed Estate Transformation Strategy; this will include the refurbishment of eight receive sites that will form part of the relocation of teams during the ESB decant and closure of Cobalt Square as well as the replacement of worn out components in ESB and security improvements; the full breakdown of costs and projects are set out in the Commercial Case.
 
d.    Approve the procurement of Warranty and Indemnity Insurance through the selection of an insurer, using a specialist broker that works with MOPAC’s lawyers following an industry standard procurement process. The proposed policy and premium will be proposed as part of the final settlement request.

e.    Approve the placing of surplus revenue funds in years 2018/19 – 2019/20 into an earmarked reserve to meet costs in later years, in line with the medium term financial strategy.

f.    Approve a re-profiling of the MPS capital plan in the Mayor’s Budget of 22 February 2018 in line with these recommendations. 

g.    Provide the Commercial Director the authority to approve contracts through standard commercial frameworks, or other MOPAC approved routes to market as appropriate to the range of projects.

h.    Note that the following disposals are anticipated in this business case that are subject to approval in separate requests: 
i.    Paddington Green is part of a separate request for a series of properties to be marketed for sale.
ii.    Cobalt Square has already been identified and approved as surplus and will be sold in 2023 (authority to market will be requested nearer the time).
iii.    Belgravia Police Station is proposed which is subject to further approval by DMPC. All existing neighbourhood teams would be housed on or near to the redeveloped site.
If these properties are not sold then there will be an impact on the availability of capital and the resultant need to raise the level of borrowing which is not reflected in this business case.

i.    Note that the Portfolio Investment Board has agreed that the operational benefits of creating a single building Counter Terrorism and Organised Crime (CTOC) Hub in Central London are critical as underlined by documented external, independent studies as referenced in this decision and set out in detail in Exempt Part 2.

j.    Note that the existing Medium Term Financial Plan (MTFP) has made full provision for the capital and revenue costs (including borrowing) of this project and that any subsequent changes will be reflected and updated in accordance with standard change and budget control management. 

k.    Note that there are wider operational and financial benefits from the consolidation of the MPS Central Estate.
 

Non-confidential facts and advice to the Deputy Mayor for Policing and Crime (DMPC)

1.    Introduction and background

1.1.    For a number of years there has been a recognition that the various MPS CT and Organised Crime related functions would benefit from improved co-location.   

1.2.    Shortly after taking office in 2016, the Mayor asked Lord Harris to review London’s state of readiness for a terrorist attack following a number of horrific events elsewhere in Europe.  Lord Harris’ report published in 2016 made 127 recommendations. 

1.3.    Since then there have been a number of attacks and it has been acknowledged that whilst the Police and the security services responded well there are opportunities to improve this response.  

2.    Issues for consideration

2.1.    The proposed approach is consistent with the MOPAC Police and Crime Plan, the Met’s One Met Model (OMM) and the proposed MPS Estates Transformation Strategy.  It will enhance the MPS’s ability to Keep London Safe from the increasing terror threat, it will provide modern tools to the police to do their job, and enhance the estate through consolidation of property assets, targeting investments in critical infrastructure, maximising the value of surplus assets to invest back into capital projects, and reduce running costs.

2.2.    The various strands of the business case for this proposal are covered in the attached MPS paper:
•    The strategic case setting out the business needs, the case for change and the benefits it will deliver;
•    The options considered for its delivery; 
•    The commercial aspects of the proposal;
•    The costs of the proposal and how these will be funded, and 
•    The management approach to the implementation of the proposal.

2.3.    Given the complexity of such a transaction due diligence and associated legal advice continues to be carried out.  Any material issues highlighted by these processes up to the point of completing the transaction will result in a further consideration of the decision. 

3.    Financial Comments

3.1.    The detail of the costs and funding of the proposal is set out in Part 2.  The costs and funding has been included in the approved MOPAC budget 2018/19, and capital programme 2018/19-21/22.  

4.    Legal Comments

4.1.    Detailed legal advice has been sought and provided confirming MOPAC has the legal authority to proceed with the transaction. Part 2 contains the detailed legal advice. 

5.      Equality Comments

5.1.    There are no direct equality or diversity implications arising from this report.

6.    Background/supporting papers

Appendix 1 – MPS Report