PlaceEXPO City Region Investment Strategies: Greater Manchester Investment Strategy with focus on North West Evergreen Fund
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PlaceEXPO City Region Investment Strategies: Greater Manchester Investment Strategy with focus on North West Evergreen Fund

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Sean Davies, head of finance - commercial and public sector reform, Manchester City Council; and Andrew Antoniades, director, CBRE capital advisors, investment advisory

Sean Davies, head of finance - commercial and public sector reform, Manchester City Council; and Andrew Antoniades, director, CBRE capital advisors, investment advisory

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  • 1. Greater Manchester Investment Strategy with Focus on North West Evergreen Fund
  • 2. Background
  • 3. GMCA Background  The Greater Manchester Combined Authority is a statutory body with functions including economic development and regeneration that cover the GM area.  It is comprised of the 10 Greater Manchester local authorities: - Manchester, Salford, Trafford, Stockport, Tameside, Oldham, Rochdale, Bury, Bolton and Wigan.  The GMCA’s Core Investment Team is managing investment programmes currently totalling £120m. Promoting economic growth  The GM strategy is the foundation of how the GM investment fund operates. It provides how GM looks to create the conditions for growth to ensure that GM is a place in which to invest, do business, live, and visit through: - Revitalising our town centres - Creating safe, sustainable, healthy places with a high quality residential offer - Providing the land to support growth - Delivery of the infrastructure to support growth - Providing the skills needed by a modern economy.  GM funding is therefore targetted at those schemes that provide the greatest gross value added (GVA) impact, most clearly evidenced through new jobs created.
  • 4. BusinessInfrastructure Investment strategy Low Carbon Our investment strategy is targeted across three areas Projects that typically support the development of strategic sites thereby creating jobs for Greater Manchester. Projects that typically support the expansion of business thereby creating jobs for Greater Manchester. Projects that support the transition of Greater Manchester to a low carbon economy (e.g. heat network, retrofit or street lighting). Available funds Growing Places European Regional Development Fund Evergreen Available funds Regional Growth Funds Greater Manchester Loan Fund Growth Hub Available funds Regional Growth Funds Greater Manchester Loan Fund Upcoming 2014-2020 ERDF programme - Greater Manchester has several funds available to deliver this strategy. - Focus is on investment rather than grant so as to recycle the funds and extend their impact.
  • 5. Types of funding PROPERTY BUSINESS Growing Places RGF 2 & 3  £34.6m initially allocated to Greater Manchester, subsequently increased to £55m.  c.£20m remaining with no time limit for spend.  Funding is for property and key infrastructure projects.  Fund is very flexible - broadly designed to unlock wider economic growth by accelerating the building of homes, office and commercial development space.  Debt product but can take senior or junior position.  Loan size £1m to £5m, similar appraisal criteria to Evergreen.  £65m allocated to Greater Manchester.  Key requirement is the creation or safeguarding of more than 3,500 jobs (benchmark of £20,000 per job is applied to projects).  Funds to be committed by 31 March 2015.  Preference for some matched funding (debt or equity).
  • 6. Funding – Criteria and our offering What we look for  Proposals that have been turned down by the Bank but can demonstrate their viability and offer a clear exit.  Projects which can raise some but not all of the financing required. The GMIF is used to bridge the funding gap.  Projects that demonstrate clear outputs (jobs, commercial space and/or residential units) that will benefit Greater Manchester.  Loan size £0.5m-£5.0m. Our offering  Loan funding on commercial terms (European reference rates).  Quarterly monitoring of outputs.  Will rank behind other lenders on security although level of security offered is a determinant of the interest rate applied to the loan.  No financial covenants.  Ability to subsidise the interest subject to EU State Aid provisions (typically by up to €200k over 3 years).
  • 7. Current position Committed funds  Demand for Growing Places funding has been strong with the majority of the fund being committed.  To date, £31.6m has been committed across 9 projects.  £10.5m of these monies are being co-invested alongside the North West Evergreen Fund
  • 8. Evergreen Fund: 1. Focus on Structure
  • 9. 9 CBRE | EVERGREEN | FUND BACKGROUND & UPDATE  Evergreen provides development debt funding for commercial property and regeneration projects in NW England at highly competitive commercial rates.  Kick-start construction, generate jobs and deliver sustainable developments in Greater Manchester, Cumbria, Cheshire and Lancashire.  Funding currently stands at £49m.  Enhancing long-term growth prospects and competitiveness of the NW’s economy: • Enterprise. • Employment. • Regeneration and sustainability. Establishment FUND BACKGROUND  Funded by the ERDF programme and the HCA.  16 Local Authority Partners.  CBRE: Investment Advisor to Evergreen. Support
