Making your assets sweat

The government is pressing local authorities to make more effective use of their valuable asset base. Celia Cullen looks at the property investment and development models available and highlights examples of where councils have already successfully put them in place.

Local government's property holdings represent a considerable asset and – with a value of around £250 billion – even modest improvements in the performance of the estate have the potential to deliver significant efficiency savings and income.

In February 2008 the Department for Communities and Local Government (DCLG) published a new framework document specifically designed for local government members and senior officers, aimed at bringing together the key policies and influences that shape local authority asset management at that time.

Building on Strong Foundations – a Framework for Local Authority Asset Management was also stated to be a response to the widespread (but mistaken) perception reported in a 2007 survey commissioned by DCLG, that the government had "lost interest" in asset management because it no longer required corporate capital strategies, asset management plans and property performance indicators  to be reported annually.

Rather than losing interest, the government confirmed that over the next three years it wanted to ensure local authorities work to secure better value for money whilst making more effective use of their asset base as the foundation for delivering high performing public services. It also placed the need for strategic planning and management in relation to assets at the centre of its ambition to create strong, safe and prosperous communities.

This was long before the dramatic downturn in the economic climate, but what is clear is that the drivers which applied then are even more relevant now. Whilst the property market has been badly hit, there are still things that proactive councils can be doing to take advantage of the upturn when it comes and local government has responded to the challenges.

A key part of the process has been to gain an overview of the property investment and development models that may be available and how those models might be used in practice to secure the immediate policy objectives as well as the wider objectives of local government in both the short and long term.  Options considered have included:

• Selling surplus assets to free resources for new investment
• Transferring ownership of assets to the private sector or joint venture structures where this secures better value for money through access to new funding and skills or by placing risk where it can be better managed
• Identifying and capitalising hidden assets
• Increasing value for money form retained assets and property
• Creating alternatives to the current means of the provision of social and affordable housing including direct development and local housing companies.

In practice of all of these models are being implemented by local government throughout the country.

Reviews have included the study carried out by 4ps (now Local Partnerships) with the Improvement & Efficiency West Midlands Regional Partnership. This involved Staffordshire County Council, Bromsgrove District Council, Redditch and Tamworth Borough Councils, Walsall Metropolitan Borough Council and Coventry City Council. Capital savings of £144m and revenue generation of £44m were demonstrated as well as the identification of the potential to remove 14,000 tonnes of carbon emissions.

Following on from this all nine regional improvement and efficiency partnerships have formed a national improvement and efficiency partnership with a remit to disseminate best practice and encourage local government in making better use of its property assets.

Some more examples of good practice are included as case studies listed by the Audit Commission in "Room for Improvement" and cover the work of Wandsworth Borough Council, Sevenoaks District Council, Lancashire County Council, East Riding of Yorkshire Council, Wychavon District Council and Hampshire County Council.

Other recent innovative projects to gain the full public potential of assets include:

Aylesbury Vale District Council: the council has undertaken a procurement for a private sector partner to join it in a local asset backed vehicle (Aylesbury Vale Property Investment Portfolio) and the transfer of council land and property into the vehicle in order to manage, improve and develop the property estate as part of the objectives of its corporate and sustainable community strategies.

Devon County Council: the council has appointed a development partner to work with through a 50:50 joint venture (LLP) in relation to the development of the 107-acre Skypark site, to the north of Exeter Airport. The land was owned by the county council and is identified in Regional Planning Guidelines as being a strategic location for large-scale employment development and will bring 7,000 new jobs to East Devon.

Of the proposed 140,000m² of business space 60% is intended as office led and the remaining 40% for light industrial uses. In addition to the business space there will be ancillary uses such as hotel and supporting retail and leisure uses. It is hoped work on the first phase of the park will begin by 2011, with the first offices ready for occupation before 2012.

Newcastle City Council and Gateshead Council: The Scotswood project involves the creation of a delivery vehicle (LLP) in joint venture with the private sector to deliver the holistic and sustainable regeneration of this run-down area of the city and promote development further afield. Key to the success of the scheme is the bringing of approximately 1,800 new houses to the market to develop a real mixed tenure community. It also involves a new neighbourhood centre comprising approximately 6,000 m2 of commercial development to support the new residential elements of the scheme.

Local government continues to be bombarded with advice and opinions in relation to this area, for example the Audit Commission has published Room for Improvement (June 2009) and Building Better Lives (September 2009) and the Treasury's Operational Efficiency Programme has work-streams on property and asset management.

Although policy fashions come and go and aspects of the economic situation continue to be uncertain, it would seem a safe bet that property is going to remain hot for some time.

Celia Cullen is Head of Local Government Services at Pinsent Masons. She can be contacted on 0161 234 8308.