好色先生TV

A year ago this week the coalition government said it was going to axe England鈥檚 nine regional development agencies. The announcement, which came amid a flurry of stories about 拢50,000 RDA staff parties and taxi perks for senior executives, felt like an easy cut for the new government. Never mind their support for developments such as Peel鈥檚 Media City in Salford and Quintain鈥檚 Middlehaven scheme in Teesside, the communities secretary Eric Pickles quipped that they would be restructured 鈥渁 bit like Anne Boleyn was restructured鈥�.

Tory policy adviser Glyn Gaskarth summed it up in his blog: 鈥淎bolishing RDAs is a simple, relatively painless cut. Few people will march to save them.鈥�

As the decision was made, nobody was thinking about the agencies鈥� land holdings. But it quickly became clear that the coalition鈥檚 first big decision on regeneration could lead to a fire sale with horrendous ramifications for 拢500m of development sites bought with taxpayers鈥� money. A year on, the government has reversed its position and is weeks away from a deal to transfer the vast majority of the portfolio to the Homes and Communities Agency (HCA). However, 12 months of uncertainty have done no favours for schemes that were already struggling to attract interest from the private sector because of the state of the market. So what exactly happened and where does it leave regeneration policy?

High value, high risk

The RDAs were set up in 1999 to promote economic growth in the regions and close the gap between the North and the South. But with 拢1.4bn of government money to spend each year, most of them quickly realised that the key to boosting the local economy was physical regeneration: flagship developments that either introduced new industries, or revived eyesore sites in the middle of former industrial towns. The idea was that the RDA would buy a site that the private sector couldn鈥檛 make work, pay for remediation, decontamination, planning permission - whatever made it unviable - and sell it back to the market. Different RDAs had different strategies but they all ended up with portfolios of sites, most with problems, but all acquired with precious public money.

When the agencies were abolished last June, the Treasury made it clear that the organisations had to be wound up by the end of next March. The bodies that are supposed to replace the RDAs鈥� economic growth role - local enterprise partnerships - have no power to own assets, so the land would have to be sold. The RDAs - according to research by 好色先生TV - have a portfolio of development sites worth 拢446m, with another 拢87m of offices, plant and equipment. They also have stakes in numerous joint ventures and other enterprises.

The prospect of a fire sale loomed at one of the lowest points in the land market. Gerry Hughes, partner at real estate agency GVA Grimley, said: 鈥淵ou鈥檇 flood the market and not achieve the best price. It would have been the wrong thing to do.鈥� Jackie Sadek, chief executive of UK Regeneration, put it even more plainly: 鈥淎 fire sale would have been a complete disaster.鈥�

Part of the problem was that the sites are only in RDA ownership because they are not viable for the private sector. So while their importance to the recovery of local economies is often huge, and their potential value also high, work needs to be done before profitable private development can take place. Dominic Williams, a partner in regeneration consultant Hewdon, said: 鈥淢uch of it there is little demand for. Without continued public subsidy they would be put in mothballs.鈥� Nigel Smith, also a partner
in Hewdon, added: 鈥淚t just didn鈥檛 make any sense to sell these sites: the reason they were bought is because the private sector wouldn鈥檛 go there.鈥�

Stalled progress

Liverpool is one council that is grappling with this issue. Councillor Malcolm Kennedy, cabinet member for regeneration, said: 鈥淚f we鈥檇 been made to sell these off first-come, first-served - the first person that puts a fiver on the table gets it, then we鈥檇 just end up with anyone owning these sites, people with no ability to actually develop. It could have held up development for a generation.鈥�

However, when officials at the Treasury and the business department, the government department the RDAs report to, realised the possible problem they had created, they told the agencies to stop talking to potential buyers, and first come up with detailed plans for what would happen to their assets, meaning progress on some sites ready to go to market was stalled. The 拢300m Pall Mall development next to St Paul鈥檚 Square in Liverpool, owned jointly by the North-west Development Agency and the Muse-led joint venture the English Cities Fund was one project hit. Despite a soft launch at Mipim last year, work to find a developer for the site was subsequently put on hold (see The waiting game, below). Meanwhile the RDAs鈥� asset plans were submitted in January and are still officially being considered by central government.

As a result of these submissions, the Treasury allowed the agencies to put on the market about 20% of their assets, sites without significant problems that were advanced enough to attract a fair price. But in many cases the RDAs wanted the rest to be sold to councils so they could control the regeneration of sites in their areas. It was hoped this would fit with the coalition鈥檚 professed 鈥渓ocalism鈥�, giving power back to elected politicians. The problem was that councils do not have the money to pay for the sites - and cover the liabilities - upfront. The Treasury put its foot down. It decided no land could be passed to councils under deals that deferred payment until a later date. Another solution was needed to avoid a potentially disastrous waste of public money.

Close to a deal

At this point, in early March, serious talks started over the possibility of transferring the land to a regeneration quango, the HCA, which would hold the sites in 鈥渟tewardship鈥� on behalf of the local authority they sat in. Government sources have confirmed that the Treasury has now agreed in principle the 鈥渋nter-government transfer鈥� required to hand over 鈥渕ost鈥� of the remaining assets.

Due diligence is being carried out, with the Treasury running value-for-money appraisals of every suggested site. A communities department source said decisions were
being finalised over which sites would be transferred, and the number of RDA staff that would move to the HCA to manage them. It is thought this will include some significant shares of joint ventures, such as the East Midlands Development Agency鈥檚 Blueprint JV with Igloo, worth 拢47m, or the Northwest Regional Development Agency鈥檚 JV with Ashtenne over its industrial estate portfolio, which is set to earn the RDA 拢139m over the next five years.

An HCA spokesperson said the deal would be agreed formally by ministers this month. She said: 鈥淭here is an ongoing discussion about the remaining assets. This includes the possibility of transferring these remaining assets to the HCA, which would then manage them under stewardship with local partners and dispose of them, or transfer them when they are ready to be sold.鈥�

The communities department source said: 鈥淭he principle has been agreed, and we鈥檙e hoping to complete in October.鈥�

The deal will add significantly to the HCA鈥檚 own holdings, which come largely from the leftovers of the post-war English new towns programme. The HCA will want to use the sites to help increase housebuilding and they could give the agency, which has had its funding cut by 64%, more leverage. However officials stress caution. 鈥淵ou have
to remember that the liabilities will transfer with the assets. These are difficult sites. Nobody is going to get very rich with this.鈥�

This comes as the coalition鈥檚 spending review has cut total annual funding for regeneration, via the RDAs and other programmes, from 拢7bn to about 拢1.5bn.

The fear is that without that money, the sites may sit dormant, whoever owns them. Sadek of UK Regeneration said: 鈥淭his is the big issue: will money be forthcoming to bring the sites forward or will they just sit there?鈥�

In the meantime, the private sector has had to wait while the coalition shuffles its deck. Sites such as Pall Mall, which could have helped spearhead the recovery of their region, are sitting vacant. Paul Evans, director at UK Regeneration, said: 鈥淎ny transition is bound to lead to a hold-up. But the most significant thing is that government has to make every effort to close out this deal as soon as possible avoiding any more delay.鈥�

The biggest remaining question is whether the u-turn over the sale of the sites should now prompt a wider rethink of the coalition鈥檚 regeneration policy.