Unlocking value through transport investment | Deloitte UK has been saved
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Yet again transport investment and real estate value forms a key discussion topic at this year’s MIPIM with representation from all of the major transport investment projects. The projects aren’t new, so what has changed since last year?
Philip Hammond’s budget on last week brought back into sharp focus in London the drive to capture the increases in land value which result from transport investment at a local level devolving new powers to the GLA and London Boroughs. Most encouraging was the creation of a joint taskforce to explore options for piloting a Development Rights Auction Model (DRAM) on a major infrastructure project in London. In essence this model aims to capture additional value through pooling land interests around major new transport facilities and auctioning development rights to a competitive field. Gains above a reserve price are then shared between landowners and the planning/auctioning authority.
This is a hugely positive step and one which will no doubt attract questions and discussion in Cannes. The timing of this trial will be a particularly hot topic in the current market and caution will need to be exercised in selecting the project so as not to stifle the very development upon which the value will be created.
More specifically TfL has been asked to bring forward proposals for financing infrastructure projects from land value uplift. A recent study undertaken by TfL suggests that prospective eight TfL projects which cost around £36bn (including Crossrail 2, Bakerloo line extension and the DLR extension) could produce land value uplifts of about £87bn. This figure illustrates the potential size of the prize and the study suggests that the package of reforms relating to land value capture (including new mechanisms, plus increased CIL, DRAM, SDLT and business rates) could potentially generate £29bn-£44bn towards the financing of the projects.
MIPIM should also provide a chance to celebrate some of the recent successes. Graeme Craig from TfL will discuss at MIPIM how they have used the Property Partnerships Framework to speed up development around existing transport hubs and generate future revenue streams to reinvest in the system. Earlier in the month TfL announced a consortium of U&I and Notting Hill Housing as the preferred bidder for a site next to Kidbrooke station in south east London. The scheme will deliver 400 residential units and 50 per cent affordable housing and is the first of many TfL sites which both unlocks additional value and delivers wider benefits such as housing and jobs.
MIPIM provides the forum for further discussion on these success stories and how future investment in transport can be used to unlock development value and intensification of land use.
Simon is a Partner in the UK firm’s Development & Assurance group in Real Assets Advisory. He has over 18 years’ experience in providing development focused agency, funding and strategic consultancy advice. Simon specialises in advising clients on major real estate development projects and programmes, including many of the largest regeneration schemes across the UK. Simon has expertise in the creation of joint ventures for major development projects and national portfolios. This includes advising Transport for London on their Property Partnerships JV programme, National Grid on their JV with the Berkeley Group to form St William, and their national JV with a Housing Association. Simon is also currently advising Diageo Ireland on the selection of a development partner for the historic St James’ Gate Guinness Brewery in Dublin. Within the Transport sector Simon has extensive experience advising on the funding and financing of new transport infrastructure through mechanisms which capture the increase in property/land value created by the initial investment, examples including Crossrail 2, Bakerloo Line extension and Brighton Mainline upgrade.