Iain Jenkinson, senior director, GVA; and Mark Bousfield, investment manager, Chrysalis Fund / Igloo

1. Chrysalis in the Liverpool City Region
Presentation to placeEXPO:
Looking back, looking forward
17 June 2014

2. Introducing Chrysalis – a JESSICA fund
• Igloo Regeneration Ltd, GVA and Royal Bank of Canada Capital Markets
• GVA – investment advisers
• Igloo – fund managers
• RBC – credit advisers
• Appointed by North West Urban Investment Fund Board to manage the Liverpool
City Region Urban Development Fund (March 2012)
• Chrysalis Fund (http://www.chrysalisfund.co.uk)
• Private fund management team with strong public sector governance
• Deputy Leader Wirral / Regeneration Portfolio Holder Liverpool Council
Directors of Regeneration at St. Helens, Wirral and Liverpool

3. JESSICA - “not the only show in town”

4. Project JESSICA in North West England (1)
• JESSICA (Joint European Support for Sustainable Investment in City Areas)
• Chrysalis is Merseyside’s JESSICA Urban Development Fund (UDF)
• JESSICA invests into a range of private and public projects, via debt or equity
• Targets projects in the development or construction phase to create new
floorspace and jobs
• It is a financial (engineering) instrument that makes repayable investments
• Not grant or ‘gap funding’ and once invested is returned and invested again
• Investment Policy is prescribed by European Regional Development Fund
Programme 2007-2014 – essentially Offices, Industrial, Warehousing

5. Project JESSICA in North West England (2)
• Established for a 10 year period with all funds to be committed by December 2014
• Initial capital of £34m contingent loans made available for on-lending to projects
• UDF invest upto 50% in a project, alongside other sources of match funding
• Can be private or public sector match
• Rationale is to focus on market failures inherent in urban regeneration
• Demand side (project developers that carry out urban regeneration projects)
• Supply side (investors and lenders who provide finance)
• Not seeking to replace or crowd-out private investment but to intervene where
market failure exists – UDFs ESTABLISHED TO TAKE GREATER RISK

6. Project JESSICA in North West – Summary
• Merseyside has its
own dedicated Urban
Development Fund
• £34m ‘seedcorn’ to
invest in urban projects
by December 2014
• Recycles and allows
public funds to be used
again (and again!)
• Opportunity to grow
fund size and extend
scope of eligible
investment

7. Eligible Activities
• Site clearance and remediation
• Development of site specific infrastructure and site servicing
• Including site specific IT/broadband, utilities, energy infrastructure, site specific
transport facilities (eg a connecting road to a site)
• Construction of new buildings and/or renovation of existing ones, including
landscaping and public realm works

8. Eligible Expenditure
• Land acquisition
• Cost of purchasing land not to exceed 10%
• Building acquisition
• Cost of acquiring a building is there is a direct link between the purchase and the
objectives of the project
• Site investigation and preparation
• Cost of preparing the land for development, including the cost of site investigation,
remediation, reclamation, decontamination and demolition and preparation
• Building and construction
• External and internal refurbishment and conversation of existing buildings, new build
premises, provision of services (eg infrastructure) and landscaping
• Plant and machinery
• Tangible fixed asset used for purpose of providing a service for the project
• Fees
• Fees and salaries for design and supervision not to exceed 12.5%

9. How it works in practice

10. State Aid Exemption Notice (@ Project Level)
• Chrysalis can invest in a number of commercial and sub-commercial means:
• Senior loans, at or below market rates
• Subordinated loans
• Equity
• Upside risk sharing: preferential returns
• Upside risk sharing: priority returns
• Upside risk sharing: timing of investment
• Downside risk sharing: first loss position
• Chrysalis can combined repayable investments with grant fund
• Fair Rates of Return must be established and verified regardless of condition

11. State Aid Exemption Notice (@ UDF Level)
• Chrysalis can receive further public and private sector investment into the UDF
• Investment is made in return for a share of potential ownership in the UDF
• SAE Notice allows for private investment to be made on non-pari passu terms with
the public funds in the UDF, which provides an advantage to the private investors
compared to normal market conditions

12. Chrysalis - DELIVERING RESULTS

13. Completing a stalled development:
Watson House & Central Village
Central Village is part of the city’s plan to “stretch” the
city centre – but development has stalled twice
Chrysalis loans are for:
1.completion of the Lewis’s
department store
2.renovation & extension of
Watson House
The outcome will be:
-High quality public realm
-New Grade A office space
-Realisation of the City SIF

14. Supporting the Visitor Economy:
Arena and Conference Centre Extension
• 8,100 square metre extension of Echo arena and conference centre
on the King’s Dock
• Development cost of £40 million
• Chrysalis loan of £8 million to support construction

15. Supporting inward investment
ACL – 89-90 Duke Street, Liverpool
• 5,575 square metre
redevelopment of 2
buildings
• Development cost of
£10 million
• Chrysalis loan of £1.4
million to support
construction
• State Aid Exemption
route

16. • Chrysalis loan of
£3.5 million
• Total investment
programme of £20 million
• Approximately 160 jobs
• Market leading technology
• Support for the city
region’s green economy
credentials
Supporting foreign direct investment:
Tratos, Knowsley
Entrepreneurial Italian company seeking expansion amidst
complex financing arrangements

17. In the Pipeline:
Liverpool Life Sciences Accelerator
• Proven need to retain life sciences
companies
• 7,300 square metres laboratory,
write-up, office and networking
space to companies in the life
sciences sector
• To be built on the Royal Liverpool
hospital site
• Dedicated incubation manager to
provide accelerator function to new
SMEs
• Project cost of £20m
• Chrysalis senior loan of £9m
Delivering on the Knowledge Quarter’s aspirations

18. Enabling growth industries:
Hornhouse Lane, Knowsley
• Latent demand for high
quality space – esp.
with arrival of the
superport
• 10,000 square metre
speculative warehouse
on Knowsley Industrial
Estate
• £6 million project cost,
Chrysalis loan of £2.4m
Unlocking latent demand: logistics & warehousing

19. Looking forward:
Need for coordination & creativity
COORDINATION, CREATIVITY & COMMERCIAL RIGOUR

20. The Future…?
• Pooling of public funds to attract private capital leverage
• Northwest started an experiment of pooled funds for place-based integrated
economic development

21. Chrysalis in the Liverpool City Region
Presentation to placeEXPO:
Looking back, looking forward
17 June 2014