Labour moves into property development

Copyright: David Lawson - Property Week 1997

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The phone rings. Tony Blair is on the line, asking how to dispel the traditional suspicion property professionals feel towards Labour politicians. What do you say?   'Let us get on with our jobs without interference,' is likely to be the first reaction.  'Recognize that we don't drink blood, we don't eat babies and we don't spend all our time  planning how to make extortionate profits by knocking down little old ladies' homes to build ugly office blocks that will never be occupied.'

  But how do you get across the idea that property is not some form of legal exploitation? How do you show this  is a product like any other, needing careful management and organisation?  Perhaps you don't have to. The Labour Party is already devoting itself to that very task.   Two years ago the National Executive Committee decided to take stock of its own assets. Labour Party Properties Ltd (LPPL), a semi-dormant company, was revived to handle the job, and the guiding rule has been to whip them into shape in a manner that would not shame a professional landlord.

  The party is now the proud owner of a portfolio worth around 2m pounds.   The most prominent sits directly opposite the party's national headquarters in  south London. How the party acquired  Herbert Morrison House, a Victorian office block, is lost in the mists of time but its last use was as  HQ for the London Labour Party. That ended three years ago, since when it had stood empty.

  Perhaps the sight of this asset wasting away on the other side of  Walworth Road was a spur to re-examination of all the party's property holdings. Anyway, it was the first test of the policy - and its most significant success.  There had been tentative plans about selling the building but  LPPL decided instead to spend 60,000 pounds on renovation. Within three months the space had been let on commercial rents. Herbert Morrison House  now pours  24,000 pounds a year into the party's coffers  and is worth around 200,000 pounds.

  A 3,000 sq ft Georgian block on at the other end of Britain on Edinburgh's Prince's Street could prove just as significant as an example of maximising asset values. Some 200,000 pounds has been spent on renovation and the local party could be richer by 20,000 pounds a year once it is let.

  The bulk of the Labour Party estate involves much more modest assets, however. A mixed bag of offices and clubs, usually in off-prime pitches have been  accumulated over the last century by purchase, bequest and gift. The haul has been carefully recorded by Peter Ballard, head of administrative services, in  travels around the country checking out local constituencies with adviser Michael Smith, former senior partner of Smith Melzack.

  So far the  survey  has  produced  around 400 buildings,  but more are being discovered every day. 'Almost every time we go out we discover new ones,' says Smith. Letters and calls are also coming in from constituencies with details of  their hidden assets.  A few surprises have leapt out of the woodwork.  One Midlands party  owns a block of flats. And, as befits the red rose party, another north of London  was found to have a garden centre on the books.

   This assessment of the party's assets is no Big Brother exercise by London-based suits imposing their New Labour capitalism on reluctant locals. The NEC must approve  matters such as terms of leases, purchases and sales, but constituencies have ultimate control through owning the property, says Ballard.

 'We don't impose rules. People have been coming to us with their property and asking for advice,' he says. Stalls set up at the last couple of annual conferences brought in 150 queries about how local  assets could be handled more efficiently. This could yet be dwarfed by a surge of interest when LPPL  sends out its first newsletter to constituencies explaining what it has been doing and the services available.

  Local parties are  under no compulsion to take the advice they seek, and there can be rumbles of discontent among the faithful when talk turns to profits and efficiency. But the two-man operation is well qualified to handle any disquiet. Ballard is a former Basildon Council leader and was in local politics for 25 years. Smith cut his political teeth advising various trade unions - one reason why he was a natural choice to advise Labour.

  'Once we talk things through sensibly, people are usually happy to go along with what we suggest,' says Ballard.

 One urgent  task taking up their time involves the need for temporary space as campaign centres in the run-up to the general election. Local parties decide what high street shops to take - and how much to pay - but  LPPL has put together guidelines to provide extra expertise in dealing  with short-term leases.

 'We have also been in touch with firms like banks which have a lot of empty space on their hands,' says Smith. This kind of well-planned preparation meant the party could move quickly into action once an election date was announced.

  A more long-term appraisal of the way Labour uses its own offices  will last  well beyond the excitement of the election, however.  Ballard and Smith are examining the way the party employs  operational space ranging fro MP's offices and social clubs to regional administration centres.

 That goes to the heart of the party - the HQ in Walworth Road.   After 17 years in the endearing but increasingly archaic jumble of John Smith House, the time may have come for a new, more modern address.  'We rent 26,000 sq ft here but could be looking to expand into  around 30,000 sq ft,' says Ballard.

 Rumours are already spreading that this will see a move to Millbank, close by the House of Commons and where the party's powerful media centre is already located. But Smith points out that this depends on space audits after  the election - and whether Millbank fits requirements.

  More progress has been made in the regions, however. One purpose-built block at Beeston has been bought from Courtauld for the Central Region. This will provide more space than necessary in the long-term so the surplus will be useful for the election run-up. After that, economics takes over and the offices will be sub-let. Other purchases include a block taken from  Wakefield Council for a Northern HQ and one from the trade union Unison for the West Midlands.

 Ballard will remain in the market for similar space for some time, seeking to replace offices are cramped or in the wrong location.  'We will be looking at all our regional properties over the next few years with the aim of moving out of rented property and into freeholds,' he says.

  All transactions are being done on a fully commercial basis. Acquisitions are generally financed out of cashflow. 'But we will borrow where necessary,' says Smith.  This hard-headed approach to use and ownership of operational property is also making its mark among local parties.

 In Bristol, for instance, problems had dragged on for several years involving the management and ownership of certain clubs. These were solved by bringing in a professional team. Money was also saved by renovating two flats in Chippenham as an alternative to  renting space for party offices.

  In central London, two merging constituencies found that in-house guidance  from LPPL was vital after finding themselves stuck with surplus space. Another was advised on selling a building to a housing association, providing useful local income. In Salford, a valuable site had been overshadowed by complications over the title of ownership. This, too, was sorted out and the land sold for housing.

 More examples are expected to emerge as constituency officers  discover this new source  of in-house expertise. Many have been haunted for years with property problems inherited with old buildings. Others are beginning to absorb the new attitude to property.

 'We live in the real world, where  you have to be efficient and maximise asset values,' says Ballard. It is a message that will not be lost on the property industry - and one that may provide more relief than a hundred political speeches.