Nigel Clews (Coventry City Council)

Transforming Property Assets

Stimulating growth & economic development – a role for assets

Coventry - Profile Within C&W Cov Warks C&W LEP Eng

Population (Census 2011)

318,600 543,800 862,400 53,012,500

Emplyt Rate (Jul11-Jun 12,ONS)

64.8% 75.1% 71.2% 70.4%

GVA (Headline per head NOMIS 2009)

£18,032 £19,387 - £20,498

Level 4 Quals (ONS Jan-Dec 11)

26.8% 31.3% 29.6% 32.7%

No Quals (ONS, Jan-Dec 2011)

16.6% 12.7% 14.2% 10.4%

Coventry’s Economy • GVA Per Head 2009: £18,032 –

around 12% lower than the national average (£20,498)

• Job density is 0.74 jobs for every 16-64 year old Coventry resident – varies across C&W but Coventry’s is decreasing

• 79% residents who live in Nuneaton-Coventry-Warwick corridor also work within it

• Persistent concentrations of worklessness

Key Economic and Demographic Challenges

• Slow city growth over last 10 years• Coventry is moving down league table

(11th-13th), e.g. Cardiff & Leicester faster growing mid- sized cities

• Image - stable but average, poor national profile and low civic pride and esteem

• Once here investors and visitors are pleasantly surprised

• Perceived as functional - goal is to be highly desirable and to delight all customers

• High risk of dropping into struggling category

The Opportunities• Quality Environment – Urban meets

rural • 40,380 businesses here• University of Warwick - In top 50

global• Coventry University – In UK top 50• Super Connected City – 90% premises

will be superfast by 2015• CWLEP- private sector appetite to

collaborate to solve challenges

Government Policy• Impact of cuts on local government plus further cuts =

greater pressure on resources• Complete rethink on approach to assets and attitude

to risk required – go way beyond efficiency savings• Coventry, 5 Warks Districts and Hinckley & Bosworth

with CW LEP working on City Deal Wave 2• Use of Assets and Infrastructure pivotal to creating

conditions for exponential growth in City Deal• CW Innovation assets key ingredients to equip us for

the future

Looking Ahead on Use of Assets• Commitment to show Coventry is open for

business and can do• Public & private assets will be catalysts for

investment• C&W Business Rates Pooling • Releasing locked-in tax benefits• Recycling asset value to grow GVA• Harnessing commercial power of public

sector• Up to £40m investment in Infrastructure and

Business Growth (combining Regional Growth Fund / European / Growing Places) is real opportunity to unlock sites, assets and premises

Coventry- ExamplesGateway • 450 acre development• 14,000 jobs• 4.5million sq.ft of commercial space• Partnership – CCC, Airport, STWA,

Developer

City Centre South • 530,000 sq.ft retail led development • 1200 space car park• £300m development value• Partnership - CCC, Aviva, Developers

Proposed City Centre South Development

Coventry- Examples

• Friargate – 12 acre development– 15,000 jobs– 3m sq.ft of commercial space incl.

2.0m of offices with the balance being residential, retail & hotel

– Partnership – CCC Friargate LLP

Proposed Friargate Development

Coventry - Examples • JLR/ Warwick University

– £92m National Automotive Innovation Campus (NAIC) at the University of Warwick

• Regional Growth Fund– £2.4b fund across England 2011-15– Supports programmes with sig. potential for economic

growth– 3rd Round – CWLEP awarded £24.4m – 6 C&W businesses also successful

Coventry - Examples • City Deal 2

– 20 Cities inc. Coventry invited to bid for 2nd wave

– Coventry working with Warks Districts + LEP to develop potential deal

– Focus on biggest barrier to economic growth

– ‘Core package’ of measures all qualifying cities will have access to regardless of their main focus

– EOI to be submitted by 15 Jan 2013

So what are others doing to leverage their assets?

October 2012

www.pwc.co.uk

Ainsley Moore (PWC)

PwC

The Market

October 2012Leveraging assets / property partnershipsSlide 13

Public Sector

• Reduced funding (and future link to economic success)

• Lost EU match

• Trend to investment (away from grant)

• Reluctance to reduce revenue returns

Private Sector

• De-leveraging

• Increased cost of debt

• Focus on distressed or core assets

• Interest in smaller schemes

Market

• Lack of mortgage or development finance

• Wider economic recession

• Falling or stable property values

• Limited No. of City Deals

Lack of activity

PwC

What is the answer?

There is no magic bullet or one size fits all.

To enhance value or add revenue, the underlying investment proposition must be solid & not simply regeneration led

Regional respect – a vision for adding incremental growth opposed to regional displacement

Potential partners depend on the scheme – national developers, local consortium, RSLs & HRA or local pension funds

Incentive Led - many are currently looking at “Corporatisation” of LAs:

• City Deals

• Civic Investment Funds

• Trading Companies

Asset Led - Varying levels of scope exist depending on the Councils portfolio, and ability to leverage the Councils balance sheet

October 2012Leveraging assets / property partnershipsSlide 14

PwC

How can Council assets help?

Wide range of models / approaches

From sale through to self develop and retention as investment

Consider “LABV” or EPP type models versus say, masterplan developer

Provide development finance to support new local schemes

What risk is the local authority prepared to accept ?

How much control does the local authority want ?

Form should follow function !

October 2012Leveraging assets / property partnershipsSlide 15

•Release surplus sites

•Attract Critical mass

•Promote mixed economy

Operational

•Maximising footfall

•Anchoring schemes

•Release sites

Office

•Equity or debt support for development

•Invest in portfolio for growth

•JV’s & LABV

Investment

•Retain local employment

•Contract with local suppliers

•Trade to third parties

Trading Co.

PwC

NW Council

October 2012Leveraging assets / property partnershipsSlide 16

Economic growth through operational estate & asset release

Developing multi service community lifestyle centres

Facilities have strong revenue returns from the Council, local health agencies & private occupiers

Structured as an programme based JV with a developer

Surplus assets are developed in the vehicle

Council provides partial equity for development and receives investment returns

PwC

SW Example

October 2012Leveraging assets / property partnershipsSlide 17

Economic growth utilising investment assets

LA investment portfolio is under performing

Reliance on the revenue stream

Assets placed in a shared equity JV with local land owner

Third party commercial management and tax incentives improves returns

Prudential development finance provides arbitrage benefit

Incentive for business cases for roling investment & refurbish

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