Perspectives 2019 2020 Public Sector

54 Putting Public Assets to Work There are a number of examples of governments using consolidated public commercial real estate assets inside a holding company to properly develop portfolios — both by segment and by location. Geographically it is most common at the local government level — as when the City of Hamburg (Germany) expanded by developing its derelict urban harbor area into one of the most attractive residential and commercial areas of the city — complete with kindergartens, primary and secondary schools, universities, and a world-class concert hall. Also, in the 1990s, economic malaise and high unemployment impelled Copenhagen’s leaders to get creative. A professionally managed public wealth fund consolidated the city’s old harbor area and a former military garrison on the city’s outskirts. Beyond transforming Copenhagen’s harbor district into a highly desirable area, income from the fund enabled the government to build a transit system without dipping into tax revenues. Segmental holding companies have such operating assets as airports, postal systems, highways, ports, and railways. They all have real estate assets that could generate substantial value if managed professionally in independent holding companies. For example, Hong Kong, aware of its fiscal limitations, set up MTR, which found a way to build a subway and railway system the size of New York City’s without using a single tax dollar. To do so MTR developed the real estate adjacent to its stations. London Continental Railways in the United Kingdom led the remarkable transformation of the abandoned area around King’s Cross Station into a hub for both tech start-ups and tech giants, such as Facebook and Google. The site also attracted notable academic and cultural institutions and has hotels, residential, and recreational areas.