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Jessica – The Blueprint model
Overview
I want to describe how, in the UK, we use public private partnerships to deliver urban projects that deliver public policy objectives and that make a commercial return.
In other words I will describe a potential JESSICA structure, although it has not been funded by ERDF money.
The example I will use is Blueprint, a partnership between the igloo regeneration fund, English Partnerships (the UK government’s national regeneration agency for
England) and emda, the government’s regional development agency for the East Midlands of England. This is just one of a number of similar vehicles that we are invested in and manage in the UK.
Igloo Regeneration Fund
But first a few words about the igloo regeneration fund. We are described by the United Nations as the world’s first responsible property fund.
We invest in
; well designed,
; environmentally sustainable,
; mixed use,
; urban regeneration projects for the
; creative and knowledge industries in
; deprived areas on the
; edge of the UK’s top 20 city centres.
We have a development portfolio of about ?2.5 Billion and are funded by a number of major institutional and socially responsible investors. Our fund manager is Morley, Europe’s largest real estate fund manager with around ?25 Billion of real estate assets.
We are a socially responsible investor founded on four principles of good design, environmental sustainability, social progress and happiness and well-being. Our SRI policy is core to our business process and is audited by a high profile audit committee led by Jonathan Porritt who also chairs the UK Government’s Sustainable Development Commission.
Background
JESSICA is an immensely powerful instrument that, in the UK at least, is poorly understood. Jessica is new and everyone is still learning about it. People who understand European funding do not understand the power of investing in projects that make a return on capital. People who understand making a return on capital have mainly not heard of, and often actively avoid, European funding.
It is also a flexible model with many possible structures – not something European
funding has been known for. But I believe the equity co-investment approach is much more powerful than for example a public:public lending model. With equity co-investment a commercial partner with specialist skills is incentivised (a powerful economic concept) to deliver public benefit that help deliver the operational programmes.
Project - Blueprint
Blueprint is an urban regeneration business formed two years ago following a competitive procurement process by the east midlands development agency and English Partnerships.
Igloo was selected and formed a partnership, Blueprint, in which the public sector has 50% and igloo has 50%.
This partnership purchased land from its public sector partners with money injected by igloo. The public sector received cash and their 50% share in the partnership.
Igloo provides a management team who then deliver physical urban regeneration projects on the land that deliver public policy objectives.
Here is a selection of the projects that Blueprint is delivering. You will see a strong Lisbon agenda emphasis on creative and knowledge industries.
; Nottingham Science Park
; Leicester Digital Media Centre
; Derby Bold Lane
All these projects are in partnership with the city government’s in those cities. So Blueprint brings together national, regional and local government in delivery partnerships with the private sector that actually make projects happen.
In total Blueprint’s project portfolio is about ?500m. All the projects make a commercial return but in some cases this is only possible with public sector financial assistance.
Blueprint is a private sector organisation for state aid purposes and therefore all financial assistance is provided in accordance with the state aid rules.
When Blueprint completes a project it sells it and reinvests the capital in new projects. Thus it is a revolving fund that grows by reinvesting its capital and profits. At the end of its ten year life the public sector partners could, if they wish, take out their capital which will have grown by 400%.
Major Issues
1 Blueprint Success
Blueprint has been successful so far. It has been profitable from year one and has beaten its budget in both its first two years of operation. It has successfully delivered one of the region’s most complex regeneration projects which the public sector had been unable to deliver in the previous 20 years. It has done this by attracting a team of talented regeneration professionals that would not otherwise have been attracted to the region and by attracting private capital which similarly would not have invested without the support of the public sector.
2 JESSICA Model
I believe Blueprint is an ideal, although not the only, model for a JESSICA structure and that it proves that JESSICA can be both a successful and powerful tool in delivering urban development and the Lisbon agenda.
As we have seen, when Blueprint completes a project it sells it and reinvests the capital in new projects. Thus it is a revolving fund that grows by reinvesting its capital and profits. At the end of its ten year life the public sector partners could, if they wish, take out their capital which will have grown by 400%.
3 JESSICA Future
Within the rules of JESSICA the public agencies will be free to use this money however they wish. They will have taken ERDF, or free money as I call it, and multiplied it by 400%, and then they get to keep it. In the meantime they will have made a substantial contribution to delivering the ERDF programme and benefits.
It is hard to understand why it is taking so long for JESSICA funds to be set up. But it is simply a combination of
; lack of understanding on behalf of the leadership of the public agencies
that should be leading on JESSICA and
; the newness of JESSICA as a concept and its relatively late introduction in
to the ERDF process and
; the lack of understanding of European funding in the private sector.
However in the UK all the ERDF programmes have references to JESSICA and decisions on how much ERDF to allocate to JESSICA are in the course of being made. I suspect that once the first RDA delivers a JESSICA fund then all the RDAs will.
Conclusions
We are now involved in a number of proposals for Jessica funds in the UK in England, Scotland and Wales.
I believe the combination of public and private capital and skills produces the best outcomes in urban development and that JESSICA is a brilliant tool to unleash this power through ERDF investment.
Chris Brown
Chief Executive
Igloo Regeneration
chris.brown@igloo.uk.net
07900 492280