length of time. Above all the strategy has to be pragmatic, you must be able to do it otherwise there is no benefit to anybody.
Delivery; tuning the property team
One of the key things about implementing the agreed strategy is having the right people, the right skills, and the right structure within the property team. Make an early assessment of whether the team can deliver the strategy. If not, you need to do some tuning first.
There are many ways to construct your team and there is no hard and fast rule about it as different organisations have different drivers and directives and so on. But for many the key issue is control of decision-making. This includes how issues are fed into the property decision-making process, how decisions are made, and how decisions taken are actioned.
This shows a simple model of a special purpose vehicle (SPV) to deal with operational estate. The vehicle could be either a limited company or a limited liability partnership (LLP). The reason the latter is effective is because an LLP does not pay tax, it is tax transparent.
The agreed strategy has identified some immediately surplus property and a range of surplus properties becoming available over the next three, four, or five years; all to be replaced by new fit for purpose assets. Surplus properties can be transferred into the SPV as it can take a more commercial approach, for example by delaying sales if that is the right thing to do. Potentially the SPV can devise and operate a sales programme, and, maybe, acquire the new properties too.
This is just an illustrative structure showing that even where there is a number of directorates to work with, by having a centralised commissioning model in some guise or centralised asset management team and control functions, actions that flow from the needs of the varying directorates are deliberate and the right people do it at the right time. Without it you will continue to have lots of people making ad hoc decisions all over the place.
Having got a strategy, and a finely tuned team to control, manage and influence it, the big challenge is to migrate away from the not-fit-for-purpose properties to fit-for-purpose properties within a reasonable time. For example there is no point in doing something in 10 years time as that is no strategy at all, and not implementing action in a sensible time.
There are other issues. Funding, what comes first the money or the action, a difficult problem. Do you have the right skills and capacity, if not how do you get the right skills and capacity to do it, and provide value for money. As a public servant providing a public service there has to be value for money. In realising the value of surplus assets rather than just putting a For Sale sign on assets as and when they come up, it is possible to deliver better value for money by trying to secure some future profit, or a bit of a future value, by taking a different view.
ASSET - Liverpool-10
Where is the money coming from? The vehicle is a commercial entity so can borrow money in the commercial market from a funder, such as a bank or institutional investor, looking for a good solid investment. As an example let us assume that you could transfer a portfolio of surplus property into the vehicle and that the funder will lend you £50 million on that portfolio. This enables the vehicle to buy the properties from the authority, and retain the £50 million as equity in the SPV, which the authority owns and controls completely, including the portfolio of surplus properties and of course the debt. It may be that third parties, such as service providers partners, occupy some of the properties, and they might pay you rent, or should pay you rent. This can go to the vehicle to help ease the debt. As the SPV starts to sell the surplus properties part of the proceeds will service the debt, part will repay the debt and part of the proceeds will go back to the authority, so in a simple way you can have your cake and eat it. This SPV is then a fairly simple vehicle for helping you to start implementing your strategy and transforming your property portfolio.
SPV summary
The advantages of an operational estate Special Purpose Vehicle are
● It facilitates a more commercial approach to asset management
● It is one step removed from the council, important in dealing with a bank or recruiting staff into it as it may attract a wider range of applicant
Kevin Hines 19
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