● Ideal for the disposal of “not fit” assets
● Enables you to enhance their value pre-disposal, if required
● It could be the procurement vehicle ● The council retains total control and all the profit ● It can take in an initial cash receipt from a funder
have the right structure, which means that it has to work both for you and all partners.
The LABV is more suited to regeneration where the primary objective is to use property to secure long-term private sector investment to regenerate areas. The structure of the LABV more complicated than the SPV and the primary difference is the presence of a private sector partner to bring in a wider range of skills, for example, in development work.
The requirement for this vehicle is about a pool of assets in an area, and that area might be your whole council, or it might be one geographic place, or it might be one segment of assets in an area so you can focus regeneration on that area. There has to be a private sector appetite for what you are going to do, if not then the whole project is a waste of time. You have to construct a feature to which the private sector will respond positively. This means that it has to be set up in such a way that the private sector can make money out of it as that is the only reason for their participation. The LABV can also be a vehicle for you to collaborate with other partners with interests in the adopted regeneration area with the incentive that if they join in with their assets this could create a critical mass.
Examples of these vehicles have been set up as Blueprint in the East Midlands, and others in Tunbridge Wells, Newham and Croydon. Croydon’s urban regeneration vehicle is a joint enterprise with John Laing and is based on this structure. Croydon has put in assets and John Laing has put in equity.
The main issues to consider here are governance and skills. It is important to build in the right level of control, as these are your assets, in your back yard, so you want to control what happens. The LABV has to create additional value over and above other methods of achieving the same outcomes otherwise there is no point in doing it. It has to create additional value. Again it needs to have the right capacity in skills and this is where selecting the right joint venture partner is critical in order to bring in appropriate capacity and skills, and probably money as well. Finally the vehicle has to
20 Kevin Hines
After the simple operational vehicle, and the more complicated regeneration model, this vehicle is even more complex and answers more questions in a more complicated way with all the challenges discussed for the other scenarios plus some more.
In this model we have a partner, there is a funder, there are third parties, and there are collaboration partners who have joined to pursue similar objectives. This structure could be the way to solve all problems, possibly, but it could be that combining operational and regeneration in one entity is a step too far. Implementation will be a problem with a number of partners each with different drivers and different agendas. A key challenge will be devising methods of operating that are going to work out for everybody.
And what type of JV will you select; a developer, a contractor, an investor, or an investment manager. You could bundle up the developer, the contractor, the investment manager and the funder all in one party. It is possible, but it is a lot more complicated. Control and governance issues get a lot more complicated with more people involved but it is still your assets in your back yard, so this is still something very important and has to be set up in such a way that the partners can help the JV partner deliver.
One of the advantages of this type of vehicle is that you can get more money out straight away. Let us assume that the authority transfers say £100 million worth of property into the vehicle. We have £100 million worth of properties on which the bank lends you £50 million. This means you have got £50 million cash released, and there is £50 million worth of equity remaining in the vehicle. If you then chose to join with a joint venture partner, let’s say on a 50:50 basis, the JV partner would pay you 50% of the equity value, ie £25m.
On this basis you release £75 million of cash immediately, a significant sum if that cash is needed for investment elsewhere. However the joint venture route does mean you sacrifice 50% of future profits, as these will be shared with your JV partner.
ASSET - Liverpool-10
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68