s2 eib%20 %20gerry%20muscat%20 %20manchester%20urban%20development%20fund vfin en
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http://beta.cmimarseille.org/sites/default/files/NUD/S2_EIB%20-%20Gerry%20Muscat%20-%20Manchester%20Urban%20Development%20Fund_Vfin-EN.pdfTRANSCRIPT
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Use of an Urban Development Fund to stimulate private investment in jobs and
growth - case of Manchester (UK)
Gerry Muscat, Senior Urban Specialist
Workshop – Urban Developers Network 2014
Marseille, 22-24 October 2014
EUROPEAN INVESTMENT BANK
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Presentation Outline • What is an Urban Development Fund? • How to use a UDF to target employment
generation? • Manchester – An investment strategy focused
on employment creation • Examples of some specific employment-
generating investments • What are the market failures? • Conclusions relevant for MENA
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What is an Urban Development Fund? • An assembler of funding from diverse investors
(public and private) • Vehicle for targeting investments with specific
urban objectives • Spatial / geographical focus • Vehicle for loan or equity investments • Financier for private or public projects • Provider of soft financing tailored to address
market failures (if public funds available) • May be structured as a “revolving fund”
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Strictly private and confidential - Not to be disclosed without prior consent of the EIB
How do UDFs compare to other approaches to stimulate employment through urban regeneration? • Traditional “direct development” approach: public sector
acquires land, clears it, equips with infrastructure, then sells/leases to the private sector for commercial development
• “Gap funding” approach: Provide investment grants to cover the difference between total development cost and costs which the market will bear (but, no public sector return)
• “Urban Development Fund approach”: provide equity and loans on sub-commercial basis to leverage developers, with repayment to the public sector and revolving of funds • Sub-commercial public investments made where market cannot
deliver urban regeneration by itself • Public support kept to the minimum necessary • Leverages additional projects
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EIB Financing Instruments – where do urban development funds fit?
Instrument Examples of potential urban financing
Investment Loans Direct loan for a specific investment project or programme, usually > EUR 25m
•Loan to a City or urban development enterprise to finance an urban development project •Loan to a private partner to implement an urban investment programme under contract •Loan to a private urban developer to co-finance a commercial real estate development project
Framework Loans Loan for a programme of investments meeting defined criteria but not finally prepared at time of signing
•Framework loan to a city or region to finance a programme of small or medium urban investments •Framework loan to a specialised municipal bank or public sector urban development agency to finance a programme of urban investments
Funds Investment in a fund
•Investment into an urban development fund, brownfield fund, fund specialised in urban investment
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Greater Manchester’s Economy
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Manchester Strategic Framework
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Top Priority: Employment and Economic Growth A minimum of 200 ha of employment land will be developed between 2010 and 2027 for • offices 140 ha • research and development, light
industry and general industry 25 ha • distribution and warehousing 35 ha
Priorities for ensuring continued economic growth include: • Improving access to jobs for all via public transport, walking and cycling; • Demonstrating that employment-generating development has fully considered opportunities to provide
jobs for local people, through construction or use; • Improving the portfolio of employment premises, by providing a range of employment sites and
premises for small, medium and large businesses; • Improving digital infrastructure delivery to businesses and residents; • Creating business destinations by enhancing the primary business use with ancillary commercial
facilities; • Ensuring the continued social, economic and environmental regeneration of the City; • Ensuring connectivity to international markets for the import and export of goods to ensure
competitiveness in international markets.
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Greater Manchester Investment Strategy
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Example of a priority area for urban regeneration: East Manchester
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Note: 1. Almost the whole area is in 10% most deprived 2. Man City Etihad Stadium is in Eastlands…
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Strictly private and confidential - Not to be disclosed without prior consent of the EIB
Stimulating employment – what are the market failures?
