London Underground could lose millions of pounds in future property revenues because of Ken Livingstone's failed legal challenge over privatisation.
The Mayor of London's intervention delayed a £2bn plan to sell off the London Underground's surplus property. A senior source involved in the project told the Independent on Sunday that up to 10 per cent may have been wiped off the portfolio's value because of the recent fall in property prices.
It is understood Land Securities, the UK's largest quoted property company and one of the parties short-listed to buy the property, is revising its sums. The deal, known as the London Underground Property Partnership, was first mooted in November 1999. A preferred bidder was to be selected this January.
But the Mayor's legal challenge, over the controversial plans to sell off parts of the network under the public-private partnership, put the property deal on hold.
Earlier this month, Mr Livingstone was defeated in the High Court, allowing London Underground to restart the property project. But the commercial property market has since deteriorated, because companies have scaled back their expansion plans in the capital, reducing the demand for property.
One source close to the bidding said: "Clearly, judgements were made at a time when the market was very different. The figures will undoubtedly have to be revised."
Chelsfield, the quoted property company chaired by Elliott Bernerd, is bidding against Land Securities for the deal. Chelsfield's managing director, Nigel Hugill, said the hiatus had not dampened his appetite for the project. Land Securities, whose bid is through Portal 2000, a specially-formed vehicle owned by the company's facilities management arm Trillium, refused to comment.
A London Underground insider said the winning bidder could be selected next month. Land Securities was widely tipped as the front- runner, but it is understood that London Underground senior management believe there is very little to separate the two bids.
The deal will involve transferring nearly 50 properties to the private sector. The portfolio, including buildings above railway track, is classed as "non-operational", giving the winning bidder scope to comprehensively develop the properties.
It is estimated that when fully developed the properties could be worth more than £2bn. London Underground believes they are now worth around £500m.
Under the deal, London Underground would form a joint venture company with the selected bidder to hold the assets.
The company would seek relevant permissions from the Health and Safety Eexecutive and planning authorities to develop the portfolio. The properties would be revalued and the spoils from development divvied up.
London Underground has estimated that in five years it could receive £500m, and double that sum over the 20-year span of the project. The money would be ploughed back into improving the Tube.
In the short term property values will have to be revised, but both bidders and the London Underground are confident the project is still tenable because of its long time frame, potentially spanning two property cycles.
Executives at Land Securities are understood to have sought urgent meetings with Mr Livingstone's transport commissioner Bob Kiley to spell out the possible consequences of the deal falling through.
Meanwhile, many proposed developments, already earmarked for Victoria, Edgware and Camden, would needpartial closure of Tube stations. With much network ownership in private hands, it is feared the new infrastructure-operating companies may demand compensation.Reuse content