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In a move that represents a first in the public sector, the Department for Business, Innovation and Skills (BIS) has transferred its obligations on the surplus leasehold properties it holds to a specialist Leasehold Liability Transfer partner. The Leasehold Liability Transfer is the initiative of BIS and its partner organisation UK Shared Business Services (UK SBS). UK SBS forecasts that the transfer will deliver a 40 per cent reduction to future lease liability costs, representing a potential saving in excess of £10m at net present value over the remaining life of the leases.
BIS has the fourth largest property estate within government. As part of joint work with BIS and UK SBS to rationalise the BIS Estate, a number of its leasehold properties are now empty or in the process of being vacated so the Leasehold Liability Transfer is an innovative way for the public sector to cost effectively manage the remaining Estate.
UK SBS, a public sector mutual providing business services across government, has just finalised the Leasehold Liability Transfer (LLT) contract with Greenhills Asset Management Ltd, who will manage the buildings and leases and look to dispose of the properties as quickly as possible and at minimal cost to BIS. Greenhills will employ a number of mechanisms including sub-letting and surrenders, in addition to strategies such as development and alternative use. In doing so significant savings for the taxpayer will be realised.
UK SBS is leading a programme to rationalise the geographically diverse real estate portfolio of BIS with projected savings of over £100 million by 2015. “We are driving an innovative delivery model to optimise the property asset across government,” says UK SBS Director of Property Asset Management, Roger Taylor. “This landmark agreement is one of a number of innovative moves that we are introducing to enable BIS to streamline its property portfolio and ensure it uses its assets of people, place and technology to its fullest potential.”
Business Minister Michael Fallon said: “This transfer is part of a sustained Government drive to reduce administrative costs and deliver value for money for taxpayers. It will generate a major reduction in property administration costs and generate significant property liability savings. ”
Stephen Jobburn, CEO, Greenhills Asset Management, commented: “We are delighted to have been chosen, after an extensive selection process, to partner with BIS on this entrepreneurial solution to their leasehold liability estate. We look forward to working with UK SBS and delivering significant savings to the taxpayer.”
Global real estate consultancy JLL and international law firm Hogan Lovells, acted as advisors on behalf of UK SBS throughout the procurement process, advising on the structure, pricing and smooth legal execution of the contract. Michael Evans, Director, JLL UK Corporate Solutions, says, “This is a pioneering Leasehold Liability Transfer, demonstrating its application in the public sector but also the strength of the market. This is the third transaction JLL has completed in the last 18 months.”
A core part of the Government’s strategy for cutting public spending is based on the sharing of business services. UK SBS Ltd is a not-for-profit mutual organisation, providing strategic shared business services to the public sector to ultimately save taxpayers money, improve quality and free up clients to focus on their core business.