I work for a council estates team. We don’t have the money to develop our properties. Would a Local Asset Backed Vehicle (LABV) help with this?’

Alistair Parker, partner in development and planning at Cushman & Wakefield, responds:

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A Local Asset Based Vehicle (LABV) is a limited liability special purpose vehicle aimed at securing development through public land assets and private development capital.

The public sector agency contributes the land and the private sector matches that value with equity capital, with both commonly being used to gear up with debt financing to fund the intended development.

Promoted in the local government white paper in 2006, LABVs were originally used by the regional development agencies to promote development on brownfield land with limited income.

They are now being used by local authorities to promote development through the use of public land assets with considerable income: the latter aiding debt financing. They could be used specifically to primarily finance the development of new council offices (as in Croydon) or to create efficient estate management vehicles that raised capital, utilised private sector skills and improved the estate quality (as in Aylesbury).

Many authorities found LABVs to be an expensive, complex and time-consuming mechanism. Others recognised the benefits of a public/private development partnership addressing long term and large scale regeneration.

The recession and consequent restriction of debt financing have largely ended the use of LABVs. The present alternative is a variant known as Local Investment Backed Vehicles (LIBVs). This variant seeks to avoid the contention of authorities committing the “family silver at the bottom of the market” by establishing a development partnership where the private sector pays for the cost of bringing forward the project with an option to purchase subject to future values.

Essentially, LIBVs concern development partnerships being prepared, with speculative costs and resource, to respond with agreed schemes to an envisaged opportunity when market conditions improve.

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