The public and private sectors are evolving new and fertile ways to marry their efforts on regeneration
To deliver regeneration effectively, the public and private sectors must come together. The market has responded to fulfil this need, with new partnerships being brokered and innovative solutions to working together being developed. Examples include the ISIS Partnership, the English Cities Fund and regional development agencies' public-private partnerships. Most recently, the London Borough of Croydon is on the cusp of setting up the first local asset-backed vehicle.
A lack of funding and resource, coupled with government policy drivers, has meant that local authorities and other public-sector bodies are evaluating their property portfolios and the efficiencies that are being driven out of them, with a view to partnering with the private sector to deliver their agendas. This may include the reprovision of civic and public facilities, as is the case with the Croydon scheme and Lambeth's Future Clapham scheme.
There has been much commentary in the UK press about local asset-backed vehicles (LABVs) and, of course, each authority's approach and need for an LABV will differ. The form must follow the function and there are many ways in which the public and private sectors can come together to deliver schemes in partnership.
Most recently both the London Borough of Lambeth and the London Borough of Hammersmith and Fulham have concluded their competitive dialogue processes and selected private-sector partners to deliver their schemes. Neither of these has involved the creation of an LABV or other form of corporate joint venture, but rather the creation of robust contractual arrangements.
Lambeth's Future Clapham scheme involves the mixed-use regeneration of three key strategic sites in south-west London which will include the provision of a new leisure centre featuring a state of the art swimming pool, a contemporary library, a primary healthcare facility and further flexible public facilities.
On the private-sector side, appetite is strong. The most recent research from the Investment Property Databank from summer 2007 showed that over five years to 2006 the annualised total return for regeneration was 16.7% year-on-year, compared with 15.1% year-on-year from the IPD's overall UK annual index.
Against this background a new market is emerging, with public-sector assets and political leadership at the forefront to drive forward partnership arrangements with the private sector. This has presented innovative opportunities for the public and private sectors to work together.
Clearly, the private-sector desire for ascertained returns and development to meet market demand and the public-sector requirement for clear regeneration outputs and controls are not totally aligned at the outset. However, as these partnerships progress the partners will evolve their thinking, align their views and develop a necessary and conducive marriage.
Effective operational working practices are the key to this, with each party knowing exactly where the other is coming from to enable the right controls or flexibility to be afforded to the partnership. In fact, the private sector may find that by having its public-sector partner sitting at the same table, it can cut through some of the bureaucracy for which the public sector is often criticised and which is inherent where the private sector is engaging the public sector on a project-by-project basis.
This more rounded approach to true partnership working requires both sides to be open-minded and work at the marriage to generate significant returns and outputs.
Kuljeet Hothi is a partner in the company commercial team at Eversheds LLP, leading on the delivery of joint-venture arrangements for property projects for the public and private sectors.