Aylesbury Vale beleives its entrepreneurialism in the property market will help ensure financial stability.
- Project: The Exchange
- Objectives: Regeneration of Aylesbury town centre and provision of new apartments, restaurants and public spaces
- Timescale: Residential element to be completed January 2019. Commercial space to be completed autumn 2018
- Cost to authority: £12m, with £3.3 secured via a local enterprise partnership grant
- Number of staff working on project: Four Aylesbury Vale DC officers
- Outcomes: A new destination site for food, drink and public space
- Officer contact details: firstname.lastname@example.org
It’s no secret local authority budgets are being squeezed. Councils the length and breadth of Britain have experienced the effects that squeeze can have on service delivery, and housing is by no means immune. In fact, those of us working in this area are faced with a unique set of challenges – how do we balance shrinking books while meeting the ever-growing demand for homes and regenerated public spaces?
To try to address this issue, at Aylesbury Vale DC we are taking an investment approach to our property portfolio. We’ve put in place a dedicated strategy to secure income-yielding assets that will help to solidify our financial security.
Property has always been a central theme of our economic, financial and placemaking strategies. In 2009, Aylesbury Vale DC was the first local authority to form a joint venture with a private sector partner to manage our significant portfolio of, mainly, multi-let industrial units. Aylesbury Vale Estates’ brief is to generate an income for the council via an annual dividend, but also to support the council’s objective of creating new, local jobs. Since then, our work to regenerate Aylesbury has involved using assets and building new infrastructure to generate confidence and additional investment in the town from private sector partners.
While we have a diverse property portfolio, one of our standout projects is The Exchange, the latest phase in our extensive regeneration of Aylesbury town centre. It’s a mixed-use scheme that is providing much-needed apartments as well as provision for new restaurants and a public square. This all forms part of more than £110m of investment in regeneration of the town centre to date.
Delivering a project of this scale naturally carries financial risk and, when the public purse is responsible for shouldering this, it’s easy to see why some authorities might be reluctant to enter into such schemes. But when it came to financing The Exchange, Aylesbury Vale took a unique approach that allowed us to generate funding without unduly increasing risk to the council.
We secured over £3m of the project cost through a grant awarded by the South East Midlands Local Enterprise Partnership. This is the public-private body responsible for the government’s capital investment programme, the Local Growth Fund. This allowed us to bring forward the new public square, which will act as a focal point for the community.
For the remainder of the project we partnered with developer Durkan. Using our local authority status, we were able to procure debt at a much more competitive rate to that available for the private sector. In total we were able to fund 75% of the project costs.
We used part of this to fund the commercial element of the development and we’ll retain full ownership of it too. This means that, when complete, we’ll be able to benefit from rent from the restaurants and other commercial spaces as well as having the long-term freehold of the building. The remaining fund was loaned to Durkan, which benefited from the commercially advantageous rate and used it to pay for the residential element of the development.
This innovative approach to a public-private partnership has allowed both parties to share risk.
Durkan will hold the long-term lease for the residential units – 47 one- and two-bedroom apartments – from which it can draw revenue from sales and associated ground rents. It will repay its loan from us with interest, as well as a share of any uplift in the properties’ value which guarantees us a return on investment.
This type of profit is key in helping Aylesbury Vale DC to achieve our goal of being financially self-sufficient by 2023. That’s only five years away, and time is of the essence. Taking a more entrepreneurial approach to the way we deliver services is going to play a huge part in realising this ambition.
That being said, forming public-private partnerships is a process that shouldn’t be rushed. Finding the right partner is always going to be key in this kind of enterprise. When it came to The Exchange, we’d worked with the community on plans for the project long before joining forces with a developer. So it was crucial we found a partner that not only understood our vision for the project but its role in ultimately providing benefit for the community too. We were pleased to find just such a developer, but it did require a lengthy and detailed procurement process.
The reality is that things are changing for local authorities, particularly in the expectations placed on them by central government. Recent history has seen councils often take a more passive role in bringing housing and regeneration schemes to fruition. But with legislation now looking to councils rather than private developers or housing associations to deliver, finding new ways to push developments forward is important.
With The Exchange due to complete in 2019 and a raft of other projects in our portfolio it’s a very exciting time to be leading Aylesbury Vale DC’s commercial property and regeneration work.
Recently, approval was given by council for up to £100m to be drawn down to acquire property based purely on its commercial return on investment worth. Mindful of the concerns about local authority investment strategies, our investment plan has been drawn up with strong governance arrangements in place. There is also a very clear focus on the criteria which must be satisfied for a business case for a potential acquisition to be given the go ahead. The task now is to deliver the strategy in what will undoubtedly be a challenging environment.
But with our entrepreneurial approach to property, we’re laying the foundations of what we hope will provide financial security and stable revenue for the council for years to come.
Teresa Lane, assistant director commercial and property regeneration, Aylesbury Vale DC