REAL ESTATE - Land Securities Trillium and Mill Group have formed a 50/50 joint venture to bid for UK public private partnership (PPP) projects.
The venture, Investment in the Community, will expand on Mill Group’s programme of the same name. It reflects the two firms’ forecasts of increasing opportunities for ‘socially responsible’ projects including public-sector schools, health centres and libraries.
“The whole area of community infrastructure will become a much bigger focus for society and the government,” said Ian Ellis, CEO of Land Securities Trillium.
Critics of PPP deals claim there is a ceiling on profits because commission public sector bodies cannot be seen to allow private-sector firms to generate high profit margins on public-sector contracts. But Ellis said PPP projects often carry lower risks than other developments.
“In many respects, these projects are low-risk,” he said. “The risks are agreed at the beginning. You don’t face planning risk or client variation risks and because the income is quasi-governmental, there’s no risk there, either.
“It’s a simpler process [than with many other developments]. Developers don’t have to price a risk they don’t understand and the government isn’t paying for risks that aren’t really risks. It just isn’t in the local authority’s interests to make these projects riskier.”
The new entity formalises earlier cooperation between the two firms on a Building Schools for the Future bid.
Ellis said: “There will be more companies like us opting for partnership. Once you’ve set up the vehicle for this kind of deal, you have the benefit of knowing how each other work. With community facilities such as health centres and libraries, you often find the local authority wants them done as a package.”
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