‘We live in a time right now when public/private partnerships are in the spotlight,’ says Andrew Savege, head of regeneration for Morgan Sindall Investments Ltd. Addressing delegates at an event sponsored by Morgan Sindall and chaired by The MJ at last month’s MIPIM conference in Cannes, Mr Savege calls for those involved in such partnerships to shout about their successes. ‘There is a perception that they are problematic, particularly in light of the liquidation of Carillion, so I think it is important that those of us working on highly successful strategic partnerships speak about them to redress the balance.’
Morgan Sindall Investments Ltd currently has four live property joint ventures characterized by forming a legal entity jointly with a public body, thus becoming co-developers.
Mr Savege explains why he believes the negative perceptions about public/private partnerships are wrong and why they can be so attractive for those in both sectors.
‘First of all is the financial dimension. At a time when a number of local authorities are on the brink of insolvency, it is all the more important to achieve best value and maximise the return they get from development land. Through corporate joint ventures, there is a powerful mechanism for them to do just that.’
Mr Savege claims Slough BC, with which it has formed Slough Urban Renewal (SUR), has not had to cut frontline services like many other councils across the country. He says the authority will be taking £20m out of the joint venture this financial year and next.
The developer and the council split 50% of all profits, which Mr Savege says ‘transforms the financial attractions of this route to market’.
Next, Mr Savege believes every landowner has a vision of what they want their place to be like in future, while on the other hand there is an ‘awful lot capital out there desperately looking for investable opportunities’. However, he says there are not sufficient investable opportunities for them to invest in them.
‘Someone has got to take a project or a series of projects from the vision stage through to investable opportunity,’ Mr Savege says. ‘This means design, planning, specifications and development management has to be deployed. Most public bodies do not have the resources to do this under their own steam. They need to engage and enlist the private sector to bring those resources to the table. Through this style of property JV, it’s possible for public sector bodies to gain access to tremendous delivery capability.’
The final main attraction of these joint property partnerships, Mr Savege says, is the relationship they create. ‘It is a very different relationship to a traditional contractual nexus. That’s because being 50/50 owned, the public sector body is literally in control of everything the joint venture does because nothing can happen without their approval. They are in joint control of the mix, timing, pricing, specifications, quality, and place-making.’
Sean Bowles, the managing director for the Central region of Morgan Sindall’s Construction division, says the pace of developments through this joint venture model is ‘astonishing’, saying: ‘We are creating places where people want to live, work, play and learn and that is happening quickly, which is very exciting.’
He also says visibility and the pipeline of projects coming through is a significant advantage. ‘Because this is a long-term arrangement, we are able to shape the business to meet what lies ahead of us.’
Social value is a key aspect of the model, with developers beginning to realise that local leaders and investors want more than just bricks and mortar and shiny new buildings. ‘This is actually happening and we are now able to monetise the value added to these schemes. It is incredibly powerful from the political perspective and the authority’s perspective,’ Mr Bowles adds.
The general manager of SUR, Andy Howell, believes this is happening in Slough, with more than £150m of direct investment in social infrastructure. ‘This supports people to live better lives and makes it a better place to live, which itself attracts more developers,’ he says.
‘What’s been pleasant for me is seeing quite a big difference in terms of civic pride in the town and the perception of Slough is changing. It has been much maligned by Ricky Gervais of late but there is a real attitude to change the perception of the town without changing the name.’
He says the council ‘grasped the bull by the horns’ by setting up SUR, but also actively purchased land and ‘looked to be the catalyst to change’.
Presenting a keynote speech, Gareth Blacker, Homes England’s general manager for infrastructure and complex projects, says place-making is now a major theme among developers, as well as being better understood by central government. As such, Homes England is attempting to value societal infrastructure. Mr Blacker says: ‘Real value is now being attached to what was previously seen as the softer side to development.’
During the event, the panel highlighted the importance of pace of delivery. Cities across the UK are currently seeing a renewed interest from developers after a period of relative quiet.
Brendan Moffett, chief executive of Marketing NG, which aims to bring investment into Nottingham, explains how the regeneration climate has changed over the last decade.
‘When we had the regional development agencies, there was a real pace in terms of regeneration back to 2008 when it was a more federal state and the regions were being invested in more significantly.
‘But it is fair to say that all stopped. In 2010, the coalition came in and things did stall for a while. It is only coming back now through devolution deals and metro mayors. Things are starting to pick back up again.
‘The reality is the landscape has changed three times in that period so we haven’t had consistency of policy around regional development.
‘I think there is an upturn at the moment and there is a sense that it is a real positive. There seems to be an air of optimism. We are seeing a lot of growth in the regions. There is a strong appetite for investment. Brand UK has continued on.’
Nottingham is a relatively young city with a huge student population. The challenge, Mr Moffett says, is creating a place where young people want to stay beyond their student years. ‘What we are trying to do is bring everything back into play again and create a modern and vibrant city. We have a young population and need an affordable housing solution to retain them. It is no good if all the talent drains down to London.’
Mr Moffett is also acutely aware of the impact of austerity on regeneration, as well as the opportunities development can pose for councils looking to find new income streams.
‘We know through working closely with the city council that there is a looming [financial] problem. It has to find innovative solutions to cutting 50% out of its budget at the same time as a growing care bill. It’s just not sustainable and something has got to give.
‘Either care has got to be paid for by central government or it has to allow councils to get on and grow their places and find new ways unlocking things. We need to be more innovative in speeding up regeneration because we are not doing it quickly enough.’
Ellen Cutler, investment director at Invest Liverpool, says the transformation of the city over the last decade has been ‘amazing’, likening it to the ‘trend of Manchester five years ago’. It has had £10bn invested in it in the last 10 years, which all began with a £1bn development of the Liverpool One shopping centre.
She says: ‘If anyone from outside of Liverpool talked about the city in the 1970s and 80s, it was not a positive story to tell. The private sector is really stepping up and the public sector is really at stage where it needs to be a part. It needs to be a player in all this development. Investors are starting to take notice.
‘It wasn’t until 2008 that confidence came back into the city. The investment into Liverpool One as a massive catalyst and you really cannot underestimate what that did to the city.’
While Ms Cutler says the city has enough housing, and enough room to grow, she says the major problem is the lack of Grade A office space. ‘Because businesses now want to be there, they need to have the right talent and skills. It is attracting lots of businesses and they want places where young people want to live.
‘We have come at it from the other way round; we started by place-making and we are now making sure it is a destination for the businesses.’
Sean Bowles says another important aspect is the viability of developments. ‘We can have brave and grand plans but ultimately schemes have got to be viable,’ he says.
He believes part of this must come from local government. ‘I think local authorities have a role to play in oiling the wheels in terms of infrastructure. We see big success stories where they are being brave in investing and providing the catalyst and when you do that, development tends to flow.
However, he says it has to be ‘strategic and joined up’, adding: ‘The best examples are those that are not transactional, ones that are not one site here, one site there. That’s when things start to stall and lack momentum.’
MIPIM Panel speakers
Gareth Blacker – General manager, infrastructure and complex projects, Homes England
Andrew Savege – Head of regeneration, Morgan Sindall Investments Ltd
Brendan Moffett – Chief executive, Marketing NG
Ellen Cutler – Investment director, Invest Liverpool
Sean Bowles – Managing director for Central region, Morgan Sindall Construction & Infrastructure
Andy Howell – General manager, Slough Urban Renewal
Michael Burton – Editorial director, The MJ (chair)