6.11 Where an asset, particularly land and property, has further development potential it may be better VfM to enter into a JV rather than simply dispose of the assets on the open market. Contractual property development JVs are relatively common in the public sector, particularly with local authorities, and likely to be the preferred approach for most straightforward single project scenarios where a partnership with the private sector is desirable.
6.12 The creation of a JV with the private sector may be preferable for more complex scenarios or where a portfolio of assets is involved. Box 6.B sets out the reasons why a public sector body might contemplate the creation of such an entity with the private sector.
Box 6.B: When to consider exploitation of property assets through a JV JV may be desirable where: ● there are complex land assembly or planning issues involved, possibly resulting in market failure; ● a marriage value opportunity exists by combining the public sector land with one or several private sector landowners; ● wider economic or social benefits can be delivered by maintaining a greater degree of public sector control over the future use of the assets; ● the value of assets can be captured and used as security to raise finance for investment in new infrastructure or buildings; and ● delivery of wider benefits could be achieved by bundling together a coherent package of assets facilitating cross subsidy of profitable and sub-optimal developments. JV may not be appropriate where: ● the decision to use a JV entity is driven by classification or accounting issues i.e. the underlying transaction is a straightforward sale and leaseback of the assets with no additional benefits. |