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UK's Birmingham eyes asset sales, ME cash

London, September 21, 2010

Birmingham council leaders are in talks with Middle East sovereign funds, hoping to plug a budget hole selling some of the billions of pounds of trophy assets owned by Britain's second city.

The NEC - the country's biggest exhibition centre, prime real estate and a stake in Birmingham Airport could all be up for grabs, councillors said, as they look to fund big capital projects at a time when the national government is demanding deep spending cuts.

Mike Whitby, leader of Birmingham City Council which represents over 1 million people and describes itself as Europe's biggest local authority, said he had been approached by sovereign wealth funds and was talking with the Abu Dhabi government as he tried to forge closer ties to the Middle East.

"We would allow them to be in partnership with our assets including the National Indoor Arena (NIA), the Symphony Hall, the ICC (International Convention Centre) and the National Exhibition Centre (NEC)," Whitby, a member of the Conservative Party, told Reuters.

The NEC Group, wholly owned by the council and which groups together the main exhibition centre as well as other venues such as the NIA and ICC, has fixed assets worth about 750 million pounds according to pre-credit crisis valuations included in the council's most recent annual report.

NEC made an operating profit of almost 30 million pounds last year, on revenues of 110 million.

Whitby said wealthy investors had shown a significant level of interest in the city's 'Big City Plan' redevelopment during a recent trip to Kuwait when he spoke to the country's chamber of commerce.

Such asset sales and foreign investment show how councils could invest in infrastructure despite expected cuts of 20-30 per cent in their budgets, and would help the government towards its goal of using the private sector to lead economic recovery.

Birmingham's Beorma quarter development, the latest phase in the regeneration of the city centre, has attracted about 200 million pounds from Kuwaiti lead developer Salhia International Investments, Whitby said.

Plans to knock down and relocate the main library and redevelop the site in the heart of the city have also caught the eye of Middle Eastern investors, said Randal Brew, the councillor responsible for finance.

"We have been successful in attracting quite a lot of Arab money, the leader has gone out and marketed the city," Brew said during a recent visit to the city by Reuters reporters. "It is important because it is a new source (of investment)."

Elsewhere, the local business community is busy forging ties with Middle Eastern investors, as highlighted by a visit this month from Sheikh Ali al-Hashimi, religious advisor in the United Arab Emirates ministry of presidential affairs.

"We want to see if we can get sovereign wealth attracted to projects in Birmingham," said Noor Siddiqi, a lawyer, who organised al-Hashimi's trip. "London has the attention of most of the world but other regions like Birmingham have a massive Muslim community and can relate to Muslim countries."

One Conservative Party councillor, who asked not to be named, said the council could raise funds by selling its 19 percent stake in Birmingham international airport.

Britain's sixth busiest airport is worth about 870 million pounds, based on the 420 million the Ontario Teachers' Pension Plan and Australia's Victorian Funds Management paid for a 48 percent stake in 2007.

Such a sale would have long-term strategic and financial implications, however, and Brew was less keen on sales of anything other than real estate assets, saying he knew of no plans to sell the NEC or the council's airport stake.

"They generate good returns and they have a good asset value... Now is not the time to review those type of assets because you would not get the maximum value," he said.

Birmingham airport reported a net profit of 0.6 million pounds for the year to end-March, down from 9.9 million in 2008/09. The council earned a dividend income of 0.4 million, down from 2 million.

The council, which according to Brew owns about 40 per cent of Birmingham, has a total capital budget for the next three years of just under 1.5 billion pounds.

"We will fund that by a number of means and included in that will be capital receipts from the sale of properties we have that are surplus to requirements," said Brew.

Other big items sitting on the council's balance sheet include about 2 billion pounds worth of social housing, equating to a third of its total fixed assets.

"We are looking at how we operate," said Brew. "We are looking a number of situations."-Reuters




Tags: UK | Birmingham |

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