Purpose

As part of its
investment portfolio, Merseyside Pension Fund (MPF) owns
a number of properties across the
UK.  It is essential that these
properties are well maintained to ensure compliance with
regulatory/environmental standards and to retain and attract
tenants.  On 22 July 2025, Pensions
Committee endorsed the procurement process as outlined within the
report and delegated to the Director of Pensions the appointment of
a main
contractor for refurbishment works of Castle Chambers,
Liverpool.  This report recommends the
appointment of DP Designs Limited as the main contractor.
 

Decision

The Director of
Pensions has approved the selection of a main contractor for
refurbishment works at Castle Chambers, 43 Castle Street, Liverpool
based upon a tender recommendation report produced by CBRE dated
August 2025 and under delegated authority from Pensions Committee
on 22 July 2025. Planned works are to run for a period of 38
weeks.

Reasons for the decision

The refurbishment of
Castle Chambers reflects a proactive asset management strategy
aimed at enhancing both the short- and long-term performance of the
holding within Merseyside Pension Fund’s wider Direct
Property portfolio. Current vacancy levels highlight the need to
improve the competitiveness of the building in an increasingly
discerning occupier market. Modern tenants are seeking workspaces
that not only provide functional office space but also deliver
high-quality amenities, flexible layouts, and a strong
sustainability profile. Without investment, the asset risks falling
behind newer or upgraded buildings in the local market, limiting
its ability to attract and retain high quality tenants.

 
Upgrading the
building’s amenities and overall specification is expected to
improve its appeal to a wider pool of occupiers, reducing voids and
supporting stronger tenant covenants. In turn, this enhances rental
income potential, stabilises cash flows, and preserves long-term
asset value. A more attractive, future-proofed building also
positions the property to capture demand from sectors with growth
in office requirements, while mitigating the risk of obsolescence
in a competitive leasing environment.

 
From a fiduciary
perspective, the decision aligns with the Fund’s objective of
maximising income and capital returns from direct property
holdings. By addressing existing vacancy and repositioning the
building in line with market demand, the refurbishment is a
targeted intervention to unlock value and ensure the asset
continues to make a meaningful contribution to the Fund’s
performance.
 

Alternative options considered

The sale of the asset
or potential conversion to a hotel were assessed but refurbishment
was deemed to provide the best risk adjusted returns to the
Fund.  The option of taking no action
was also considered. However, this carries the risk of Castle
Chambers becoming obsolete within the local office market,
undermining the portfolio’s objectives of yield and capital
growth maximisation.