Challenging the myths: An investigation of the barriers to wider use of Local Asset Backed Vehicles in the UK

Abstract

With a shortage of debt funding, particularly for real estate investment and development, alongside public-sector funding cuts, the full effects of which are only just being felt, the need to explore alternative modes of regeneration financing has, arguably, never been so acute. When considering the public-sector real estate asset base, composed of operational assets, commercial estate and development land, a series of questions arise, mostly related to access to finance. Such questions are often prompted by concerns about refurbishment requirements and liabilities, financing of new developments, the creation of sustainable communities and the delivery of better estate management. How will these be funded in light of current budgetary and wider resource constraints? One option is Local Asset Backed Vehicles (LABVs) — limited liability, special purpose joint ventures, operating through Public–Private Partnership collaboration between a public body and a private company. This paper presents the findings of a research project that sought to identify essential success factors and investigate barriers preventing wider uptake of LABVs, first through a comprehensive review of the literature on LABVs that have operated in the UK over the last decade, and secondly, by capturing, through expert interviews, the perceptions and experiences of practitioners involved in such LABVs. The study sheds light on some of the myths surrounding LABVs and attempts to dispel some of the common misconceptions surrounding their procurement, operation and performance. The research ultimately sought to identify the key measures that are required to make LABVs a more viable tool for financing and facilitating investment in economic development, regeneration and renewal in the UK.