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Investors vie for slice of BBC estate
Sunday Telegraph
28 Feb 2000
Goldman Sachs, Nomura and George Soros are vying to form a joint venture with the BBC to redevelop its � 430 m property portfolio.
The BBC will next week launch a tender process for a PFI-style deal to find a private sector partner willing to give it cash in return for a stake in its portfolio and a return backed by the corporation's rock-solid covenant.
Trillium, the PFI specialists backed by Goldman Sachs, Mapeley, which is backed by Soros; and Servus, backed by Nomura all say they will bid. Property company Marylebone Warwick Balfour which recently entered the outsourcing market with a bid for JP Morgan's property outsourcing project also plans to enter the fray.
The BBC's aim is to reduce overall expenditure on property by finding a partner willing to spend up to � 300 m over the next six to eight years on modernising its accommodation. It aims to make savings of 30 per cent on the � 30 m to � 50 m it currently spends on property services each year. It estimates its current total occupancy costs at about � 175 m or 6 per cent of its budget.
The BBC owns about 500 properties totaling 7-5 m sq. ft with an asset value of � 430 m. of that about 70 per cent is held freehold and 65 per cent of the portfolio is in greater London.
John Smith, BBC director of finance, said the corporation has a � 200 m borrowing ceiling and has � 200 m in the bank but that its borrowings show up on the PSBR. Taking its property off the balance sheet means that it can be geared up without adding to government debt. He added that the had presented his plans to the Government and that it had not raised objections.
The BBC plans to set up a joint venture with a private sector partner which will own and manage its property and be able to provide the BBC with managed space. The BBC is expected to inject property into the joint venture with the partner contributing equity. The vehicle will then gear up to tackle its first major project: the redevelopment of White City.
The BBC already has 400.000 sq. ft of space at White City which will be refurbished, but there is also 6-5 acres of developable land at the site and the Corporation wants a further 600.000 sq. ft of accommodation there. The BBC is in discussion with masterplanners for the site, to be used partly as broadcast space and partly as office space to decant staff into when other parts of the London estate are redeveloped.
In central London, the BBC plans to redevelop the two buildings next to Broadcasting House on Langham Street. The move is likely to lead to BBC staff being shunted around London as its buildings are redeveloped and could lead to job losses among its existing 150-strong property team. When London is complete, the partnership will start looking outside the capital to Glasgow, Cardiff, Manchester and Birmingham.
George Crowe, BBC controller of property, said: "We are entering an era in which the choice the viewer can have is about to explode in the next five to six years. We are totally changing in order to survive. We can't get programmes on the air fast enough because we've got nowhere for people to sit."
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