Call for advisers launches massive deal to put 750 government buildings in private hands.
The government has fired the start gun on one of Britain's largest-ever private finance initiative property deals.

Called the "strategic transfer of estate to the private sector", the deal will involve moving 750 buildings from the Inland Revenue and Customs and Excise estates into the private sector.

The process started last week with an advertisement for a property adviser in the European Union's Official Journal. Property and facilities management expertise are required to put together the STEPS deal.

The deal will require a private consortium to take on a total of 1.5 million m2 of space on a 20-year concession. It will take responsibility for the day-to-day running of the estates to provide serviced accommodation for both departments.

The properties range from large office blocks and historic customs offices at ports around the country to specialist buildings, including custody centres.

The estates currently cost the two departments £300m a year to run, and they are looking to the private sector to make major savings. The deal could include the sale of some properties, refurbishment of others and new-build if required.

The deal follows the Department of Social Security's PRIME project, which saw 1.7 million m2 of space transferred in a £4bn deal.

Tenders for the STEPS main contract are expected in the summer. Front-runners to win it are thought to be Servus, backed by Japanese bank Nomura; Citex, formerly Bucknall Austin, backed by US bank Donaldson Lufkin & Jenrette; and the Goldman Sachs-backed Trillium consortium that won the Prime contract.

Phillip Russell, managing director of Servus, expects the competition to be tough.

"It is definitely big news; not many schemes of this size come along. It will change the face of the facilities management and property industries, not least because two large government landlords are about to be replaced. It represents a huge amount of work," he said.

The PRIME deal attracted overseas investors and Russell believes STEPS will do the same: "I think the difficulty will be whether the UK market has the capacity to take it up. PRIME was just too big and new for British banks." But he added: "I would be amazed if UK banks don't look at [STEPS]. The value of the assets is enormous."

  • In other PFI news, the Ministry of Defence is drawing up plans for a £1bn PFI deal to rebuild the Atomic Weapons Establishment at Aldermarston in Berkshire.
Also, consortia bidding for the £7bn part-privatisation of London Underground are reported to be facing delays of up to 18 months because of problems in drawing up contracts.