  • 10. 10 CBRE | EVERGREEN | FUND BACKGROUND & UPDATE  Additionality: provide funding where traditional debt cannot be obtained.  Not grant funding: exit strategy required.  £49m at present (next round further funds committed). Assists eligible projects that are viable but cannot obtain financing from traditional sources PRINCIPLES AND CAPACITY What does Evergreen invest in? Fund-Level Criteria: JESSICA funded projects must be eligible.  Outputs:  Employment / job creation.  BREEAM Excellent space.  Brownfield regeneration. Financial  Ideal loan size £4m - £10m (higher in club loans).  Reasonable leverage.  Clear exit & opportunity for fast repayment.  Clear capital structure / meaningful equity. Transaction-Level Criteria:  Office, industrial, hi-tech manufacturing, logistics.  Greater Manchester, Cumbria, Cheshire and Lancashire.  Complimentary funding.  Committed during 2014 & spent by end of 2015. Scheme  Scheme viability.  Developer experience and skill.  Planning consent / land assembly.  Ideally, pre-lets / occupier interest. What do we look for in transactions?
  • 11. 11 CBRE | EVERGREEN | FUND BACKGROUND & UPDATE Benefits for Developers WHY USE EVERGREEN? Collaboration  Funding where traditional finance cannot be obtained.  Works in tandem with other forms of funding.  Welcomes schemes with grants.  Quick decision making. Flexibility  Competitive cost of debt.  Flexible terms.  Various methods of funding:  senior debt.  clubs & syndication.  mezzanine.  Flexibility around cash flow timings. Experience  CBRE as investment advisor:  Originating and managing debt investments.  Finance and real estate expertise.  Clearly defined processes.  Market-standard loan documents.  Ekosgen: eligibility assessment.
  • 12. 12 CBRE | EVERGREEN | FUND BACKGROUND & UPDATE Evergreen Fund: 2. Case Studies
  • 13. 13 CBRE | EVERGREEN | FUND BACKGROUND & UPDATE CASE STUDY The Cotton Building The Cotton Building  Speculative Development  £15m loan from Evergreen and Growing Places  Total development costs of £40m  Mezzanine funding by Pramerica Borrower Allied London Nature of loan Senior Debt Size of Loan £10,000,000 Evergreen and £5,000,000 Growing Places Location Spinningfields, Manchester “ “The availability of Evergreen and Growing Places finance has enabled us to bring forward our vision for the Cotton Building in a market where development funding for speculative schemes is still challenging to secure.” ” Freddie Graham-Watson, Group FD, Allied London.
  • 14. 14 CBRE | EVERGREEN | FUND BACKGROUND & UPDATE CASE STUDY The Hub The Hub  Joint Evergreen and Growing Places loan  Manchester Science Park speculative development  Strong occupier interest not yet formalised  Evergreen required to kick start development  Evergreen £4.5m matched by Growing Places £2.5m loan in club deal  Total development cost £9m  Preparing to start on site Borrower Manchester Science Parks Nature of loan Senior Debt Size of Loan £4,500,000 Evergreen plus £2,500,000 Growing Places Location Manchester “ “The role that Evergreen can play to support schemes that will enhance the local economy is incredibly important and . will bring a number of long-term benefits to Manchester". ” Eric Day, Relationship Manager, Lloyds Bank.
  • 15. 15 CBRE | EVERGREEN | FUND BACKGROUND & UPDATE CASE STUDY City Place, Chester City Place  Originally a stalled scheme  Developer not able to commit 100% funds  Bank would not lend, due to no proven market  Cheshire West and Chester Council provided Put Option  £4.8m match provided by developer, some ERDF grant  On site now Borrower Muse Developments Nature of loan Senior debt Size of Loan £4,800,000 Location Chester “ “Muse has worked closely with Evergreen since its inception, and we are delighted to be able to start construction works on City Place, Chester. The collaboration of Evergreen and Cheshire West and Chester Council has enabled Muse to progress this catalytic scheme in a challenging market.” ” Phil Mayall, Muse Developments Limited.
  • 16. 16 CBRE | EVERGREEN | FUND BACKGROUND & UPDATE CASE STUDY Cutacre (Logistics North) Logistics North  Joint Evergreen and Growing Places loan  Funding infrastructure to release up to 87 Ha distribution hub  Aldi is building a 500,000 sq ft distribution centre  Evergreen £7m matched by Growing Places £3m loan in club deal  On site now Borrower Harworth Estates Nature of loan Infrastructure, senior debt Size of Loan £7,000,000 Evergreen plus £3,000,000 Growing Places Location Bolton “ “Evergreen funding will be instrumental in enabling us to deliver what will be the premier logistics location servicing the North West. The loan we have received will fund the construction of roads, ground works, power, drainage and utilities and we will begin works in the summer.  Having local authorities and funds such as the North West Evergreen Fund championing key regeneration projects in the North West of England is crucial to the continuing growth of the region.” ”
  • 17. The Future
  • 18. Funding  Given the level of transactions completed to date, and the pipeline of future projects, the Growing Places fund size has been increased by a further £20m to £55m overall.  Similarly, Evergreen’s success has also led to the fund size increasing to £49m.  In the medium term, the capital received from existing loans will be made available for reinvestment.  This funding will be enhanced by the proposed Evergreen II (£60m) and Low Carbon (£15m) funding streams for GM investment that will be targeted along similar lines to the successful Evergreen I fund.  It is intended the new funds will be operational from early 2015, although there is still some remaining capacity currently for any suitable schemes.  Should the funding market move and there is increased appetite from banks to fund developments then GM funds will also move accordingly; GM funds are able to operate at difference points in the capital stack.  Strong pipeline of schemes.
  • 19. Contacts Andrew Antoniades, ACA Director, CBRE Capital Advisors T +44 207 182 2587 Email: andrew.antoniades@cbre.com For more information regarding this presentation please contact: Evergreen enquiries Sean Davies Head of Finance, Manchester T: 0161 234 1647 Email: s.davies3@manchester.gov.uk Manchester