Leeds City Region

Revolving Investment Fund Prospectus | Revised February 2017

Investing In You

It is with great pleasure that we re-launch the Leeds City Region Revolving Investment Fund (“Leeds City Region RIF”), the second phase of a finance offer that supports businesses to accelerate economic growth and job creation in the Leeds City Region.

Recent years have been challenging for the economy right across the UK and the construction industry in particular. Although game changing schemes have continued to be delivered across the Leeds City Region, the immense potential for growth has not been fully realised due to a number of factors, including difficulty in accessing finance.

The Leeds City Region RIF is available funding for commercially viable private sector led infrastructure and construction projects (such as new homes, new energy infrastructure, new factories and commercial buildings), where conventional sources of funding are insufficient and/or unavailable.

And this is only the beginning. It is the intention that over the next year, the Leeds City Region RIF will grow in both size and scope, attract private sector funding and offer new and more flexible financial products to support growth across the Leeds City Region.

In partnership with:

And working with:

1 Leeds City Region | Revolving Investment Fund Prospectus | Revised February 2017

The place The Leeds City Region economy has many strengths and assets, including the largest business base in the North; the largest employment centre for financial and business services and manufacturing outside the capital, as well as the largest concentration of higher education institutions in Europe. The region has:

• fast mainline rail connections to London and Scotland, access to international airports, arterial motorway routes and labour pools;

• access to the markets of the neighbouring Manchester and Sheffield City Regions;

• Excellent trade and export opportunities, including through the nearby Humber Ports.

In addition, the region’s broadband connectivity will soon be amongst the best in Europe, and the proposed Leeds high speed terminal will be a further catalyst for growth.

Prospectus | Revised February 2017 Leeds City Region | Revolving Investment Fund 2

Our strategic priorities

The Leeds City Region RIF is a core investment tool for delivering the Leeds City Region Enterprise Partnership’s (LEP) aspirations ‘to be a globally recognised economy where good growth delivers high levels of prosperity, jobs and quality of life for everyone’.

This ambition is underpinned by the LEP’s four strategic priorities outlined in the Leeds City Region Strategic Economic Plan 2016-2036. These are:

3 Leeds City Region | Revolving Investment Fund Prospectus | Revised February 2017

Growing Business

Skilled People, Better Jobs

Clean Energy and Environmental Resilience

Infrastructure for Growth

The Leeds City Region RIF - what is on offer?

The Leeds City Region RIF has been established to address market failures in the provision of commercial finance. Its ultimate aim is to catalyse investment to accelerate economic growth and job creation in the Leeds City Region.

In particular, the Leeds City Region RIF creates avenues for developers and business in the region to work together with the public sector to drive investment in otherwise commercially viable projects, where conventional sources of finance are insufficient and/or unavailable. The Leeds City Region RIF makes investments on commercial terms and compliant with State Aid restrictions, to meet the gaps where private finance cannot be obtained. It does not provide grant funding.

Who is involved? There is strong commitment in the Leeds City Region RIF from key stakeholders across the Leeds City Region. Currently, there are commitments of in excess of £20m from the local authorities of Leeds, Bradford, Wakefield, Kirklees, York, Harrogate and Calderdale to capitalise the Leeds City Region RIF, and there is scope for this commitment to increase.

RIF Objectives

address failures in the provision of commercial finance

accelerate economic growth and job creation in the Leeds City Region

The geography of investment

Funds are available to projects from across the Leeds City Region that support the LEP’s Strategic Priorities as set out in the Strategic Economic Plan for the region:

https://www.the-lep.com/about/strategic-economic-plan-(1)/

Prospectus | Revised February 2017 Leeds City Region | Revolving Investment Fund 4

We are offering an initial £20 million of

investment into asset-based infrastructure construction projects, including housing

We are looking to support large scale

projects with the minimum RIF investment level set at £1m

Funding commercial projects

This is a call for projects from the Leeds City Region business community. We would like to invite applications for a share of an initial £20 million available for loans to commercial asset based infrastructure and construction projects.

Short term loans are provided on a commercial basis that is deemed appropriate based on the other funding sources being utilised for the specific project and the risk profile associated with the RIF lending.

The loan terms are also assessed from a State-Aid compliance perspective. The loan term is limited to 5 years.

5 Leeds City Region | Revolving Investment Fund Prospectus | Revised February 2017

Detailed Investment Criteria

Criteria Description

Target sector • Asset based infrastructure and construction, including housing.

• Projects must be aligned with the Leeds City Region Economic Partnership Strategic Priorities (please refer to page 2).

Geography • Restricted to projects that will grow the Leeds City Region economy (jobs, GVA and reduced carbon emissions).

• Investments are made predominantly in projects within the Fund founder member geographical areas of Leeds, Bradford, Wakefield, Calderdale, Kirklees, York and/or Harrogate.