• Positive externalities of urban regeneration hard to capture (eg. environmental, resource efficiency, indirect /induced employment)
• Brownfield land has high costs / risks for site preparation – greenfield sites more attractive but negative externalities
• Since the financial crisis the market will not construct offices without a high % of pre-let
• SMEs need space but are unable / unwilling to pre-let • Banks perceive urban regeneration as high risk • Perceived risks elevated in deprived urban areas • New employers / employees / residents require improved services
– urban transport, public space, culture and leisure facilities which market will not deliver alone
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Strictly private and confidential - Not to be disclosed without prior consent of the EIB
Primarily an urban regeneration focused Fund Both UDFs target the remediation of brownfield sites, creation and/or refurbishment of new/redundant floor space and job creation UDFs can only invest in strategic sites or areas of regeneration need as defined by Local Enterprise Partnerships Market conditions are limiting the pipeline, a number of schemes still need grant and there are competing public sector schemes (Growing Places Fund) NWUIF state aid approval secured in July 2010 – which enables sub commercial debt and equity to be provided where certain conditions and requirements are met NWUIF established with in kind match and is now operating on a hybrid co-finance/co-investment model
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Northwest Urban Investment Fund - Strategy
Strictly private and confidential - Not to be disclosed without prior consent of the EIB
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URBAN DEVELOPMENT FUND
The UDF approach using EU funding (JESSICA model)
EUROPEAN COMMISSION Structural Funds
MEMBER STATE Via a designated Managing Authority
Holding Fund
Projects forming part of an Integrated Plan for Sustainable Urban Development
Grant (not repayable as long as EC Regulations adhered to)
optional
OTHER INVESTORS (Public & Private)
CITIES
IFIs/Public Agencies/ Banks
Investment (equity, loan or guarantee)
Contribution (repayable or non-repayable)
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Strictly private and confidential - Not to be disclosed without prior consent of the EIB
£32.5m
Northwest Urban Investment Fund
£100m Managed by EIB
Additional co-investment at project level
Chrysalis UDF
(Merseyside)
Aiming to deliver outputs of job creation, new and refurbished floor space and redevelopment of brownfield land
Evergreen UDF
(Rest of NW)
£36m
£50m
Cash and in kind In kind
substituted out at project level
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Northwest Urban Investment Fund
Strictly private and confidential - Not to be disclosed without prior consent of the EIB
£50m
Soapworks
City Labs
Exhibition Centre
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Strictly private and confidential - Not to be disclosed without prior consent of the EIB
Evergreen signed project – City Labs
Grade 2 Listed Building Bio-medical Research Facility Prelet – 55% - Clinical Trials Challenges – Senior Debt Evergreen – Match Senior Debt “Club” Financing
14 Strictly private and confidential - Not to be disclosed without prior consent of the EIB
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Strictly private and confidential - Not to be disclosed without prior consent of the EIB 15
Background
• Former Colgate Palmolive factory in Manchester was unused and deteriorating
• Signed to be refurbished and turned into green office space for a variety of sectors & other facilities
Best practice because…
• Big step in city transformation from industry to business hub
• Promotes healthy lifestyle: cultural, family and sports facilities in the complex
• Local employment boosts the economy in the area
Strictly private and confidential - Not to be disclosed without prior consent of the EIB
Evergreen signed project – Soapworks
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Strictly private and confidential - Not to be disclosed without prior consent of the EIB
Harnessing linkages: Agent for Change and essential urban infrastructure
Etihad Stadium • Catalyst of “sport city” • Stimulus to medical, sports,
culture, science industries • Financial and in-kind
contributions from the stadium owners
+ nearby Beswick Community Hub • Regeneration linked to Etihad
sports city • New school, community
swimming pool, community-focused retail
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Strictly private and confidential - Not to be disclosed without prior consent of the EIB
Key features of the UK UDF approach
• Investment decisions delegated to independent professional UDF fund managers
• Enables leveraging of public funding at both the project level and the fund level
• Creating a UDF forces emphasis on sound governance, which can build public commitment and transparency (citizens/mayors feel its “their” UDF)
• Portfolio effect to mitigate risk • Revolving nature leads to sustainable approach • Flexible in tailoring sub-commercial funding to
project-specific market failures 17
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Strictly private and confidential - Not to be disclosed without prior consent of the EIB
Conclusions relevant for the MENA region • Challenge for employment creation targeting SMEs is equally
relevant in MENA as in Europe • Planning-led approach + Urban Development Strategy is key
everywhere • Preference for (less sustainable) greenfield development equally
strong in MENA • Fewer brownfield sites but they do exist in MENA (eg. disused
airfields) • MENA can also harness agents for change • MENA does not have EU structural funds, but government funding,
long-term IFI funding, waqf/kabbous funding (?), can provide some softer co-financing.
• Lack of grant funding in MENA places even greater emphasis on efficient financing approach
• Urban development funds just one of may financing vehicles
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