8.20 Surplus assets must be sold or disposed of for at least open market value (OMV). It is not sufficient that the NHSScotland body achieves a value which simply makes the scheme affordable. The private sector partner must be prepared to pay at least the OMV for the asset at the point of sale.
8.21 Identification of OMV requires relevant professional advice. It is recommended that a suitable land valuation is sought from the Appointed Valuer (AV). An NHSScotland body may, of course, seek an additional valuation from a suitably qualified and independent valuer and discuss any differences with the AV. However, for PPP valuations, the AV is recommended in the first instance. Bodies may wish to obtain professional advice regarding the marketing of land in order to help maximise disposal proceeds.
8.22 Where the land included in a PPP scheme represents only part of the total available estate, steps should be taken to ensure that the item of land sold does not adversely affect the value of the remainder. This could be achieved through valuations or market testing the entire site as a single disposal and comparing the likely figure obtained with the actual cost of sale plus an equivalent market test for the remainder of the land.
8.23 The NHSScotland body should also consider whether the value to be derived from land disposals will be improved by the NHSScotland body obtaining enhanced planning permission for the land prior to disposal. The advantage of this approach is that the NHSScotland body will receive the full benefit of any uplift in value from the enhanced planning permission.
8.24 NHS Bodies should consider whether overage arrangements are necessary. Overage occurs when the proceeds realised at the actual time of sale of the land by the PPP consortium are in excess of the minimum underwritten value in the project agreement and the excess is shared between the NHSScotland body and the Project Company. Hence, the total agreed price for the land would be the minimum of OMV at the time of signing the project agreement plus overage. For example, this may be appropriate where enhanced planning permission is likely to increase the market value of the property. The affordability of the scheme for the purposes of FBC approval should be based on the minimum underwritten value.
8.25 Overage arrangements will ensure that the NHS receives best value for money from the inclusion of surplus land in PPP schemes in respect of valuation risk and the forward sale of land. The anticipated benefits for any overage arrangements should be compared with any increase to the contract price which the consortium requires in return for agreeing to such arrangements. The NHSScotland body should also consider whether other arrangements to share in the future benefits which the consortium or other parties may derive from the land will improve the value for money of the PPP deal. For example, the Body could negotiate for share of future revenue streams in the event that the consortium realised opportunities for developing the land or acting as a building contractor on any development by a third party.
8.26 As with all clawback arrangements, the NHSScotland body will need to assess whether such arrangements will improve the value for money of the PPP deal, taking into account any price adjustment which the consortium may seek for agreeing to these arrangements.
8.27 The formula for the overage arrangements should take into account the risk and effort that the private sector has taken in enhancing the value of the land. Where the risk taken by the Project Company is insignificant, a higher share of overage should accrue to the NHSScotland body. Conversely, where the Project Company underwrites proceeds in excess of market value, a smaller share of overage may be appropriate. Irrespective of risk transfer, underage should not be agreed as this would cause difficulties in obtaining value for money.