Overview

A NEW SOURCE OF FUNDING
FOR PUBLIC SECTOR BODIES

ADJUTO unlocks development opportunities through a unique funding solution, collaborative partnerships and private sector skills and capacity.

Pressure on public bodies is at an unprecedented level. In the current age of austerity, public sector resources have been affected by shortfalls in financial support from central government, lack of bank funding and a limited number of developer partners with financial backing. These combine to ramp up the financial pressure. Public bodies are competing to attract investment, tenants and income to support jobs and frontline services.

So where do public sector organisations go from here?

DELIVERING MORE FOR LESS
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A CATALYST FOR GROWTH

Benefits

In my view... any client authority may have a high degree of confidence that the structure is compatible with procurement law.

Jason Coppell, QC
2016

UNLOCKING DEVELOPMENT OPPORTUNITIES

ADJUTO unlocks development
opportunities and provides:

  • A unique funding solution
  • Collaborative partnerships
  • Private sector skills and capacity
  • A solution that outperforms institutional funding and prudential borrowing routes
  • Fresh thinking applied to regeneration
  • Additional income
    • interest from loan to investors
    • profit rent from occupational tenants
  • Option to buy back at agreed term
  • A HMRC reviewed model

The ADJUTO team has developed an innovative model for the financing of works. The objectives of the model are:

  • To enable the public sector to access sources of funding for development, principally through the transfer of land, and long lease income
  • To maximise tax efficiency, reducing costs to the public sector
  • To provide a state aid compatible model

Solution

THE ADJUTO SOLUTION

ADJUTO delivers new capability and capacity through a leading edge
model and a multi-disciplinary team of experts.

ADJUTO delivers quickly and effectively to unlock development opportunities, stimulating growth and employment.

A public organisation can choose to act in the capacity of ‘Bank’ and receive a market return for cash loaned into the model.

This model removes the requirement for an external development company.

The public organisation can choose to act in capacity of ‘Developer’ and receive a percentage of developer profit.

Process

UNLOCKING ADJUTO IS
FAST AND EFFICIENT

Having highlighted an opportunity we agree to work together to investigate the viability of your project.

Working in collaboration with the public body, the ADJUTO team will support and define your scheme brief.

For more complex projects we have preferred suppliers who have experience and can assist in developing the client’s own internal business cases, solve viability issues and work through funding options.

Free design and cost services as part of feasibility study.

To protect the parties, all stakeholders sign a non-disclosure agreement without making a contractual commitment.

With our team of experts our proposal will be delivered with legal (OJEU & state aid), financial, design and construction know-how built in.

All parties agree Heads of Terms in preparation for the contract.

Willmott Dixon build your project to an agreed programme and budget using local resources.

All the hard work is rewarded with your building delivered on time and on budget.

ADJUTO MODEL

Development Company can either be third party developer or
the public organisation acting as ‘developer’

CASE STUDY

A public organisation with a need for a private sector
operated laboratory building

PERFORMANCE

Unlocking ADJUTO is fast and efficient

The chart illustrates the ADJUTO offer, demonstrating its competitiveness compared to
market rent and PWLB borrowing options. ADJUTO is completely flexible to the public
organisation needs. We are also able to offer a ‘low start’ rent product (not shown)
which will allow a low initial cost for the first 5-7 years, providing a significant profit
rent and/or buffer to manage demand in the period where the risk is at its greatest.

WATCH THE PANEL DISCUSSION

Maximising the Midlands' assets through smart financial structures

Midlands UK Pavilion, MIPIM 2017

THE TEAM

THE TEAM BEHIND ADJUTO

ADJUTO introduces an impressive team of experts in structuring
property transactions and the design and build of your project.

Build >

Willmott Dixon create, improve, care and invest in the built environment. Its ultimate ambition is to provide sustainable space for people, businesses and communities to thrive in. Willmott Dixon is one of the UK’s largest privately-owned construction companies.


Structure >

Adducere has years of experience in managing property transactions. Aware that property investors have not always had access to sound advice, Adducere gives individual investors unique access to professional expertise that significantly enhances returns from property investment.


INDEPENDENT EXPERTS

The ADJUTO team can introduce you to independent
professionals with experience of the product.

