Post on 03-Nov-2014
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Greater Manchester Investment Strategy
with Focus on North West Evergreen Fund
Background
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.
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.
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).
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).
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
Evergreen Fund:
1. Focus on Structure
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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
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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?
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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.
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CBRE | EVERGREEN | FUND BACKGROUND & UPDATE
Evergreen Fund:
2. Case Studies
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CBRE | EVERGREEN | FUND BACKGROUND & UPDATE
CASE STUDYThe 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.
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CBRE | EVERGREEN | FUND BACKGROUND & UPDATE
CASE STUDYThe 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.
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CBRE | EVERGREEN | FUND BACKGROUND & UPDATE
CASE STUDYCity 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.
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CBRE | EVERGREEN | FUND BACKGROUND & UPDATE
CASE STUDYCutacre (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.” ”Phil Wilson, Executive Director at Harworth
Estates.
The Future
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.
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