public sector residential land disposal & development deferred receipts mechanisms liam fennell...
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Public Sector Residential Land Disposal & Development
Deferred Receipts Mechanisms
Liam Fennell
RBS Property Ventures
23rd June 2009
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Liam Fennell - Track Record
Director Property Ventures based in Edinburgh (2006-Present)
Focused on Regeneration & Public Sector Joint
Ventures.
Scottish Enterprise (1991-2006)
Area regeneration: My Future’s in Falkirk,
Raploch URC, Chemical sector initiative, Life
Sciences, business property.
Specialist developments: science parks –
Aberdeen, Edinburgh Bioquarter, Edinburgh
Technopole, Pentlands Science Park, Roslin
BioCentre, Stirling University Innovation Park.
Local Regeneration: Exchange District –
Edinburgh International Conference and Financial
Centre. Accessing ERDF.
Construction & Mining (open cast & deep mines)
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Property Ventures – Edinburgh
PV work alongside our colleagues in the corporate bank to provide a total funding solution for property
deals in the UK and Ireland PV provide the equity and mezzanine element Deals cover all property asset classes and transaction types but must have a value driver and a
planned exit – typically asset management, development (including speculative) and planning plays Deals are property specific No typical deal structure – each deal is tailored to meet the specific needs of the partner and
transaction Deals can be effected via lending with profit sharing exit fees, joint ventures, limited liability
partnerships, limited partnerships and direct ownership with profit related fee for partner Typical deal size is GBP5-150m. Currently PV Edinburgh have over 80 active deals with a total
exposure in excess of GBP1.5bn PV Edinburgh are a team of 14 comprising a mix of property and finance professionals
PV fund the gap between senior funding and the amount of equity the partner can contribute
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Partner Partnership – partner as principal Track record/reputation of partner is key “Pain” money from partner is required
Property Quality of asset Reasonableness of appraisal assumptions – yield, income, costs, timing Portfolio/ appetite for sector/transaction Exit – when and for what price? There needs to be a value driver
Risk vs Reward Evaluate risks Profitability of scheme Potential return vs risk being assumed
Approach – Key Factors
Partner
Property
Risk vs Reward
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Deal Structures
Structures are driven by the specific needs of the partner and the transaction
– Control
– Transparency
– On/Off Balance sheet
PV are currently working in the following structures
– Lending with profit sharing exit fees
– Joint Ventures (50:50) with minority/majority feedback
– Direct ownership with profit related fee for partner
– LLPs (Limited Liability Partnerships)
– LPs (Limited Partnerships)
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Property Market Correction
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Who is lending (June 2009)? – Savills “top 22” with anappetite to lend in 2009 (above £10m)
• Abbey
• Barclays Bank
• BLME
• Canada Life
• Coutts & Co
• Deka Bank
• Deutsche Postbank
• DG Hyp
• Eurohypo
• Handelsbanken
• Helaba
• HSBC Investec
• Landesbank Berlin
• LBBW (Stuttgart)
• Lloyds Banking Group
• Munich Hyp
• Nationwide BS
• Nord LB/Deutsche Hypo
• Norwich Union
• RBS
• West Immo
Note:
10 are German lenders, 8 are UK lenders and 4 are other
international lendersSource: Savills
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Funding Re-benchmarked
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Risk Profile
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CASE STUDIES
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Public/Private Regeneration Projects/Vehicles
Isis Waterside Regeneration
English Cities Fund
Blue Print
Igloo
Priority Sites, Welsh Industrial Partnership, Networkspace
ONE Buildings for Business, NorwePP, PxP, ONEDIN
Local Asset Backed Vehicles – Croydon, Tunbridge Wells
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Infrastructure Funds
Tariff Based Models English Partnerships Milton Keynes Tariff, Bedford
SWERDA
JESSICA
BIDS (or Tax Increment Finance)
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Cart Corridor, Renfrewshire
A location specific GBP30m public / private
partnership between RBS (50%) Renfrewshire
Council (45%) and Scottish Enterprise
Renfrewshire (5%) Established in August 2005 to achieve planning,
build, let and sell office, industrial and
commercial units at Cart Corridor close to
Glasgow Airport To be developed in 5 phases, Project Life
estimated at 5 years By 2010 the project is intended to create 1000
new jobs with an additional GVA of GBP245m
for the Scottish economy
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Higher Broughton, Salford
Limited Partnership vehicle formed in May 2004 to develop 5 phases of mixed use regeneration scheme
Joint venture between RBS (41%), Salford Council (19%), and developers City Spirit (20%) and Inpartnerships (20%)
Land remediation was supported by Manchester and Salford Housing Market Renewal Fund.
