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UK: LLOYDS TSB GEARS UP FOR OUTSOURCING REVOLUTION.
19 Nov 1999
Banking giant Lloyds TSB is exploring ways to outsource the running of its vast estate in what could be one of the biggest property deals ever.
Rivalling Prime, the �2bn transfer of the Department of Social Security's estate to the private sector, a Lloyds TSB deal would involve up to 3,000 properties, including 2,600 branches as well as 750,000 sq m (8m sq ft) of non-branch space.
Like Prime, the idea would be for a private sector operator to take over the running and ownership of the estate, with Lloyds TSB paying an annual charge running to hundreds of millions of pounds to its new landlord.
With firms under increasing pressure to focus on their core businesses by reducing their property exposure, several firms, including ICL and SmithKline Beecham, have explored similar deals, but none have been signed yet. However, industry executives believe this will be the model for big occupiers over the next decade and that Lloyds TSB is right to blaze the trail.
The firm's executives discussed the plans with four private sector consortia in London on Monday and Tuesday this week, with the Prime model emerging as an early favoured option. Lloyds TSB could also opt to keep ownership of its properties and bring in a new facilities manager to cover the estate, or do nothing.
It is understood that Goldman Sachs-backed Trillium; Nomura-backed Servus; Citex, a firm backed by US bank Donaldson Lufkin & Jenrette; and Mapeley, which includes George Soros's Quantum Realty Fund, were interviewed.
All the firms declined to comment, but Malcolm Beadle, head of central properties at Lloyds TSB, said: 'Like all large organisations, we like to review what we are about, and it is true to say that we have had informal discussions with people in the marketplace this week to see what the opportunities are. 'We are not going into this with any preconceived ideas - nothing is favoured as of now. It was a very useful exploratory exercise and we will now take stock and have further discussions. 'The key for us is improving shareholder value. If doing something like this doesn't achieve that, we will not do it. We think we are very efficient already, but there's always room for improvement,' he said.
Beadle said a number of difficult issues would have to be tackled, not least how to deal with 700 branches which it has already sold and leased back. Its administrative offices, support buildings and computer centres are also held on a mixture of freeholds and leaseholds.
One industry executive said Lloyds TSB appears keen to invite selected bids next year and conclude a deal in early 2001.
By Giles Barrie.
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