• Projects which are outside the geographical area of the founder authorities may be considered depending on the economic benefits to the Leeds City Region.

Investment product • Short term up to 5 years debt finance on senior and mezzanine debt terms.

• Equity

Target return • Determined on a project specific basis. • Consistent with commercially available rates and ensuring compliance with State Aid requirements.

Investment period • Investments can be made until further notice.

Investment style • Front-loaded – prior to private sector finance.

• Co-invested – on an equal basis with the private sector finance.

• End-loaded – after private sector funding has been fully utilised.

• Mezzanine style finance – where the investment ranks junior to the private sector funding and; therefore, a higher repayment risk.

Minimum / maximum ticket size

• Minimum investment per project is £1m. • Flexibility is provided on the maximum investment per project.

Ethical, social and environmental considerations

• Investment decisions are taken on the basis of the economic, financial and commercial outcomes for the Leeds City Region. If, in the process of assessing any investment, there are issues and concerns about the social, environmental or ethical nature of an investment, the Leeds City Region RIF reserves the right not to invest.

Criteria

Prospectus | Revised February 2017 Leeds City Region | Revolving Investment Fund 6

Investment process Applications are considered as they are received and may be submitted until the initial investments have been allocated. The following table explains the application process:

Point Process

Stage 1 Initial assessment

Project Application Form submitted for assessment and evaluation.

Clarification questions period, holding interviews, receiving revised applications, providing recommendations, etc.

Focus of assessment will be 5 key criteria:

1. Strategic 2. Economic 3. Commercial 4. Financial 5. Management

Recommendation to proceed with applications to next stage (or reject or identify other potential funding opportunities within the Leeds City Region)

Decision Point 1 Stage 2

Consideration of detailed business case and due diligence (funded by the applicant) Decision Point 2 Stage 3 Investment Phase

Finalisation of funding terms with an arrangement fee payable by the applicant

Partnership Committee decision whether to support the investment in principle Refresh of the 5 key criteria from stage 1, together with detailed due diligence

Recommendation to proceed with applications to next stage (or reject or identify other potential funding opportunities within the Leeds City Region)

Decision whether to invest and Terms of Investment

Agreements finalised and signed There is no guarantee of a loan from the RIF until the final terms have been agreed and agreements signed by both parties

Should you be seeking finance on a commercial basis to create economic development in the Leeds City Region but do not fully meet the current eligibility criteria for Phase 2, we would be pleased to hear from you to understand more about your business requirements.

7 Leeds City Region | Revolving Investment Fund Prospectus | Revised February 2017

A bit about our loans…

Prospectus | Revised February 2017 Leeds City Region | Revolving Investment Fund 8

Mezzanine Finance: The RIF is helping to support the development of 38 houses, including 11 affordable homes on a vacant greenfield site near Bradford. The properties range from one to four bedrooms and provide good quality, well designed and constructed, energy efficient homes for social provision and the open market. Up to 40 construction jobs will be created and local suppliers and contractors will be utilised. The development will utilise skilled labour and supplement a low carbon economy as a consequence of the energy efficient design, and create an environment for further growth in the immediate area as a consequence of creating a range of accommodation for families including affordable homes.

The utilisation of RIF mezzanine funding alongside traditional bank debt enabled the developer to use their own financial resources to undertake further developments in the region as well as to accelerate work on their existing developments.

Senior Debt:

The development loan from the RIF has funded the first phase of Citu’s Climate Innovation District next to Leeds Dock. It has enabled Citu to remediate 6.5 acres of brownfield land, and to fund infrastructure and construction to build 312 low carbon family homes and apartments, as well as footbridge to connect both sides of the river Aire.

“Working with the RIF has been a shining example where the public sector has funded a project where conventional market finance has failed. The combined quality of commercialism and legal execution from the RIF was second to none. At Citu we deal with a number of banks, but the RIF demonstrated that the public sector can complete in excess of the quality of service than one might expect within the private sector. Throughout the process, the RIF acted in a manner that both supported the long term objectives of the project, but also found practical solutions to obstacles whilst protecting the interests of all parties involved.”

How do I apply? Interested parties are invited to contact us on 0113 3785930 or email Investmentfund@leeds.gov.uk. If the Leeds City Region RIF is deemed an appropriate funding source for your project, we will send you an application form. On receipt of the application form, the project will enter Stage 1 of the Investment Process. If the project is approved for “investment in principle” at Stage 1, then it will move to Stage 2 for detailed due diligence and the setting of commercial terms prior to a decision to invest being made. The cost of undertaking the detailed due diligence prior to a decision to invest is agreed with the applicant. If the project is approved for investment at Stage 2, it will move to the Stage 3 Investment Phase to finalise the funding terms and loan agreements.

9 Leeds City Region | Revolving Investment Fund Prospectus | Revised February 2017

In partnership with

Working with