Co-operate. Re-generate

As perhaps the ultimate money-spinning activity, retail doesn't really suggest itself as something public institutions should be involved in. But retail centres are evolving and with that, closer co-operation between public and private parties. Eurobuild looks at two projects: one in the UK and the other in Poland, which have both claimed to be the biggest of their kind in Europe

In September this year in Birmingham in the UK, a new, hugely ambitious 110,000 sqm retail centre opened. As well as bringing sixty-four new retailers to the city, the Bullring project was also the centrepiece of a wide-ranging urban re-generation scheme. And for that to become more than just a dream, both the local authority and developers needed to pursue the same vision.

Burying differences

"Birmingham City Council encouraged us to form the Birmingham Alliance," says Bob De Barr, Development Director of Land Securities, one of the three companies that pooled their resources in 1999 to start work on the Bullring and share the burden of the UKP 800 mln investment. The other two were Hammerson and Henderson Global Investors. What was truly ground-breaking in this 'limited partnership', was that Land Securities and Hammerson had till then been direct competitors. Though the city council had no financial stake in the Bullring project and the 'public private partnership' as existed was neither formal nor legal, its support was fundamental to the centre's completion. "It helped that there were a limited number of points of contact," with the city council, says Bob De Barr. It ensured that the Alliance had no bureaucratic maze to negotiate before getting down to work, because it was equally concerned to see the project through. Council leader Sir Albert Bore had this to say about the project and the Birmingham Alliance, in his speech to mark the opening of the Bullring: 'We were extremely fortunate to be dealing with three visionary companies who were able to pool their individual land and property holdings and work together. They then delivered not three competing schemes, but one co-ordinated, phased development that reflected the aspirations and needs of the city council and most importantly the people of Birmingham."

The Warsaw experience

"It is a full public private partnership, a joint venture between the city of Warsaw and ING Real Estate," says Jan van Hensbergen, the Dutch developer's President in Poland, of Zlote Tarasy, the city centre multi-functional project, for which the company is responsible. In this partnership, the public party has a 'secured position', in that it has an exit option from the joint venture, should profits fall short of a minimum level, which is defined on the basis of the value of the land. But if "the profit exceeds a certain level," says van Hensbergen, "the first part will go to the private party, who are taking the full financial risk, then everything above that will be shared." "Development of retail is usually not that complicated," he adds, "and there isn't a real need for such co-operation [PPP], but if you look at a site like Zlote Tarasy, which is in the centre of the city, where there are issues of traffic and transport flows and above and underground infrastructure to be solved, then there is an added value for private and public parties to operate in a mutual process." This, he stresses is handled in a "very open" way, by the two parties.

PPP elsewhere

ING Real Estate's public private partnership experiences in other parts of Europe, contrast both to those it has had in Poland and the Birmingham Bullring model. In Holland, for instance, city authorities are often far readier to adopt a more 'hands on' role, going beyond both the cautious involvement of Warsaw city council in the Zlote Tarasy scheme and the simply supportive stance in Birmingham. "In Holland, I have been involved in public private partnerships, where the public party had a full fifty per cent stake, meaning they took a both a full risk in the development of the project and were financially liable as well," says van Hensbergen.

A push in the right direction

In Poland, aside from Zlote Tarasy, public private partnerships in retail projects, are a rarity. Though a major event in Warsaw city centre, Zlote Tarasy doesn't quite claim that it is a 're-generator' for the Polish capital, unlike the Bullring with Birmingham, and sees itself more as a catalyst. "Warsaw lacks a real retail structure: an essential part of the city is missing. I don't think we will solve this with Zlote Tarasy but we will give the city its first push and it's ambitious in that sense," claims van Hensbergen.