“Partnership” has long been the buzz-word for contractors working with the public sector. But with tight budgets and volatile markets, partnering means more than helping to generate funding and mitigate risk
Councils are under more pressure than ever to secure a sustainable future for their towns. But after years of sustained budget cuts, things just aren’t as simple as they used to be. Local authorities are having to find new and innovative ways to generate funding for developments and our private sector partners can play their part.
Councils have no choice but to play a more active role in critical developments such as housing delivery and town-centre regeneration, so naturally the list of things we need from prospective partners has become more specific. We need the private sector to be flexible and open to new ways of funding, as well as being sympathetic and respectful of our vision and, critically, willing to share risk.
This was the case in our most recent project; The Exchange. Over the last decade, we’ve invested over £100m in regenerating Aylesbury town centre, delivering a state of the art theatre, a new supermarket, a hotel and a university campus. The Exchange is the next stage in the programme.
We need the private sector to be flexible and open to new ways of funding, as well as being sympathetic and respectful of our vision and, critically, willing to share risk
The scheme is mixed-use and will include flexible commercial space, restaurants, apartments and a public square in the heart of the town centre. But funding the project needed an ambitious and innovative approach, and a development partner that was prepared to work with us to achieve the vision.
We chose to work with Durkan, a developer and contractor in London and the home counties, and agreed a solution that would generate the funding needed to deliver the scheme to the benefit of both parties.
But after years of sustained budget cuts, things just aren’t as simple as they used to be
We procured debt through our prudential borrowing capability and loaned it to Durkan at a commercial rate that was far better than that which was available from lenders. Durkan will use this loan to fund 75% of the construction of the project, which will be repaid from proceeds of sale, securing our ROI.
Once the build is complete, the council will hold long-term freehold ownership of the full development and will lease the apartments to Durkan. That way, the Council will benefit from the rent of restaurants and commercial units, and Durkan draws revenue from the sale and rental of the apartments. AVDC will take a share of any uplift in value.
It’s solutions such as the one we’ve created with Durkan that illustrate true “partnership” working and take it beyond the buzz-word it has become. When funding is difficult to come by, the public and private sector need to work together to find a solution of mutual benefit. That means the old ways of working are over. Developers need to be prepared for councils to play a far more active role in development, be flexible and respect the local vision if we’re going to meet our targets and secure the future of our town centres.