Client: London Borough of Croydon
Income rather than capital receipts is now a more attractive route to local authorities, particularly where the former can be enhanced through appropriate financing structures.
Under present accounting regulations – SSAP 21 and capital and accounting regulations 2003 - local authorities are unable to retain any capital receipts realised by the sale of council-owned property; these go to the Treasury.
Recognising that five of its freehold-owned car parks were potentially very valuable, the London Borough of Croydon - a client for over ten years – asked us to think about potential alternative financing structures to realise value through an enhanced income mechanism rather than dispose of the properties.
We introduced the Council to NCP and the Royal Bank of Scotland and undertook sensitivity, scenario and simulation analyses to address its financial risks, and to establish how to maximise its returns. The financial structure we devised allowed the Council to receive value from the car parks via a structure involving NCP and RBS. Instead of paying a single lump sum, we created a mechanism whereby the value was taken out in the form of revenue through an operating lease. It has allowed the London Borough of Croydon to realise more than £40m in revenue enhancement.
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