TfL’s novel development of London property needs ‘careful watching’

The chair of London Assembly’s Budget & Performance Committee has told PSE that Transport for London’s (TfL’s) novel plans to raise more than a billion pounds by developing its property portfolio more commercially need to be watched carefully.

Speaking after a Committee meeting where Assembly members questioned senior TfL representatives, John Biggs AM said that it was early days in the process, but noted just how many projects TfL is working on.

TfL, one of London’s largest landowners, revealed its plans in February to work with property companies to develop about 50 sites over the next decade.

By June, after launching a tender process, TfL had narrowed the list of potential development partners down to 16, with those successful expected to be appointed by the end of the year.

Asked whether the project could deliver the profits forecast, Biggs said: “The London property market is so ‘hot’ that if they take forward a number of their bigger schemes then the amount that will be generated through disposals and the growing income will be in the hundreds of millions. We’ll keep a close watching brief on it.”

The initiative’s very novel approach meant it had some inherent risk, he added.

TfL’s potential development sites are spread across the capital, though two-thirds are in central London (zones 1 and 2). Previously TfL sold assets and properties it no longer needed, but in recent years it has taken a new approach to retain and invest in a number of sites to generate long-term revenue.

As part of its new commercial development property strategy, TfL set up a non-executive Commercial Development Advisory Group to provide specialist support. This is chaired by Francis Salway, the former CEO of Land Securities.

Biggs, who was elected the mayor of Tower Hamlets earlier this year, said the work of the new advisory group was a focus of the questioning by Assembly members of Salway and Tfl’s commercial director, Graeme Craig, during the Committee meeting.

Biggs said he was keen to learn more about that relationship. “It is clear they [TfL] are paying for advice from four advisors who have development expertise and can help them to understand the questions, which as a non-commercial organisation historically, they might not understand themselves.”

Public sector organisations aren’t always well-known for their commercial awareness, Biggs suggested.

Asked how quickly the work may progress, Biggs said: “Every individual project needs a lot of hand-holding and stewardship. I’ve been around long enough to know that a high-level proposal and turning that into planning permission, then a development and getting finance in place, can take a matter of years.

“It does look like a promising start in terms of them doing what they want to do. And it looks as if they are fairly thoughtful about how they protect their transport interests as well.”

Overall, Biggs said he was excited by how innovative TfL was being.