Public Sector Residential Land
Disposal & Development
Deferred Receipts Mechanisms
Liam Fennell
RBS Property Ventures
23rd June 2009
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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Approach – Key Factors
Partner


Partnership – partner as principal
Track record/reputation of partner is key
 “Pain”
Partner
money from partner is required
Property





Quality of asset
Reasonableness of appraisal assumptions – yield, income, costs, timing
Portfolio/ appetite for sector/transaction
Property
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

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 an
appetite to lend in 2009 (above £10m)
• Abbey
• Barclays Bank
• HSBC Investec
• BLME
• Landesbank Berlin
• Canada Life
• LBBW (Stuttgart)
• Coutts & Co
• Lloyds Banking Group
• Deka Bank
• Munich Hyp
• Deutsche Postbank
• Nationwide BS
• DG Hyp
• Nord LB/Deutsche Hypo
• Eurohypo
• Norwich Union
• Handelsbanken
• RBS
• Helaba
• West Immo
Note:
10 are German lenders, 8 are UK lenders and 4 are other
international lenders
Source: 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
Wansbeck, Ashington
Croft Business Park, Bromborough
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
Gemini Court, Baglan Energy Park
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
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 record
Cost – high upfront bidding, heavy investment in infrastructure, timescale
Demanding – of people, time vs opportunity cost with other projects
Scale – single site vs portfolio approach
Premature or ill conceived proposals
Clear understanding and expectation of the private sector partner’s role and contribution
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