British Waterways' Commercial activities - Risk versus Gain

Something strange for you today - I am going to say something positive about British Waterways' property portfolio! (Before you get too excited do read the whole thing!)

Headline news is the Wood Wharf development in London Docklands, and that Canary Wharf Group has bought out Ballymore and British Waterways' regeneration/redevelopment interests in the scheme. British Waterways retain their freehold interest and it seems have some reasonable expectation of significant rental income in the medium to long term, once individual elements in the regeneration are completed and let.

Whatever the detailed in and outs of the Wood Wharf deal, this deal is, to me at least, reassuring. This much safer and less risky model of commercial investment, where BW stick to the Landlord function and stay out of the riskier Developer function, is one I have advocated to BW for years. I therefore have to be pleased about this week's events.

Now to return to my usual more critical mode!

I must say, about time too: This sort of re-alignment should have happened many years ago and if it had, BW might be getting that much needed commercial income now rather than five or ten years into the future. One of the property websites has dared to headline their report with a point of view on this deal which I think is much closer to the truth: "Canary Wharf buy out lame duck partners to press ahead with Wood Wharf development". 

Did BW jump or were they pushed? Canary Wharf no doubt understand that the clock is ticking on the Planning Permissions that are in place and are rightly anxious to start getting works on site. Problem is that means more money up front. That BW is not in any position to provide their share of that cash is apparent to anyone who has even a basic understanding of BW's current parlous financial state and cash flow, let alone Canary Wharf's development people. Even if BW could borrow the money who would back that horse? (Canary Wharf by comparison is reported as having completed the buy out deals with cash.)

Narrowboatworld's Alan and others are as usual on the case on the retrospective and quite rightly question what BW have been doing with this scheme for the last decade or so and whether the money already invested has been spent wisely and to best effect? Many are suggesting that at best the £52M receipt only represents some sort of break even position. In terms of being an income generating scheme, even after the current sale, the history of Wood Wharf to date seems far from rosy, even if its future may finally be looking a little more optimistic and transparent.

As ever there is the usual and persistent veil of a lack of transparency surrounding these matters, so that us the punters are as ever having to guess and probe BW to get anything close to a true picture of what is going on and this takes me back to that word, "trust" that is much on everyones mind.

Looking forward none us know for sure how BW will re-invest the £52 million receipt from this deal and that is as ever a concern. That BW's Board and Directors have in the past been allowed to use public money and assets in the commercial property casino with the at times disastrous results large and small, but collectively, too often negative, is something that I and others have often alluded to. As Allan has asked, will this receipt be re-invested transparently or will it in fact be put back into the at times casino-like  investments and self congratulatory salaries and bonuses and pension pots for BW directors?

It seems they cannot even manage to offer a consistent answer as to what their expected rental income from the Wood Wharf deal might be?

The fact is we will not know and that's the nub of it. At this time that is still £50M+ of public money. To me it is indefensible that the future application of those funds is shrouded in secrecy and is likely to be heavily influenced by the cabal that is BW senior management and Directors with little accountability to the public, we who are still at this time the true owners of the waterways in question.

I have railed on the question of transparency in BW's commercial activities before and this remains for me a huge risk to the waterways. If the Wood Wharf deal signals a change in thinking in BW and a commitment towards engage in lower risk investments and disengaging from the higher risk and cash dependent schemes, that is good news.

I have my doubts because as above, there is evidence that this instance it has not been a matter of choice but more a sharp reminder of the financial reality; that BW's financial position remains tenuous to the point that their supposed partners are squeezing them out of deals in the well founded belief that BW will not and cannot deliver their part of the bargain.