When it comes to private investment in public projects, nothing is more important that a participatory outlook.
This is one of the most participatory governments we have had in a long time. It sees the need to work more closely with the private sector, with the property community and the organisations that aggregate and deploy domestic and international capital.
Government is now talking and behaving in a different way. It has become accessible and regards real estate, and housing in particular, as part of our economic infrastructure. Real estate and development are now seen as a factor of economic production, which means government has to both work with the property sector and enable it.
There has been a sea change. Property is now front of mind. Several senior civil servants at DCLG and the Treasury are now better equipped and have a better understanding of how real estate and development work. They are happy to work closely with the sector to bring about real change for the country.
The public sector is working hard to understand what the private sector can and cannot do. At its best it now understands the capital stack needed for major, transformational projects and it understands the risk that the private sector must consider.
Two projects that show just how public and private investment can work together to create game-changing developments are King’s Cross, N1, and Battersea Power Station, SW11.
King’s Cross may have taken three attempts to get it right, but the third attempt worked because all parties took a long-term view of the project and worked in an entirely collaborative way. The same method is working at Battersea. RIO (forerunner to the DTI’s Capital Investment Organisation) worked with the GLA and Wandsworth Council to reconfigure the planning process to make financing of the development – another that had been subject to many previous failed regeneration attempts – more viable. Alongside that, work on establishing tax increment funding was being progressed to enable the infrastructure needed to connect the project to the rest of London. That participatory work has ultimately enabled Apple to take 500,000 sq ft at Battersea.
So, together, the change that the public and private sectors can bring about is clear. But collaboration and understanding are vital.
The private sector has a tendency to talk at government, rather than with it. It has often expected government to wholly de-risk investments, but there are limits to what the government can do. The private sector needs to understand this and adopt a bilateral view about how risks can be shared rather than shifted.
In fairness, investors, particularly the institutions, have a growing acceptance of alternative assets such as infrastructure and now see that they can be a very productive part of their portfolios. And the long-term nature of these schemes is now a draw rather than an obstacle, which has significantly altered appetite.
If we have one message to the property sector, it is talk to government, not about government. Participation is not an armchair activity. By working together the public and private sectors can create opportunities far beyond the fiscal.
Anthony Danaher is chief executive of the Department for International Trade’s Capital Investment Organisation
