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Creating a placeFebruary 2016, Nottingham
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
Development ConsultancyDevelopment Consultancy
CREATING A PLACE
THE CHANGING FACE OF DELIVERY
Simon Hope
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
INTRODUCTION Construction is the tip of the regeneration iceberg
The formative stages are crucial to setting the
direction
Public/Partnership lies is at the heart of delivery but..
The public sector is playing a broader delivery role to
unlock complex projects
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
IT’S A CHALLENGING AND CHANGING PICTURE
Local Government finance under pressure
Housing Bill and housing delivery pressures
But there’s still a need to stimulate economic activity
Changing corporate objectives - greater self sufficiency
Council’s need to generate investment returns
Greater freedom and access to low cost funding
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
“With government grants dwindling every year councils must find other ways to keep the money coming in to sustain quality public services. We are determined to maintain our services to a high standard and keep council tax low. To do that we must make the most of our resources.”
East Hants DC’s Deputy Leader, Cllr Richard Millard
A Familiar Message!
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
A CHANGING WORLD AS…….
COUNCILS BECOME THE DEVELOPER/INVESTOR Buying assets Strategic land acquisition Establishing Local Housing Companies PRS investment – promoting and direct development Infrastructure investment – inc energy providers
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
Approaches to Delivery
INFLUENCE AND INTERVENTION
As Planning AuthorityLand Assembly FacilitatorMarket Site / Select DeveloperAs Master DeveloperUndertake Direct Development
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
Examples of the Public Sector’s changing role
To help shape a place there are an increasing number of tools at public sectors disposal
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
Council’s as Investors
Buying strategic town centre
assets – shopping centres
Investment income
Employment land
Energy generation
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
Council as Enabler City centre and town centre retail and leisure development increasingly has required
a helping hand
Council’s taking a pre-development role to place making – working with specialist
development managers, examples inc - Chester - Newport - Barnsley - Sheffield - Swansea
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
Using Council CovenantCASE STUDY – BRACKNELL
£200m town centre ‘stalled’ scheme being
delivered by L&G/Schroders. Council played a
key enabling role
Council took lead on finding a deliverable
solution – use of lease wrapper
Future rates income important
Other schemes being unlocked using “rent
guarantees”
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
Local Housing Companies Council’s becoming housing
developers/investors
Objectives: meeting housing need, filling gaps
in the market and creating new source of
revenue
Development management and long term asset
management creating new public/private
opportunities
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
DELIVERY RELIES ON A POTENT COCKTAIL
Political will …..and sometimes courage to stay the course!
Appropriate resourcing - both staff and funding
Effective public/private partnership
Clear objectives and a robust
business plan
…..and good preparation!
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
Early Stage Considerations
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
PREPARATION - VIABILITY TESTING
Understand the project risk profile
Viability “tools”
Consider Partner(s)’ risk appetite - de-risk if you can!
Meet the market with clarity on commitments & deliverability
Use soft market testing to “shape” the proposition
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
POTENTIAL PITFALLS
Procurement
Resources constraints
Marginal viability
Political uncertainty
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
POTENTIAL PITFALLS
AVOIDANCE MEASURES
Create “Unstoppable Momentum”
The right partner for the right scheme
Share ideas and referrals
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
WHAT ARE PARTNERS LOOKING FOR IN A COUNCIL?
WHAT ARE COUNCILS LOOKING FOR IN A PARTNER?
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
CASE STUDIES – PREPERATON STAGE
HEREFORD & NEWTON ABBOT
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
CASE STUDY – HEREFORD
Award winning retail/leisure scheme
Innovate forward funding needed
Economic downturn forced review
Extensive pre development work
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
CASE STUDY – NEWTON ABBOT
Council pro-active, direct investor
Twin benefits
Masterplan/infrastructure planning attracts
occupiers and enables investment
Phased delivery planning
© MONTAGU EVANS LLP REGENERATION SEMINAR – FEBRUARY 2016
Regeneration projects
Stephen Matthew
The landscape is changing?
• financial pressures - cuts, service delivery pressure, reduced grants
• stimulating economic activity – enabling investment, sustainable environments
• generating investment returns - financial innovation, new income sources
• corporate objectives- greater self sufficiency?
Drivers
Councils as enabler / investor• buying assets e.g. shopping centres • strategic land acquisition• establishing local housing companies• PRS investment – promoting and direct development• infrastructure investment• energy providers
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
260,000
Private enterprise Housing associations Local authorities Housing need
Hous
ing
com
plet
ions
, Eng
land
House building
Source: DCLG, Savills 31 December 2014. Department for Communities and Local Government.
At the start (legal)• land assembly – who owns what? CPO?• market appetite• procurement route – or not, frameworks, procedure, timings• planning context• risk appetite of LA• enabling works?• finding – inc’ loans and grants. State aid?• other statutory steps – highways, railway, allotments, etc.
Direct delivery
LA
Funder(s)
Contractors DevCo
Occupier, etc – or sale out to an investor?
Wholly owned, CLS? Construction
Corporate JVLA Developer
JV Co (or LLP)
Bank Other Finance
50% shares (nominal)
Investment of cashfor loan stock
50% shares (nominal)
Investment of landfor loan stock
Development Subsidiary #2
Development
Subsidiary #1
Housing to Rent
Subsidiary
Commercial
Investment
Subsidiary
Programme
Management
Subsidiary
SUB- DEVELOPE
R[TBC]
BUILDER[TBC]
BUILDER[TBC]
Strategic Funding Agreement
FUNDER [TBC]
Development & Sale Agreement(s) Option
Agreement(s)
LLP
LA PSP
Management Services
Agreement
Housing Asset
Management
Commercial Asset
Management
Development
Management
PARTNER
PARTNER
Partnership Agreement
Members Agreement
Pros and consDevelopment Agreement Direct Delivery JV
• Well developed • Contractual control• Risk allocation is clear• Overage terms
• Profits retained• Control over delivery• Control over timing• Accountability
• Governance – shared• Risks and rewards shared• Flexible
• Lack of transparency• No true involvement in
decision-making• Difficult to vary• Rewards shared
• Development risk is retained
• Expertise required?• Blurred accountability?
• Set-up costs• Operating costs (inc’
management of JV)• Complexity• Blurred accountability?
Procurement – to OJEU or not
Procurement issues• land sale – or not?• market appetite – time and money• which route – RP, CD, CPN?• documentation (HoTs?)• framing the selection and evaluation criteria• dialogue – on what?• timing – factors• soft market testing
Powers
Typical legal ‘issues’
CPs Land Value
PhasingInfrastructure
Typical legal ‘issues’ 2
ViabilityOverage
State Aid
Works obligatio
ns
Variations
• councils as investors• councils as enablers• councils doing delivery, ownership, and management• traditional sales and/or development agreements• joint ventures with private sector partners• or all of the above!
Conclusion