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					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)


                                                   2
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




                                                                                                              3
Approach – Key Factors

Partner
   Partnership – partner as principal                                          Partner
   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
                                                                                Property
   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                                                  Risk vs Reward
   Potential return vs risk being assumed




                                                                                              4
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)




                                                                                     5
Property Market Correction




                             6
7
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

                                                                                      8
Funding Re-benchmarked




                         9
Risk Profile




               10
CASE STUDIES




               11
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




                                                              12
Infrastructure Funds
Tariff Based Models
  English Partnerships Milton Keynes Tariff, Bedford


 SWERDA

 JESSICA

 BIDS   (or Tax Increment Finance)




                                                        13
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




                                                    14
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




                                                     15
Priority Sites
 EstablishedOctober 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
 ByJuly 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




                                                        16
         Priority Sites
     route involves the lease of or sale of individual developments to owner occupiers or individual
 Exit
 investors, or leasing to occupiers




                Cannis House, St Austell                            Croft Business Park, Bromborough




                  Wansbeck, Ashington                                   Dakota Business Park, Speke



                                                                                                       17
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
                                                         Gemini Court, Baglan Energy Park
  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

                                                                         Integra St Asaph




                                                                                        18
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




                                                      19
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



                                                     20
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




                                                                                                           21
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