Growth and economic regeneration through job creation, enterprise and sustainability is an essential part of the vision for the region.
However, funding for real estate developments is key to enabling this regeneration and growth.
Several government-backed vehicles have emerged in the last few years, seeking to offer affordable financing for schemes that may otherwise be unable to secure capital. The North West Evergreen Fund has established itself as arguably the most successful fund of its type, having already committed around £60m of capital to eight strategically important development schemes across the region.
So far, Evergreen has supported Allied London, Bruntwood, Peel, Harworth Estates and Muse Developments among others in a range of schemes that would not have happened without the fund’s support. This has included such diverse asset classes as office, industrial, logistics, biomedical and infrastructure, and is set against a backdrop of a lack of availability of debt finance for development in the regions. In Manchester, debt availability has improved over the last 12 months. However, banks still only appear willing to lend to predominantly de-risked situations, often only lending where leverage is low and then only for the best developments, with a secured prelet, in the strongest locations to high-profile developers. For the rest of the regions, it remains hard to secure asset-backed development funding.
Evergreen’s existence is a direct response to this absence of finance. The fund provides much-needed capital in order to kick-start developments. The result of this is economic regeneration. As schemes are brought forward, jobs are created, land is remediated and high-quality commercial space is added to the market, stimulating local economies.
Flexibility has been essential. Each financing provided by Evergreen has had unique qualities and features specifically tailored to the individual development. For Logistics North, Evergreen provided £10m of essential infrastructure funding needed to unlock a 90-hectare logistics hub in Bolton. In Chester, it funded City Place, ensuring the area can offer much-needed grade-A office space to attract employers. The fund has also had its first loan repaid on the highly successful Citylabs (former Royal Eye Hospital) development, providing new lab and office space for high-tech industries.
More recently, Evergreen provided funding to One Spinningfields, Allied London’s flagship office development. For this transaction, equity and senior debt were already in place from a private equity house and a bank respectively, but there remained a gap in the middle of the funding structure. Evergreen was flexible and provided the necessary £15m mezzanine loan to complete the capital stack and enable the development to be brought forward far earlier than would have been possible. This also highlights Evergreen’s ability to attract third-party capital to the region: for every pound Evergreen commits on average more than two pounds of private capital is leveraged.
The key to successfully deploying public sector capital into development has been threefold: supportive and committed local authorities, an investment adviser dedicated to transaction success and fund management and a willing and creative developer community.
The North West’s future looks even more promising with further capital available and a strong pipeline of transactions that includes various asset classes and infrastructure.
Andrew Antoniades is a director of CBRE Capital Advisors, the investment adviser to the North West Evergreen Fund