Development to be in ‘Homezones’ of 20-30 units to foster community atmosphere
Phase 1 consists of 177 units (apartments and three to seven bedroom houses) and is due for completion by mid 2007
Future Phases will include a community hub, 193 apartments for key worker rental, 60 affordable apartments, 115 units mixed tenure, plus 5,000 sq ft food store and 13,000 sq ft medical centre
Over 60% of homes sold off-plan Winner of ‘Best Family Home’ and ‘Best Overall
Development’ at MEN Residential Property Awards on 12 October 2006
www.broughtongreen.co.uk
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Priority Sites
Established October 1997 as a Joint Venture
between RBS (51%) and English Partnerships
(49%) Brought together the financial strength of RBS with
England’s national regeneration agency. Remit to
undertake development of industrial, hybrid and
office space in areas of economic need Now renowned as one of the most active
speculative commercial developers in England Initial target was 1.3m sq ft of industrial space By July 2007
– 3.12m sq ft of floor space had been built
– Over GBP240m had been invested in the regions
– Opportunities for 6,500 people had been created
– Further 700,000 sq ft was underway with 900 sq ft
in the pipeline www.prioritysites.co.uk
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Priority Sites Exit route involves the lease of or sale of individual developments to owner occupiers or individual
investors, or leasing to occupiers
Cannis House, St Austell Croft Business Park, Bromborough
Wansbeck, Ashington Dakota Business Park, Speke
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Welsh Industrial Partnership (WIP)
A public / private partnership between RBS (51%)
and Welsh Assembly Government (previously
Welsh development Agency) (49%) Established in 2002 to fund and develop
industrial units throughout Wales. RBS provided
funding up to GBP32.6m WAG contributed GBP0.98m equity and
contributed GBP9m investment property portfolio
to represent the gap funding appropriate for the
development programme WAG undertake the project management and
manage the external property advisors Phase 1 consists of 240,000 sq ft in five locations
costing circa GBP14m The partnership is being extended until July 2010
and will undertake further speculative
developments
Gemini Court, Baglan Energy Park
Integra St Asaph
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Project Omega, Warrington
50 / 50 Joint Venture with the Miller Group Site remains in the ownership of English
Partnerships. JVCO has an option to draw down
land for a fixed price (subject to overage) on an
as needs basis 500 acre brownfield site (former US military use)
at Warrington Potential to develop up to 7m sq ft of mixed used
development Planning achieved for 1.6m sq ft of logistics /
industrial and 1.5m sq ft of offices and ancillary
use 15 / 20 year time scale www.omegawarrington.co.uk
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Ecosse Regeneration Ltd
AEquity, mezzanine and debt funding provided to Ecosse to assist in acquiring and obtaining planning for c1200 acres of land at Polkemmet, West Lothian, Scotland
Original investment made in April 2002 – long term project
Outline planning consent has been granted for
– 2000 residential units
– 500k sq ft class 4 (business/offices)
– 500k sq ft class 5 (industrial)
– 500k sq ft class 6 (storage/distribution)
– Two PGA designed golf courses
– new M8 motorway junction
– Neighbourhood shopping centre Contract awarded to extract 1.6m tonnes of coal
via opencast to provide a development platform and remediate the site
Discussions ongoing with residential developers. Options being explored in connection with the
commercial land
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Summary/Conclusion
Regeneration is a Long Term proposition Public sector can generate confidence for private sector by investing and reducing risk e.g. planning,
site assembly, decontamination, pump priming, public realm, related investment etc Clear objectives required, value driver(s) and a planned exit Flexibility to respond to changing market demand and conditions Pricing will reflect level of risk IPD research indicates returns in regeneration areas comparable with other property classes But there are barriers to investment:Risk – lack of coherent strategy, lack of track recordCost – high upfront bidding, heavy investment in infrastructure, timescale Demanding – of people, time vs opportunity cost with other projectsScale – single site vs portfolio approachPremature or ill conceived proposalsClear understanding and expectation of the private sector partner’s role and contribution
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