Peterborough to launch regeneration investment fund

Peterborough City Council has agreed details of a new funding vehicle aimed at raising £130 million of investment for regeneration projects, initially on development sites it holds.
The council’s cabinet this week approved the plans to create a joint venture with a newly-created offshore investment fund, and they will now go to the full council for approval.
The plans would see the 50:50 joint venture work up and gain planning permission for schemes, before transferring them to the investment fund in return for the market value and a share of future profits.
An officer’s report said: “Since December 2009, work has been ongoing to develop relationships with potential investors willing to work collaboratively with the council, focussing initially on council-owned land and assets, and particularly those in and around the city centre.
“These investors need to be flexible and willing to work with the council to develop schemes rather than expecting the council to have done the scheme development work and incurred the associated costs up front.”
Both the council and the fund would pay £3 million each for shares in the joint venture company, with the council’s £3 million investment funded from existing capital programme budgets aimed at delivering growth, along with receipts from section 106 planning agreements.
The total of £6 million would provide the vehicle with working capital to cover the cost of developing the schemes up to the point of investment by the fund into a special purpose vehicle created by the fund.
The SPV would then refund the joint venture for the costs of developing the scheme.
The fund would initially raise around £130 million from international and UK investors, and would be based in Guernsey.
Peterborough rejected the option of obtaining finance directly from the Public Works Loan Board, because it said doing so would incur substantial interest charges on the loan for an initial period during which it would receive no income or receipts because schemes were being developed.
The option of creating a local asset backed vehicle was also considered but rejected because of the complexity of some of the sites owned by the council.
It added that “LABVs, by their nature, also tend to be constrained to work on sites the relevant public body has transferred to them, whereas the JVCo proposed here would be free to work more widely if its Board approved”.
Following approval by the cabinet earlier this week, the proposals will now be included in the council’s 2014/15 budget plans which are set to be voted on by the full council next week.
Speaking about the proposed model, John Harrison, executive director of strategic resources at the council told Room 151: “I am not aware that anyone else has done this – I believe it is a UK first.”