Stand and deliver

Rosemary Jago examines how regeneration can be funded through local asset backed vehicles.

The landscape that led to large scale Private Finance Initiatives over the last 10 years has changed – as has the government. Local Asset Backed Vehicles or “LABVs” are fast becoming the regeneration funding and delivery model of choice for the public sector.

The potential impact on the regeneration sector for public sector bodies embracing this new approach is enormous, in terms of leveraging in private sector finance without calling upon central government funding and heralding a new culture of genuine partnership between the public and private sectors.

What is a LABV?

LABVs are often limited liability partnerships typically owned 50/50 by the public and private sector partners with the specific purpose of carrying out regeneration and/or renewal of property assets. The most important concept which underlies the LABV is that it allows the public sector to exploit and unlock the full economic potential of its existing property estate through regeneration and rationalisation. The main attractions of the LABV include the potential to deliver a pipeline of projects without having to enter into a series of separate procurements.

LABVs typically run for an initial period of around 10-20 years. The private sector is asked to cash match the public sector assets being contributed into the LABV. There is nothing preventing the public sector from injecting cash of its own (to the extent this is appropriate). Control is retained by the public sector through the drawing up of a partnership business plan for the LABV and the overall relationship is governed by the terms of a Members Agreement entered into between the two partners.

The models can deliver much greater efficiency in procurement and design costs for new or refurbished buildings and are much less “contractualised” than structures such as PFI. They rely upon both parties seeing the potential for joint working and committing to the development of the partnership because the value is obvious rather than a consequence of a contractual obligation.

Case Study: Torbay Council

Torbay Council is using the LABV structure for a major regeneration project that aims to deliver the objectives set out in its plans and policies, such as the Mayor’s Vision for the New English Riviera, along with major housing and accommodation schemes on council owned sites in the Torbay area.

The joint venture is not envisaged to be simply a vehicle to extract the highest appropriate financial returns from the council’s land assets, but has been conceived on the basis that through it, the council will be able to better meet its key objectives and redevelop key sites, leading the way for the comprehensive regeneration of Torbay.

It is intended that the LABV will be established as a stand-alone commercial entity, in which both the council and private sector partner will work side by side in true partnership. The joint venture will blend the skills of the partners to help deliver the physical and economic development to the benefit of Torbay.

Key features include:

• the timing of when property transfers into the LABV and how it is valued
• the conditionality for the transfer of properties
• the extent to which the LABV would be committed to develop the more difficult, less economically advantageous sites, and
• control and termination provisions in the Members Agreement.

Next steps

A number of local authorities have already embarked on the procurement of a private sector partner and have assessed that the LABV model is suitable for their estate. This is not an area where it is possible to create a “one size fits all” model.

Rosemary Jago is a Senior Associate in the Major Projects team at Bevan Brittan. She can be contacted on 0870 194 3032 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..