Where Now for Property Assets?

1. Where Now for Property Assets? • Suffolk Public Sector Leaders • Presentation by Mike Atherton and Phil Cresswell * Please ensure you have sought permission from the Client for use of their logo as stated in the CBRE BMS Manual – Section 3.1.9

2. To move between headings, body text and bullet levels, use the indent buttons NOT the bullet button A Future Beyond Efficiency • How can assets be used to generate new income streams? • How can I enhance the value of surplus assets given current deflated conditions? • How can assets be used to promote growth in the locality and create new places? • Is it right that equity is tied up in bricks & mortar? • Can property be better linked to service objectives? • What are we really doing about CSR and the Green agenda? • How can we use our combined purchasing power most effectively? • Some public and private sector entities are starting to think differently....

3. Promoting Place and Generating Capital • A Real Example: • Current book value of surplus land assets = £10m • Running costs for these assets = £400k per annum • Actual market value currently = £7m • Partner undertakes promotional activity and infrastructure = £5m • Forecast market value rises to = £20m • Client gets enhanced capital receipt, saves the revenue costs and sets targets for regeneration/place. Portfolio can be across multi-agency partners • e.g. Lancashire CC

4. Releasing Equity • Sale and partial leaseback is one way of releasing equity: • Current office footprint of circa 48,000 sq m of freehold property, forecast to shrink to 32,000 sq m over 5 years. • Running costs for that portfolio over 35 years total PV of £67m • Sell the entire portfolio and lease back the footprint needed. Over 35 years. To a financial institution and titles reverts to the client at the end of the period • Capital released circa £100m • Running costs under this option, including the new lease payment, total PV of £129m but including the capital the comparator PV is £30m. The client enjoys a PV benefit of £37m before the costs of financing of the £100m • e.g. Nokia, Plymouth CC, Sheffield CC

5. Linking Property to Service Objectives • Below the Line savings – savings in property budgets • Above the Line savings – savings in operating expenditure that are enabled in part as a consequence of property projects • Service review conducted on a multi-agency basis: • Elderly care • Middle/back office • Education and learning • Community assets • Depots/storage • IT/Data storage • Youth management/troubled families • Front office and customer access • Engineering/highways/streetscene • e.g. Stockport MBC, DIO, LB Hammersmith & Fulham

6. A Case Study • The Challenge: • 1000 units of sheltered housing with very low levels of service provision, non-specific qualification criteria but revenue pressure on budgets. On assured tenancies. • Shortage of extra care provision, with short term (<12 month) requirement for 100 units • Resistance to borrowing. • The Assets: • Quite well maintained with no major condition issues • Design unsuitable for modern requirements (e.g. lifts, scooter parking) • Some interspersed with social housing • The Solution: • De-shelter half of the units and classify as social housing • Re-provide some 200 units with enhanced level of service that meets elderly care needs • Provide 100 units of extra care, ideally through conversion rather than new build • Exit high value locations • Financing and procurement options to achieve revenue savings overall • A London Borough - 2012

7. CSR and Green Issues Birmingham Energy Savers - BES Governments Green Deal A Partnership with BCC BCC utilise Carillion’s Energy, Commercial, Project and Business Acumen In return we can utilise the BCC brand to achieve our joint potential across the City No core fees, payments by delivery We Will Deliver £163m funding and finance o/a (£79m borrowing + £84m eco- funding) To – 30’000 homes, 163 schools and as Many commercial buildings retro-fit and Eco-pod can be installed into This Translates to The Creation of 360 jobs 16’000 person training weeks £28m invested in WFD 90% targeted spend re-circulated within Birmingham £30m into social enterprise Contributes towards community cohesion

8. CSR and Green Issues Birmingham Energy Savers - BES

9. Purchasing Power – FM Intregrator • An increasingly popular structure used in global Corporates but now being considered in the public sector (e.g. GPU and the Met) • Works best in a multi-agency environment and where there are existing FM/TFM contracts in place that would be very difficult to unravel. • Comprises a ‘Strategic ‘Management Agent’ that sits above the existing FM providers and driving savings through: • standardisation • removing duplication and overlaps • opportunity spotting at the portfolio level • economies of scale (e.g. headcount, helpline) • To be effective the approach needs buy-in of other public sector partners but can be scaleable so work with a ‘coalition of the willing’ initially. • e.g. Microsoft, Met Police, GPU

10. Partnership Options • Long term strategic partnering is increasing in popularity Total Property Partnership e.g. Stockport Incremental Partnership e.g. Lancashire Strategic Partnership e.g. DIO Mixed Economy e.g. Sheffield Total Propco Issues: Issues: Issues: Issues: Issues: • Follow corporate approach – all assets in standalone propco • SCC and other public sector have a client relationship • Fundamentally change ownership and structuring of property • TUPE to apply • Insource of strategic expertise • Probably a JV • No direct link to supply chain • Limited TUPE • Can bring some finance • Series of (few) district partnerships • Theme specific structures only. SCC leads • TUPE unlikely but could apply • Services are specifically scoped • Project based finance • All aspects potentially in scope • SCC JV at strategic level • Can form project vehicles • TUPE probably applies • Partner brings finance • SCC potentially invests land and money • Focus on known projects, potential to grow • Can be corporate vehicle or contractual • Can form project vehicles • TUPE may apply • Brings finance Who: Who: Who: Who: Who: • Property Companies • PFI entities • Consortia • Construction contractors • Outsourcers • Property Companies • Annuity investors • Service providers • Contractors • Advisory firms • PE • Infra • Construction contractors • PFI • Consortia • Outsourcers • Property companies • PFI • Infra companies