Request
In the minutes of the Sept 2nd 2021 Audit Committee meeting, you're recorded as stating that ‘objective indices’ supported the 50% increase in carrying value of Pinkham Way.
Am I right in assuming that Savills applied these indices for 2021/22?
Please supply full details of the indices, including relevant values for the various periods, and describe a) what it is they reflect and b) whether, and if so how, their values can be applied to sites that don't, for instance, meet any of the valuation criteria for industrial land set out in the 2017 ‘Land Value Estimates for Policy Appraisal’.
Did the indices show the > 55% decrease over 2022/23 reflected in the fall in site value from £29.8m to £13.1m?
Or, because this was a formal valuation, did Savills apply different criteria for 2022/23? If the last answer is ’yes’, please give details.
By what criteria does the Authority propose to value the site in the future?
Finally, please explain what the Authority understands by 'carrying value' in this specific context.
Response
The Pinkham Way site is valued for accounting purposes every five years, in accordance with our accounting policy for non-current assets, which states:
"Fixed assets are valued at five-yearly intervals in accordance with the Statements of Asset Valuation Practice and Guidance Notes issued by the Royal Institution of Chartered Surveyors, although material changes to asset valuations are adjusted in the interim period, as and when they occur. Depreciation is not charged on non-operational assets."
A full, independent valuation of Pinkham Way was undertaken by Savills for the 2017/18 and 2022/23 financial statements. In the intervening years, Authority officers are required to assess whether the value has changed sufficiently to adjust the valuation in the financial statements. Savills have advised that the value of land at Pinkham Way is similar to that at the Edmonton EcoPark.
Due to the differences in accounting practices required for limited companies and local authorities, a valuation of the EcoPark is required every year. Therefore, in those intervening years between full valuations at Pinkham Way, we have reassessed the value of the land based on the land values in the EcoPark valuation, after confirming with our valuers that there are no circumstances that would cause the land values at the two sites to differ.
In the financial statements, we have endeavoured to be clear about the treatment of Pinkham Way in both 2020/21 and 2021/22, in the notes to the accounts. In note 5, property, plant and equipment, we have included a sentence relating to Pinkham Way that states:
"The change to the value of Pinkham Way was not based on a full valuation and does not take into account changes in planning designation or the environmental conditions at the site. A full valuation of the site will be undertaken as at 31 March 2023, in line with the Authority’s policy to revalue every five years."
In the 2020/21 accounts, the EcoPark was valued at £3m per acre. This was compared to the March 2018 valuation of £2.2m per acre, and a similar uplift was applied to the valuation at Pinkham Way.
In the 2021/22 accounts, we were advised that the land value of the EcoPark had temporarily risen to £4.5m per acre. We were informed that this was likely to be a temporary peak in valuations, but these were the evidenced conditions at the date of the accounts, and for consistency between the two sites, we believed that the value should be changed.
In the 2022/23 accounts, a full valuation was undertaken. The valuation basis was changed in that it was based on the ‘net developable area’ of the site, considered to be 75% of the site. Adjustments were also made for risks and a waste premium. The net developable area was valued at £3.5m per acre, the same value per acre as was applied at the EcoPark.
Going forward, we propose to follow the same method in the years without a full valuation of Pinkham Way, reviewing the calculations against the valuation at the EcoPark.
Finally, you asked about the meaning of the carrying value. This is the value of an individual asset in the balance sheet at the date of the accounts.
