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CHANGING TIMES – PART II

29-05-2010

Central Library

The building of the new Library of Birmingham was predicated on the sale of the current site in Paradise Circus, which would help fund the new project. Alan Clawley claims the sums no longer add up, leading to the creation instead of a “cosy” relationship between local authority and favoured developers.

A section of the Birmingham Post that is not normally read by those outside the property business, the Property Forum in the 20 May edition paints a picture of just how dramatically the commercial property market has changed since 2000 when the Council decided it would sell the Central Library and Paradise Circus to a commercial property developer for redevelopment.

Amongst the seven property professionals gathered together was the City Council's Director of Property, Peter Jones, whose current projects are the New Street gateway, Paradise Circus, and the restructuring of the authority's back office portfolio.

Ten years ago it was taken for granted that the land value of Paradise Circus would for ever increase so it was only a matter of time before a private developer would snap up the most expensive piece of real estate in the city centre, knock everything down and cover the site with office blocks.

Now, one private sector member of the Forum advises: Selling any property asset at the moment is not a good idea. What a property might generate is far more important than capital receipts.

Jones responds with: We (the City Council) would be prepared to invest our land as equity, probably through joint ventures. We get a very good and solid revenue stream for the City from our assets) and a lot of other cities who have sold their public assets have regretted it.

So instead of flogging off the family silver to the highest bidder, the Council will 'invest it as equity'. What does this mean and how could it affect the redevelopment of Paradise Circus?

One way that owners of land and buildings make an income from it without selling the freehold is to lease it for an annual rental based on the current market value of the land. The Council would have to accept a low or even nominal rental in the present recession but would include review clauses in the agreement to take account of future land values.

Argent plc already own a lease to Paradise Forum and takes its responsibilities seriously (unlike the previous leaseholder who filled the place with junk and had to be removed to save the Council further embarrassment). The Central Library and other useful buildings could be kept and leased to the developer on condition that he found a way of making them pay.

In this way the Council would contribute a notional property value to the project, thereby freeing the developer, Argent to concentrate on the tricky task of borrowing capital for refurbishment of existing buildings or the construction of new ones.

The Council is in effect, offering a huge discount to the developer, and deferring any significant returns until the property market recovers (if it ever does).

Jones continues: The days are gone when the public sector could look to deliver regeneration. The model now has to be much more sophisticated, and it is now about delivering regeneration in partnership.

'Partnership' is of course the new buzzword seen on every council contractor's van these days. What once were mere 'contractors' to the Council are now 'partners' with a
privileged relationship with the Council in that they no longer have to compete in the open market for Council contracts.

That is the relationship the Council has with Argent plc. No other private developer will be invited to compete for the lease. Its price will be determined in secret and the figures will no doubt be exempted from the Freedom of Information Act on the grounds of commercial confidentiality.

That is how cosy their relationship will be.

The Council taxpayers of Birmingham are not alone in wondering just what is going on. As one of the private sector members of the Forum (who would normally be expected to know) said: “Unfortunately the old regeneration handbook was thrown out of the window when recession hit, and no-one quite knows what will happen now”.

Argent's Rob Groves informed me on 10 May that the results of its own public consultation exercise on Paradise Circus (held in February this year) would be published 'in the next couple of weeks'.

In the meantime the relocation of the Conservatoire, an important part of the redevelopment jig-saw, is on hold because of the High Speed Rail Station.

Alan Clawey is Secretary of the Friends of the Central Library, campaigning for the preservation of John Madin’s building in Chamberlain Square.

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