Legal >

DLA Piper in the UK provides full service legal advice from London and major UK centres. Unlike many law firms, DLA Piper acts as trusted advisors to its clients with a range of essential business and commercial advice.


Advise >

Gleeds is a world class management and construction consultancy with over 125 years’ experience in the property and construction industry. Its reputation for combining personality with professionalism allows Gleeds to put its clients’ needs first.


Q&A

QUESTIONS & ANSWERS

What is the risk of legislative change in relation to the use of capital allowances and the impact on a project’s funding if the scheme is already committed? >

  • Capital allowances are long established tax allowances and are not seen as a structure to be stamped out; use of capital allowances is not tax evasion
  • Legislation can change, however, the risk of change sits with the investors not the public body or Willmott Dixon
  • At the time of Financial Close of the funding cash for the project will have been committed and will sit in a ring fenced bank account released against QS certificates

What is the risk of negative publicity? >

  • The model has been reviewed positively by QC
  • The model is not aggressive tax planning and therefore the risk of negative publicity is minimised
  • Effectively a public body is entering into a sale and leaseback, something they do regularly and have been doing for years

Where does the money come from? >

  • The Investor cash is placed into a bank account at the time of the Financial Close (FC) of the funding
  • It is released against QS certificates
  • Professionals involved in implementing the model are obliged to go through a “know your customer” (KYC) process and in certain circumstances the fund raising will be subject to Financial Conduct Authority (FCA) regulations
  • A public body will have transparency and knowledge of the investors
  • Willmott Dixon will have a contract with a public body and the public body will pay for the works done

Is the model state aid and OJEU compliant? >

  • Yes
  • The model has been reviewed by Jason Coppell QC, by DLA Piper LLP and DWF LLP
  • Nottingham City Council’s in-house legal team has signed off the model, as have a number of other public body legal teams

What is the benefit to the Local Authority >

  • Public bodies do not pay tax and cannot claim capital allowances
  • The model is designed to allow public bodies to share financial benefit, created by the model, with the investors
  • It also allows the public body to act as debt provider to the investors so it can take revenue advantage on the cost of its borrowing and margin charged to the investors
  • The modelling of the rent payable in the first 5 year period will typically allow for a reduced or discounted rental payment by the public body
  • If the public body is able to sublet at a rent greater than that payable to investors, the profit rent is retained by the public body
  • The model acts as an alternative funding option to a public body over PWLB borrowing and provides greater flexibility than a pension fund would offer

At what stage of the build process does the funding model need to be introduced? >

  • The funding can be put in place any time after land is controlled by a public body (or right to purchase is assignable), planning is in place and a fixed price build contract is negotiated
  • The cash from investors can be introduced before the start on site, during build or after Practical Completion — so long as the capital allowances remain intact

What impact does introducing funding have on the build programme? >

  • Depending on time of year, funding typically takes 3 to 6 months
  • The build process can continue to original timetable with the public body using PWLB (Public Works Loan Board) cash or other monies and then those monies or a percentage of those monies can be replaced by the investors’ cash

Can existing property be refinanced to free up PWLB cash? >

  • Property that has recently been practically completed and has a good percentage of capital allowances (and those remain intact, not claimed by third party) can be refinanced by using the ADJUTO model
  • This would typically result in the public body receiving cash at least equal to that spent on the project and having the ability to re-use that cash on alternative projects

What land interest do the investors require? >

  • In order to claim capital allowances, investors must own a substantial land interest in the asset
  • Typically, investors require a 150-year long leasehold interest. The public body can retain the freehold
  • If the option to purchase the asset back is exercised by the public body at year 5, this 150-year lease is collapsed

What is the minimum occupational lease length that the public body would have to enter? >

  • The investors typically require a 30-year occupational lease with institutional rent review provisions
  • The lease will be collapsed if the option at year 5 is exercised by the public body

Can the option to buy back at year 5 be assigned by the public body? >

  • The option to buy back at fixed price will be assignable

Contact

KEY CONTACTS

For a swift initial assessment of any of your development local
growth opportunities, ask our team for a meeting...

MICHELLE COTTERILL
Account Manager
Willmott Dixon
M: 07971 518 849
E: 

JANE KEMP
Partner
Adducere LLP
M: 07717 813 483
E: