/Assets%20and%20Liabilities%20main%20document by Northwest Regional Development Agency

~orthwest

REGIONA OEVElOPMEI A6

I Confidential

Northwest Development Agency Assets and

Liabilities Plan January 2011 J!

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NWDA ASSETS AND LIABILITIES PLAN

CONTENTS Executive Summary Chapter 1 Introduction 1.1 Principles, objectives and assumptions 1.2 Partner engagement 1.3 Disposal strategy 1.4 Layout of the plan

1.5 Exclusions Chapter 2 Land and Property 2.1 Summary

2.2 Directly owned land and propert 2.3 Contingent assets 2.4 Property Joint Venture

2.5 JESSICA Investment Fund

2.6 Daresbury

2. 7 ~ssociated"contingent liabilties 2.8 Ongoing rpanagement obligations ยก i 2.9 Financial model ,

2.10 Next steps and engagement

Chapter 3 Financial and Company Interests

3.1 Venture capital loan funds

3.2 Corporate interests

Chapter 4 Operational Estate 4.1. Freehold and leasehold properties

4.2 Offce fumiture 4.3 ICT equipment

4.4 Vehicle leases

4.5 Softare licence agreements Chapter 5 Programme Liabilties and Post NWDA Activity 5.1 Project expenditure beyond March 2012

5.2 Compulsory Purchase Orders

5.3 Clawback Liabilties 5.4 Business Link NW Liabilities 5.5 Expired Contracts

5.6 Post NWDA programme activity

Chapter 6 Key Milestones and Activities l Chapter 7 Financial Summary Chapter 8 Risk Management

Annexes 1. As'ĹĄet ,and liabilty schedules

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l. Land Ă nd Properties

B.Contingent Assets ''I

C. LOc;ms

D. Venture Capital and Loan Funds E.RDA Section 5 Companies F: Estate and Offce Equipment G. Current Liabilties H. Long Term Liabilties i. Contingent Liabilties

2. Projected statements of financial position 3. Portolio approach - Land & Property interests

Executive Summary NWDA has a large, varied and complex portolio of assets and liabilties. The broad

thrust of our proposed approach, articulated in this Plan, is to divest ourselves of assets and liabilties prior to closure in a way which meets the National Transition Board's (NTB) assets and liabilties principles and contributes to an effective and effcient closure. Our key objective is to minimise the number of assets, liabilties or ongoing activities which default to successor organisations. In many cases we have identified clear exit solutions. In other cases we have sought to assess a range of

possible options and consider where clear choices lie as a basis for further discussion with the NTB and stakeholders in the Northwest. \

Land and Propert

NWDA's directly owned Land and Propert portfolio contains individual sites and properties which display some of the following characteristics:

. Subject to existing development activity and therefore potentially requiring bespoke transfer solutions . Income generating . High value without significant re-investment

. Require new investment to extract value .,r

. Carry holding and management costs

. Have associated liabilties such as project costs, CPO claims, potential ERDF

clawback etc 1 "

Many NWDA assets were transferred into a,Public Private Partnership (PPP) in 2006 which provides for annual income until 2016. NWDA is also entitled to repayment of its cash investment and a proportion of returns from the JESSICA Investment Fund in

2020.' ('

NWDA has also g~~nt Ă ided a la.rge number of land and property projects undertaken

by third parties and enjoys clawback and overage rights. These can be categorised as: . -"Local ~ '"Authority 'I It owned sites with a high likelihood of future repayment when if the siteSĂ&#x2020;1!~ sold on I developed.

. \ Private sector developments where overage may be payable dependent on

the prdfitabilty of those developments. . Grants where clawback is payable only in the cases of default e.g. non penormance or change of use.

There are many variables regarding the way in which the overall portolio of Land and

Properties, and parts thereof, might be best managed in the future. However, we believe that the fundamental choices to be made are as follows:

. Apart from sites which can be readily disposed of or transferred on an individual basis prior to closure, NWDA's own sites and properties should be

managed as a single portolio in order that income can be used to off-set costs. The question is, at what level and by whom and to what end?

· Current PPP and future JESSICA income could be used to support the land and property portolio, especially as a means of reinvestment to ensure the realisation of full asset value.

· The same choices exist in respect of c1awback and overage, where the expectation of a return is sufficiently high to justify the resource investment in monitoring activity. Following the Regional Transition Group's Assets and Liabilties Workstream

recommendations, the NW Leaders Board (comprising Local Authority Leaders) has stated its preference that the NWDA's land and property assets and liabilities be retained and managed (by HCA) as a single portolio under their direction and oversight for the benefi of the locations in which they reside. This proposal is stil subject to further option development and due dilgence. '1,

Financial and Company Interests 'i.

The Plan puts forward a clear recommendation that Nõrth West Büsiness Finance (the North West's JEREMIE holding fund) should be the benefici~ry of all future income from various NWDA supported venture capital loan funds, in accordance with the approved Business Plan for JEREMIE. NWDA's' interest in" North West Business Finance should transfer to Capital for Enterprise Lirñited in accordance with the

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existing agreement between BIS and the RDAs. L NWDA wil exit from its other company interests\ on a phased basis up to March

2012. Our place in Joint Ventures wil be taken bý whichever successor body takes responsibility for the NWDA assets in those'JVs.

Operational Estate

, )1 ,

The Plan recommends the immediate marketing and disposal of two of NWDA's three freehold interests -which form part of the operational estate and which can be released now without operatiopaí impact. The third freehold, a unit which serves as our archived~ r~cords store, would be retained until closure and added into the Land and ProperJ portolio. , The Pla'ñ all~o reconÌ1mends that action be taken now to seek to assign the residue of

our office leases which run beyond closure and also to withdraw forthwith from short lea¿~s on ove'rseas offces used for inward investment activity. , .. "

BIS have c~onfirmed to NWDA that all office furniture and equipment should be disposed of prior to or upon closure. We therefore propose to undertake this disposal by sellng to partner bodies and on the open market using the OGC framework, on a

phased basis as items become surplus to requirements. Some ICT equipment wil be offered to staff at market value and all remaining items, including those with no value will be gifted to charities.

Vehicle leases and softare licence agreements wil be managed out prior to closure.

Programme Liabilities It is assumed that any project expenditure liabilties wil fall to our statutory successor

(BIS or Residuary Body) although there may be exceptions if this liabilty can be transferred with an asset. A specific question presents itself regarding actual and contingent CPO liabilties at two sites and where these liabilties might falL. NWDA is taking concerted action to ensure that such liabilties are dealt with prior to closure and any "over hang" is minimised.

Some ERDF c1awback liabilties (and any arising from other Government funding), which exist where NWDA has received funding as applicant, may be capable of transfer to whoever receives the corresponding asset. Others are Iikely!to pass to our statutory successor. ,) Upon its closure in November 2011, NWDA wil inherit from \Bu~iness Li.nk: NW .~. :1,::",,;. ..';, _ I¡¡'"

contingent liabilties concerning indemnities provided up,pn th~,çreati9n' of the

Business Link company and ERDF grants it has s_eëùred ôr? inhé'nted from

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predecessor Business Link bodies. Upon RDA closure ttlèse"'t\jll neep to transfer to our statutory successor. ""/,,,

Summary of Exit Strategies

A summary of the exit strategies proposed/in thlSi.plan ördifferent asset and liabilty

types is presented in the table below. ",' ""'\O;~/ ":- :' if. r

Asset/Liabilty Type

Assets Sites to be sold in 2011/12 Sites to be transferred in 2011/12" .. ,./¡j~~.

Market dis osal

Specifc bespoke solutions potentially involving TSB, HCAand LAs

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Remainin ortolio of sites '%!t.",é"'c PPP/JESSICA income - post March

To be determined To be determined - potential use to support liabilty

L&P clawback incomë:i7póst,March

To be determined - potential use to support liability

2012 :ii¡:;"h "'i~!_. -~~~:t:t'

2012 ,,,Ef';:" ,':., ,\", """C VCLF returns - to date / future o rational;Estate freeholds

Ofce Furniture ~ ICTiiE ui ment~i#'¡',!o,!"e!;" l~:

Liabilities? Operation~t'iiÆstate leaseholds

to closure with balance

ost March 2012 Vehicle Leases - ost March 2012

Softare licences - post March

2012 NWDA u to closure and BIS/RB thereafter

Pro"ect a ments - ost March 2012

NWDA up to closure, seek to transfer any

CPO contingent liabilty

outstanding liability with asset, otherwise wil default to BIS/RB ERDF clawback

Transfer with corresponding asset, otherwise will default to BIS/RB

Risks

Key

A full Risk Register is included in the Plan. Risks are scored from a combination of likelihood and impact. On this basis, two red risks are identified. . Abilty to dispose of freehold land and property and operational leases given

current market conditions - The mitigation is to commence marketing as soon as this Plan is approved. . Delay in decision on successor arrangements (e.g. Residuary Body) for

managing ongoing project activities which could be highly detrimental to a number of important projects - The mitigation is for the NTB to make early decisions on a Residuary Body and for NWDA to work closely with grant recipients to keep projects on track and ensure a smooth hand

over. 路

Impact of Implementation

Financial

Financial schedules have been prepared and are attached as Annex 2. These

provide projections of the Statement of Financial Position for the years ended 31 March 2011 and 31 March 2012.

Detailed financial modellng has been undertaken on the Land and Property assets. This indicates that the suggested asset portolio ,which requires management post NWDA closure can generate an NPV of_:

"''leases on the operational estate which extend

A key financial risk to BIS is the

beyond 31 March 2012. The total Iiability\(i.e. value up to expiry date) is _.

'prior to closure wil revert to BIS. ..

Any which cannot be arranged

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Chapter 1 Introduction 1.1 Principles, Objectives and Assumptions Since the announcement of RDA abolition, NWDA has reviewed all of its assets

and liabilties to ensure that they are comprehensively and accurately recorded

and that all supporting data is centralised and held on a consistent basis. Separate closure activity on knowledge management has prioritised assets and liabilties in terms of ensuring that all files and records are collated, thoroughly

reviewed and ready for transfer. NWDA was therefore very well placed to respond comprehensively to Transition Guidance Note 6 through the compilation and submission of this Assets and Liabilties Plan.

Our approach to the disposal and transfer of assets and liabilities, as articulated in this Plan, is governed by the asset and liabilty principles aqopted by the NTB,

namely (para-phrased): . Decisions on disposals are made based on the principles of the RDA Act -

to further the economic development and regeneration of its area. '"

. Any authority disposing of land, property or other assets must comply with

EC state aid rules.

. Wherever possible assets and liabilties should be disposed of together with consideration given to what, if any, other assets and liabilties are going to the receiving body. When packaging assets and liabilties together

the aim should always be to ach.ìeve the best possible economic outcome

for the region.' i

. Wherever possible,lassets~~lÍould be disposed of before the end of March

2012. · .-

. The disposal of an asset and any associated costs should be affordable in

the current fiscal climate. . Consideration should be given to whether the asset wil prosper with the

planned new owner - this means the original strategic intention for aquiring the asset must be considered before making a decision on disposal and a

view taken as to whether this wil be achieved and built on with the new owner. Consideration should also be given to: o Achieving best value o Meeting local demands and ambitions

o Reaching a reasonable balance between national deficit reduction, national policy aims and local ambitions/opportunity o Striking a balance between the original purpose behind the asset's

purchase and the views of localities on best use

o Ensuring an appropriate balance between capacity, risk and the Government's commitment to localism.

Our objectives in producing this Plan have been as follows: 8

. To prepare the plan in accordance with RDA Transition Guidance Note 6

and to present proposals which accord with the above principles and meet

NWDA's key objective of disposing of as many assets and liabilties to suitable bodies as possible by 31 March 2012, thus minimising any

"overhang" in terms of default transfer to a statutory successor upon NWDA closure.

. To present to the NTB a coherent description and analysis of all of our assets and liabilties with relevant supporting detailed information. . To set out a range of potential options for disposing or transferring different types of asset and liability and to convey i the potential

permutations available to packaging those different types. . To put forward clear preferred options where we believe that a single

option presents itself as the best way forward.

. To narrow down the options in areas where there is notnecessarily a single preferred solution and to articulate the types of choices that need to be considered, and further work that may need to be done, before arriving at a decision. This is especially true of Land and Property assets where a

large number of options exist and where a number of potentially competing policy and financial issues need to be considered. . To present the information in a way which has the greatest prospect of

securing early decisions on the future of NWDA assets and liabilities

which is key to ~nsuring an'\ effective and effcient closure of the

organisation. ~

The Plan is based on a nuirber of key assumptions as follows:

. This is a plan which paves the way for decisions on asset and liability transfer;.itis-not.a detailed implementation strategy which can only be put in place when transfer decisions have been made.

t~ ~.

. \The plan,is based on the best possible information at the current time but

, is subject-to a range of dependencies outside of the Agency's control such ii as imarket conditions, the wilingness of potential recipients of assets to

accept transfer etc.

路 All financial information is based on best current estimates but subject to change. . The plan is based on the premise of timely transfer of assets and liabilties

to nominated successors with minimal residual transfer to a Residuary Body or other statutory successor. However, this approach is highly dependent on early decisions from Government on transfer solutions. . It is assumed that the Government wil cover the transaction costs of asset

and liabilty transfer / disposal by amending our resource allocation or providing access to the Transition Fund.

1.2 Partner Engagement In the Autumn of 2010 the NW Leaders Board initiated a review of various NWDA

functions and activities in order to determine its own preferences in terms of transition. Ten workstreams were established, covering the following areas: . Inward investment . Business support

. Europe . Research and intellgence

. Assets and liabilties . Planning . Tourism and the visitor economy

. Atlantic Gateway (a specific regional spatial initiative) . Civil contingencies

. Sectoral development

The assets and liabilties workstream focussed' on NWDA Land and Property assets and liabilties and involved Local Authority representatives from across the region, shadow LEPs and HCA. NWDA contributed to this review by presenting information on our assets and Iiabiltie,t but was not part of the consensus that emerged. Our role was to inform and assist, this working group. The scope of the review covered the following:

. NWDA owned sites and propertiJs . Income from the Property PPP

. Future income frĂľm JESSICA. Potential income frĂ˛m Lo~l Authority owned sites which had been funded

by NWDA' . PotenJial overage from NWDA funded private sector developments

The preferance from the review, which was subsequently ratified by the NW Leaders. Board, was.

that all of the above elements should be retained as a single

portolJo, managed by HCA in a way which supported local economic d~evelopment objectives. Political oversight of the asset management strategy would be through the NW Leaders Board. ,

That preferance emerged after three other options were considered and dismissed: . Transfer to Local Authorities - Not supported due to inabilty to acquire

from NWDA at market value, the additional financial obligations that site

management would entail, potential financial risks, lack of expertise / capacity, likely inabilty to fund the investment required to realise value from the sites and the uneven distribution of sites across Local Authority districts.

· Transfer to LEPs - Not supported as the LEPs would not be developed

sufficiently in the timescale involved, doubts over the legal abilty of LEPs to hold assets and the reasons under Local Authorities above. · Transfer to Government - Not supported as the North West region and the

places where the assets are located would lose influence over the way in which the assets could contribute to local economic development objectives and was in any event contrary to the Coalition Government's

localism agenda.

1.3 Disposal Strategy The over-arching asset and liability disposal strategy articulated in this Plan can

be summarised as follows: h

of the Land and Property asset portolio and articulate the key choices" as a basis for

. To analyse and narrow down the options for the majority.

further discussion and detailed development. This is a deliberate approach which recognises the need for the NTB to rêconcile potentially competing policy imperatives before maklng fin~al decisions and it is considered that the analysis presented in the .Plan provides the basis for

that to now happen. . To review, action and then ,close those contingent assets which are so

remote that there is little value in continuing to manage and monitor them beyond NWDA's life. . To complete the market disposal of assets where possible and in

accordance with the NTB's asset and liabilty principles. r

· To ensure that North West Business Finance benefits from ongoing

returnsfrom legacy venture capital funds in accordance with its approved s.usine~s'Plan.

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... TÇ) take "all n'ecessary action to dispose of all leases connected with the o~er~io.n~i estate in order to minimise the residual liabilty post closure. \

· To )take all necessary action to reduce the extent of programme related !inancial liabilties post closure but at the same time alert the NTB to the inevitable liabilties that wil remain following closure.

NWDA is mindful of its obligations under State Aid law and wil ensure full compliance with State Aid law when transferring assets and liabilties. Where disposals take place outside of a statutory transfer scheme, they wil be made at a

genuine market rate as determined by an independent expert and purchasers wil be selected through a genuinely open and competitive process.

1.4 Layout of Plan The Plan narrative is organised to deal with assets and liabilties in four chapters:

Land and Property, Financial and Company Interests, Operational Estate, and Programme Liabilties. This is to avoid repetition and to ensure that related issues are considered together. Clearly this does not wholly reflect the structure of the

standard schedule templates and the narrative therefore takes care to cross reference to the schedules as appropriate.

We have included, at Chapter 6, a table setting out key milestones and activities to ilustrate the timelines involved in implementing the Plan. Clearly at this stage

some of this can only be indicative until the Plan is approved and all selected options are known. Even then, processes and timelines wil need to be agreed with selected recipients of assets and liabilties in order to establish the detailed implementation plan.

We have also referenced at Chapter 7 headline financial data to support the information contained in the previous chapters which is drawn from the detailed financial analysis contained in the asset and liabilN schedules at Annex 1.

Finally, Chapter 8 provides an assessment of the key risks associated with the Plan and the groups of assets and liabilties.

1.5 Exclusions . We have not included details of Intellectual Property within this Plan. We do not believe that NWDA owns or has! rights to any items of IP with a value of

more than ÂŁ150K. Consequently we believe that our IP is a knowledge asset ,asset and we have therefore dealt with the detail of IP in our Knowle~dge Management Inventory which has been submitted to BIS in response to TGN9.

rather than a financial

. We have provided NPV calculations in respect of land and property assets, as requested by the guidance. We have not done this for venture capital assets as ttiere is an existing decision (JEREMIE business plan and Government approval) that future returns from legacy funds wil flow into Northwest

BusinĂŞss Finance (NWBF) and a recent Government decision that NWDA's

interests in NWBF wil transfer to Capital for Enterprise. NPVs have not been calculated for operational furniture and equipment assets due to the very low values involved which are not material to this Plan.

Chapter 2 Land and Property 2.1 Summary NWDA has a range of Land and Property interests which have been acquired and held for a variety of specific objectives, with the overriding goal of pursuing the long term economic development of key priority areas. The NWDA's interests comprise its own directly owned land and buildings (the

majority of which are focussed in Merseyside and Cumbria) which includes a wide range of holdings, ranging from large employment sites to small standalone office buildings and has a book value of £56.8m.1 As detailed .later on in this

Chapter, it is estimated that further capital expenditure _ wil! be necessary in some of these properties, to realise best value and ""o,yerarching

objectives.

As a result of its substantial investment prograrwiles WDA also has 203 property interests through private sector c1awbaGk'~àiìd ttirq pá,rty land assets.

This Plan has quantified and appraised thoseè'-¡'~terestsè~,d" recommends a

forward strategy for each project.~\:.-...,',\" .~ "iË,~ c.

The NWDA PPP - Property Joint VeJ1tûrefi!ÐaI~§Rury"and JESSICA Holding Fund interests have also been assessè'd'ancHuturê"S'frategies identified. d,'_c~.,e,.",,_.. . 'iA-::.... :t' -''''__'_ '1:",";,..,.

The portolio of activity is large anc::t Görnp'ïex as" summarised below: ,,:;,.I¡¿'¡;;~:1'.:'_;:;I~'~Å~~~t~, '':'f!~, ~ti;§.i-ir

Reference Interest Nature Value

Realisation Timetable

2.2 2.3 2.4 2.5 2.6

0-10 Years 0-10 Years

5 Years + 10 Years +

DaresDury

20 Years +

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':.. -;~~!,~ .;.,:"1'r;¡õiËI'!,'f:'~ t:~~

NWD~' corifrne,nceç!, a review of its direct Land and Property holdings and

coiitingent assets'" during the summer of 2010 in preparation for ,träh'sitió~n!çlosurê. The analysis of each holding reflects NTB principles and ~includes tiiê'extent to which a proposed solution for a holding wil: )

· '",'l!1ller the economic development of an area

· meet local demands and ambitions

· reflect where possible the original purpose behind the acquisition · be compliant with state aid · the packaging of assets and liabilties i King Sturge Annual Valuation March 2010 2 NWDA has developed the cost of investment required based upon 7 sites, including car parks,

development land, buildings portolios, income producing assets and potential refurbishment/development projects. These 'Invest to Divest' figures have been collated using a

combination of existing data and broad brush estimates. As such the figures may change dependent upon market conditions, proposed uses, scheme costs etc, which can only be confirmed following detailed appraisaL.

. . . .

ensure disposal prior to March 2012 s ecure best value for the exchequer be affordable in the current fiscal climate reflect capacity, risk and localism issues

This process has effectively created a two tiered approach to options ass essment for each directly owned site and contingent asset; Tier One has dete rmined whether the disposal or transfer of a site prior to closure is viable and compliant with the principles above, or alternatively whether the interest sho uld be transferred for realisation post the lifetime of NWDA. The Tier Two ass essment considers principal options for the subsequent receiving body. .d'

The table below summaries the outcome of the Tier One options"âialysis.

Outcome of Tier One Strategic Options Analysis As set

Transfer Pre Close -lljjt,15;.~..;J F- 25

Lan Thi Cia

45 '"'.

AÆ0NI A",~, '%"''J

12 36,tJ 'i.

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Eac h of the six asset groups could.ttle 'm;;maged independently post the closure of N WDA. However, it is irnp'òrtant'Wtò, nòtethat the NWDA Land and Property interests represent a mb( âf~t.both ~sséts and liabilties and as such, the rb~',~t i:,'t! r:

cont inuation of the mariagernent 'òt each category as an overall portolio enables ~..i\.. i....:. ~¡;_\"', ..'"

a fin ancially balance,d'aiì~ suslainaple approach to be adopted. The continuation

of a portolio approâëh hàs,therefore been identified as a viable solution.

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The North vyeStL~àg.ers B,oard (consisting of Local Authority Council Leaders)

has statedJ'its~~ipreferèb£e)¡(following the Regional Transition Group's' Asset & Liab i1ties~'W8rkstr~am recommendation) that the land and propert assets and Iiabil ities of tneJNWDA be retained and managed (by HCA) as a single portolio, und er wfheir dirèçtion and oversight for the benefit of the localities in which they "",";" i dè. ~\T~Qi~""proposal is stil subject to further option development and due ,,res if i1g ence.

)

Key) Points N WDA

land and propert interests are large, varied and complex

Fe edback from the market indicates that it wil not support the disposal

of all interests prior to 2012 and such an approach is not considered to me et the wider NTB Asset and Liabilty principles, including local am bition, or the views as expressed by the Regional Leaders Board.

31 Wirral I

nternational Business Park is a large site and plots are included in both the pre closure

disposal a nd post closure resolution categories.

Following the NWDA analysis, land and property interests have effectively been divided into two segments - pre and post 2012.

For the remaining post 2012 interests, the continuation of management as a portolio of activity is seen as key to achieving the NTB Asset and Liabilty principles.

The components of the portolio effectively net out each other, creating no additional call on Government resource, whilst ensuring that long term economic development objectives are achieved as set out in the NTB Asset and Liabilty principles. ~:

2.2 Directly Owned Land and Property

The table below sets out key details of the directly owne:~~~~\apil~a!)d"property

assets. Please see Annex 1 A for full details. "tl'?It:" . ',.. 't\;,,¡ )' Site Name

Site Area (ha)

BIS CLG BIS BIS BIS BIS BIS BIS BIS BIS BIS BIS BIS BIS BIS

Book Value Pre/Post 3113/10 Closure £000 Post Post Post Post Post Pre Post Post Pre Pre Post Post Post Pre -' Post Post Pre Post Post Pre Pre Post Post Pre Pre/Post

BIS/CLG

Asset ,'i'i,Y/iJJ!;ijiE"V' S'f,:d~'\ Lillyhall East Ind.Estate, Workington 7. 79 ""-.-t::'èii Devonshire Road Ind.Estate, Milom "b,.. J~98 ::'.l :,.~t Lillyhall West Estate, Workington ~10.64,,, Lillyhall Business Park, Workington Hi;8 t:) ,.,%':.',"::r-., ....'.1, Land at Mercury Court, Liverpool 4'/ "" ~,~. 16\\\~,¡"..ii; /" Lea Green Ind.Estate, S1. Helemu "f~t,;." °t39

Croft Business Park, BromboroCighJ:, "'c:- '-;7'~

ïW~ft\.

2;'11

Wavertree Technology Park;rUverpdoh", j. '''3.87 ,."''' , ~'-"~" Rossmore Road, Ellesmére~Port!g¡, 1.05 ~:~~If¿: ,,~ i':-'7:'IHooton Business Park, Ellesmere 9.32 _._ r.~, ;,. Port White

haven Comniecs.~"&~ark:\"

~\~iy~

Estuary Commerce Park, Liverpool Estuary - Nat Bio MaQufaç1yring Centre Estuary h Aè,rpdrome"Çomplex Central Park~(North Manchester Business "ì!;!fktiig't##l ,.&:¿' Park:) Ancòat~ Urban iYilage, Manchester

12.95 31.55 2.5 9.02 27.18 3.3 26.63 164.71 0.85 2.54 0.12 8.09 0.68

Wirral International Bus.Park, BromborouQh

12.38

CLG BIS BIS BIS BIS CLG BIS BIS BIS BIS

Former Michelin Plant, Burnley

16.97

BIS

BoulevãfcL!ndListry Park, Liverpool

Kingsway Business Park, Rochdale

Broadshaw Farm, Rochdale Borders Business Park, Longtown Station Road, Silloth Venture Point, Speke, Merseyside Harbord Street Ind.Estate, Liverpool Daresbury Science & Innovation Campus

-. .

Post

Stone

bridge

Business

Park,

Gilmoss, 30.44

Post

BIS

Mersevside 73-81 & 353-353 Edge Lane, Liverpool

0.97 (73 - 81) I CLG

Post

Liverpool Digital

0.15 (353 - 355) 24,384 sq m buildinQ

BIS

Post

BIS BIS BIS CLG CLG BIS CLG BIS BIS BIS BIS BIS BIS BIS BIS

Post Post Post Post Pre Pre Pre Pre Pre Pre Pre Pre Pre Pre Pre

Cross Keys House, Moorfields, Liverpool Lillyhall North Ind.Estate, Workington Kingston House, Liverpool Former Littlewoods Site, Liverpool Bickershaw Collery, Leigh Agecroft Collery, Salford

Cronton Collery, Merseyside Ashton Field, Walkden Mann Island, Liverpool Jordan Street, Liverpool TGWU Building Speke Freeholds Victoria Way, Rawtenstall, Lancashire New Chester Road, Tranmere Windy Arbour Road, Huyton

0.045 10.62 0.11

2.32 17.86 21.99 42.21 5.81 1.59

0.75 0.18 54.1

0.24 0.27 0.16

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r I

2.2.1 Tier One Options Analysis - Directly owned Land and Propert For each of the directly owned sites a detailed review of each asset/liabilty has been undertaken. This analysis" has 'been developed to identify timelines for realistic sale or transfer to the private sector/other public sector bodies, so as to determine what activity can be realistically completed prior to closure, whilst complying with NTB's. Asset ahd Liabilty principles. Individual proformas for each of the sites have been completed, which include details of; issues on title;

any existing agreements;' asset book valuation; strengths and weaknesses; income; plannin'g; holding costs; timescales and risks. Each of the sites has been reviewed':against four possible options as follows: .

路 Dispose J)rior to closure ~. Transfer prior to closure

路 TranMer upon closure and pursue med/long term managed disposal 路 'Transfer upon closure and pursue an 'Invest to Divest' approach

Where transfers have been identified post closure, sites in this category have then been tested against second tier of options, which represent different management solutions, as set out later in this Chapter on page 19.

Following the review process, there is a clear division between sites which can

be disposed/transferred pre-closure and sites that wil need to be transferred to a receiving body. The table below summarises the outcome of the analysis:

T e No

Pre/Post 2012 Prior

Cat 1 Dispose prior 8

to Close Prior

Cat 2 Transfer prior 12

to close

Cat 3 Transfer 18

Post

upon closure and pursue a medium to long term

mana ed dis osal Cat 4 Transfer upon closure and

Further options development and

pursue an invest to

due diligenee

divest a roach

:-".~~t~~~.

Category 1 - As detailed in the table above, 8 site!~!"~OUld;iappeal''';o merit disposing of in the near future, in particular these sites.are those whicH' are of less strategic

nature to the NWDA and local partners. Thes"'~~s)tés;¡haye. beên identified for planned

disposal prior to the closure of NWDA. F,urHier irtniedialã term disposals have been dismissed, as a lack of a phased procesS;~~iI.Jead,tö',~ignificant value loss, as well as not being compliant with the remainil1 NlB' Asset and Liabilty principles, including local demands and ambitions. JL' ",

#.~~ .,'

,.:.

Category 2 -12 of the sites';A'ave een identified for transfer prior to closure. This includes 4 coalfield sites'1'\\hid~'~lare ì~gicã'¡iy best vested in the HCA as these sites are already covered bY46~ Caalfiëlds,programme under a Service Level Agreement with HCA. HCA have(playeçf á" key:role in funding the investment to date on these sites and are assumed'to hã\e. a future role in this type of activity. A number of sites within this categôryi~are;~a)S9 trlê'hold reversionary interests with very little value and

no associateçiJiabilties~ If's"%'recommended that discussions with HCA (which may be residual assets and liabilties) and the impacted py tlÌéìt~pöteI'tial role regarding

relevant Lcl'cal Autharitie~s are progressed immediately to enable transfer. .'.I::¡t~::;,~:,gfß!';i . _,

Thi~¡, category alsò! includes Daresbury Science and Innovation Campus (Joint Venti.re) which it is recommended be transferred to the Technology Strategy Board. DarešBury is~êonsidered to fall within the definition of a 'National Asset' as set out in

Transitiô~!i!"Guidance Note 1 (the NW Leaders Board would, however, wish to understand their potential to influence the further development of Daresbury). It is proposed that all sites within this Category 2 are dealt with and transferred prior to the closure of NWDA. Category 3 - The 18 sites which have been categorised as Managed Disposal are

sites where it is considered there are no abnormal barriers to development. As such

the sites have been serviced and, subject to end user demand, can be brought forward and hence a receipt generated. A staged disposal strategy for these sites, 4 Ancoats is included in both Category 3 and 4, given it is a mixture of Managed Disposal and Invest to Divest

post NWDA closure, is recommended due to the nature of the sites and external factors, such as take up rates. If land supply is not controlled, it is our view that the local market could become distorted and best value wil not be obtained. This is

particularly the case given the pattern of NWDA ownership, which is heavily concentrated on gateway sites into Liverpool. Phased disposal is also necessary to

ensure any control over proposed development and the abilty to secure strategic economic development objectives is maintained. As such, controlled and

medium/long term disposals are deemed to be the most appropriate way to achieve best value for the sites in this category. The role of the receiving body therefore is to

continue to market and manage the landlinterest unti such time that the site is sold/development complete Three key interests, Ancoats, Central Park and Kingsway are also included within this category. It should be noted that the specific nature and complexities of these interests, mean that it may prove necessary to follow a bespoke solution in these

instances. Category 4 - The 8 sites that have been classified as 'Invest to Divest' are sites where it is considered either require or wil benefi from further investment. Some of the NWDA's directly owned assets are a liabilty in that significant abnormal barriers to development remain. These barriers need to be removed In order to make them viable for private sector development. Examples of such up front investment

activity could be provision of infrastructure and / or demolition of obsolete buildings. De-risking these sites wil enable them to be put to the market and market values achieved (estimated cost of investment required is circa ~).

An estimate of the value of the sites in the 'Invest to Divest' category post the investment identified has not. been possibleJo provide, given the current uncertainties

over the eventual end uses for these sites and market conditions at the time of disposaL. However, in the ,majority of cases, the investment that has been identified is regarded as necessary, so as to support the achievement of overarching

regeneration objective's and underpin the existing value, rather than deliver any real step change in the currerĂ&#x152;tbook value.

2.2.2 Tier Two Options Analysis- Directly Owned Sites ii

As outlined above, it is not desirable to seek to dispose of all the NWDA land and propert interests .,prior to NWDA closure whilst also presenting a solution which is compliant with NTB's Asset and Liabilty Principles. In particular, such an approach is likely to result in a significant loss of value and an inabilty to achieve the original

purpose behind the acquisition. In most instances, this would also not support the further economic development of an area or indeed meet local demands.

Given the obvious exit routes identified for sites in categories 1 and 2 prior to closure,

only sites which fall into categories 3 and 4 (for transfer/disposal post 2012), have 5 NWDA has estimated the cost of investment required based upon 7 sites, including car parks,

development land, buildings portolios, income producing assets and potential refurbishmenVredevelopment projects. These Invest figures have been collated using a combination of existing data and broad brush estimates. As such the figures may change dependant upon market

conditions, proposed uses, scheme costs etc, which can only be confirmed following a detailed appraisaL.

been subjected to the second tier options assessment to identify the most viable receiving body/management solution. For categories 3 and 4 (24) there are three second tier strategic options detailed in the table below.

o tion

Advanta es

1. National

Residuary

ensuring assets and liabilities

Body

balanced

Disadvanta es

Viabilt

Could be contrary to Local Growth White Paper . Maybe unacceptable to NW Partners . Additional management resource required . National body may be too remote to manage day to day :.~

Practically viable, however

Avoids fragmentation -

. Provides Govt with greater flexibility and a direct source of income and control . Achieves national economies of scale and coordination

issues

limited policy fi

with

localism

agenda.

2. Sub-national

receiving body (Regional Leaders Board

recommended HCA)

· Avoids fragmentation ensuring assets and liabilities

· Recipient body ta be'" ~Consi.aered

confirmed '~Y(¡¡!f't"" 'ã~y'iàble

balanced · Independently

· Governance arrangen1'liit§:,ó,ppfion, to be developed ,c \"," '-"cfurther · Not fully'compliant with options

financially sustainable solution · Longer term approach adopted to secure best value

LGWP principÎés, giveriWSlJb~!" analysis

national tiet'tt;¥&" '''4Ï~,'!!f''' required to

~~~~,,' r ~~~~~~e

· Governance arrangements could comply with LGWP · Strong support with Northwest Regional Leaders Board 3.1 Disposal to

· Delegates control tö

LAs

local authorities - in Iihe with

LGWP:" '

· LA's havêfèxis ,:;1. ';;:t.!

estate managërnenré~pe

f solution.

",èPortolio is very , i..., lå'nced - emphasis on .:1¡

~Merseyside and Cumbria

i. Some LA's would need to take major liabilities with

insufficient balancing income -

Not

considered viable due to LA inability to pay book

dowry funds would be necessary · LA's don't always have

value/afford

required capacity and expertise -

fragmented

could prove an additional burden · LA's unable to pay book

estate Le.

value for sites

liabilties not balancing

ability

assets and

· Broad variance in

Not

structure, scope, size and

considered

operation perceived in respective

LEPS

viable due to LA

· No desire conveyed to take on NWDA assets and

pay book

liabilties · LEPs unwillng to pay book

value for sites

inabilty to

value/afford ability of fragmented estate Le.

assets and liabilities not

balancing

2.2.3 Key Points

Phased approach to the realisation of the assets to secure best value and

overarching economic development objectives is essential High level options assessment support the retention of a portolio approach

Further work needed to determine optimum solution for portolio approach 2.3 Contingent Assets 1~

Please see Annex 1 B for full details.

NWDA's contingent assets can be broken down into three categoMes:;;,",

oo Clawback Third Part Sites \'¿J""'''", i (e.g. gap funding) \-r' o Non Penormance Clawback .ti_t~..

For the purposes of this Plan, non penormance c1a"\vb,ack ha~been dismissed. This is because non penormance clawback could'''âpPIYifitQ)tie májority of NWDA capital :i. ,I, .....;~8:'iii::..' investments and NWDA has historically ~~'Cured'~i' verY 'limited amount of income as

a result of such instances. '- '. '\, '~ ,y'The majority of the _ in c1a'Nbã:tk'L;N\JÐA"nJ~ received during its lifetime has

come from third party sites and prl~ate seêt9r gàp funding clawbackloverage. I::r

Nature

Value

Third Part Sites

Clawback

..,'i;Ì;

2.3.1 Third Part~Sit~~i!:':';~~, " ,,,-tR!f'tt~,%,,.. "'''n.",,''''''''''';''':

Third partYJsites~lare thoê~ sites which have been acquired by Local Authorities using

NWDASingle Pot With income / clawback rights, to further development objectives in :.:;" ,..:ì" ¥:-.

priori,ty"àreá~;t":~W()!, commenced a review of these interests during the summer of 2010 in prepàrâtion' for transition/closure. The purpse of the review was to assess the s,iJes within this category and identify where significant influence or potential valueWèquld",De extracted in the future and the interest therefore transferred post

NWDA è'Öšûre. Where the interest was small and of low value and there was no merit envisaged in transferrng the interest to a receiving body, the NWDA interest is recommended to be terminated prior to closure (this involves 36 sites). The total potential value of the third party asset portolio is estimated at up to ..

This estimate was arrved by following a representative sampling approach against

land and property values in each sub-region. This allows for an informed estimation

of recoverable grant extrapolated across the NWDA's investment in third party assets. It should be noted that there is potential for a considerable margin of error at arriving at the individual figures, but by averaging across the entire third part asset

portolio the aggregated total wil be more accurate. Caution therefore should be 20

taken in reading individual site values6 and the overall forecast value from this interest. There is a potential upside for the future receiving body of these interests. Not only wil the future body, be able to ensure the delivery of the original economic

development objectives, the receiving body will also have the abilty to receive the NWDA financial share from completed schemes. 2.3.2 Clawback

There are two types of clawback which have been analysed for the purpose of this Plan: . Private Sector Gap Funding c1awback - where the NWDA receives a share

of potential increased final values achieved in excess of assumed Base

End Values undertaken at appraisal of developments, calcuiĂŁted either at a specific date in time after completion of the development or on disposal as

an investment sale. . Other - where the NWDA has invested in Programmes delivered by, for instance, SRB Partnerships, Rural Partnerships and the like which involve a combination of the above.

114 sites have been identified with possible clawback implications. In assessing the likely value of c1awback, NWDA has reviewed the Base Value of the Asset in the

Funding Agreement against which the level of potential c1awback is calculated. The Agency shares generally 50% of vany" uplift. The figure therefore included in the schedule has been calculated by applying first a % likely level of increased Base

Value (taking into account the nature of the project and its "market location factor") and then applying to this a further % "possibilty of recovery factor" (which

accounts for the age qf the project sinĂ¨e completion, financial standing of the grant applicant, and legal risk). J

The abilty to recover clawback is not certain nor is the potential income known in advance in most casĂŞs. Therefore valuing the rights to c1awback is particularly diffcult. Given the low level of certainty around level of c1awback and when it might be realised~an estirnate'of_ has been calculated. U

It is iworth noting the following points, in reviewing the forecast c1awback value: ~

. Until NWDA has obtained responses from applicants at the appropriate dates, it is diffcult to ascertain potential values of clawback, but we have attempted to provide an indicative value based on probabilty.

. The values should not be viewed as specific to each project or necessarily achievable but represent a likelihood of the level of recovery - some wil be

less and some wil exceed these values. 6 NWDA has adopted a RICS Market Value approach in defining the value, Le. the Market Value is the greater of

the Existing Use Value or Development Value. However in some instances there has not been suffcient information to determine the Development Value. The Assets and Liabilties Plan guidance requested a value as at 31/03/10, this is an assumed Book Value. The NWDA would note that as the assets are not in our direct ownership this information was unavailable frm the asset owners in the current time frame.

. The value takes into account where recovery is "highly unlikely" (due to

long passage of time and where applicants may be in receivership) and where recovery is "probable" and "highly likely" given our knowledge of the project's level of success. . Projects in the "highly unlikely" category are likely to have a final brief

review with a recommendation they can be removed and written off.

Of the number of sites and values estimated above, it is en~d that. clawbacks

wil be realised pre 2012, securing a potential value of _ The remaining. clawbacks wil fall beyond the closure of NWDA and wil need to be transferred to a receiving body. It is estimated that these c1awbacks could raise_.

Tier Two Options Analysis- Contingent Assets \ :'"f. it¿ì'

For these interests, where it has been identified, that value or strã'egic infiJè,riê~ can be achieved post closure of NWDA. The strategic options for these interests: are set

out in the table below: P" o tion

1. Transfer to receiving body

Advanta es

Disadvanta es · Add,itiönal management

Provides a direct source of income and control Achieves national economies of scale and

co-ordination Could utilse same staff, 'iiù, resource base as direct '."

resoùrce reqÙitèd

X' ~""

.""J,,,,Recipient body tö be """'1~':~pñrrrme~Ïf"

land and property ",,t:i!'h'NH

. .

assets ,.ûf't~-'

Considered a viable option,

further options

Governance arrångements to be developed

analysis

.0,. Not'fully compliant with 'idl7fL'GWP principles, given

optimum

. sub national tier

Longer term appróac;h

required to

determine

management solution,

adopted to sêèure "i clawbacklreceipts"

Governance," .i~i.::.?t::fi,. ì"

arrarigemerits"roul

cotnRIY wiih'LGWP " Strong ,regiol\aL support I;..

":.",

2. Gift to LAs

*-l

.t~pelegates control to ''!!lbcal'authorities - in line

Portolio is very inbalanced -not all LA's

With ~ LGWP

~èduces complexity of 'transfer of NWDA legacy activity

would receive interests. LA's the beneficiary of

a signifcant number of investments, therefore no incentive to secure clawback LA's don't always have

Not considered viable due to

LA role as beneficiary of number of investments

required capacity and expertise - could prove

an additional burden 3. Close

projects

Reduces complexity of transfer of NWDA legacy activity

Significant reduction in potential income

Abilty to influence and

generated control developments to secure economic develo ment removed

Not compliant with BIS Asset and Liabilty Principles

2.4 Property Joint Venture

Please see Annex 1 C for full details.

2.4.1 Summary In 2006 NWDA vested its prime income generating land and property assets into a

Joint Venture vehicle with Aviva Investors (PPP). The private sector partner is Ashtenne Industrial Fund (AIF), now controlled by Aviva, and the properties are

managed by Ashtenne Asset Management Ltd (MM). The company name for the PPP is NorwePP (General Partner) Ltd, but the portolio trades under the name of Space Northwest. The PPP is a fixed life vehicle (until 2016), and the NWDA benefits from three financial streams: - An annual fixed Loan Note (Loan Note B) repayment of ÂŁ10m per annum

(ÂŁ2.5m per quarter) unti April 2015 variable by 20% per annum by agreement.

- A fixed rate interest payment (received quarterly) on the outstanding value of

Loan Note B.

- A final payment (Loan Note A) based on any overage achieved on the final value of the portolio at the end of the life of the PPP (2016). 2.4.2 Considerations

The PPP should continue to generate a fixed income return on a quarterly basis until December 2016. There are, however, two particular value considerations to factor in.

Firstly, the potential value of the PPP if there was a direct sale of the NWDA interest

in return for a single receipt prior to NWDA closure. The NWDA has previously sought advice on this point and were informed that this option would lead to a receipt significantly below the future cash value of the partnership.

Secondly, the value of Loan Note A is variable, based upon the actual sale prices of assets achieyed by the PPP Property Manager. The abilty to maximise this potential receipt canrbe"'directly influenced by NWDA or its successor's action. For example, notifying potential~ tenants of the space available in the portolio, or advising the Propert Mcinager on how to obtain ERDF to contribute to refurbishment works.

, .. ,,,

In order to ensure that Best Value can be secured there is a natural incentive to maintain a long term role in the PPP. If it were agreed that the PPP could be retained

within the portolio it would provide a source of direct finance which can be utilsed to ensure a positive legacy from the NWDA. It could be used to manage off liabilties, to provide funding under the 'invest to divest' option, and to provide capital to help unlock receipts from the third party assets. Without this important income stream it would be difficult to achieve the key objectives of managing off liabilties whilst providing investment finance to maximising of sale price of assets whilst meeting local

objectives.

no one Local Authority or LEP is in a position to purchase this interest from NWDA.

Secondly, the very nature of the PPP means it is impossible to fragment its ownership below its current single body basis. In our opinion, this makes the options of disposal to Local Authorities or LEPS unviable.

The options of a sub national or national receiving body solution are therefore considered most appropriate. Both these options would enable the income generated

by this interest to be used to offset the liabilties elsewhere in the portolio, creating a balanced solution post closure of NWDA.

The PPP is a significant source of future income for the region, which can be used to

offset the costs of managing other elements of the portolio, to enable no net additional call on Government resource as part of NWDA closure.

2.5 JESSICA Investment Fund Please see annex 1 C for full details.

2.5.1 Summary Joint European Support for Sustainable Investment in City Areas ("JESSICA") is a policy initiative of the European Commission, supported by the EIB. It is a financial engineering mechanism which enables repayable public investment by way of loans, equity and guarantees in urban development projects. , \ ,-

NWDA created a JESSICA Holding Fund in November 2009 and EIB have been

appointed as Fund Manager. NWDA manages the Investment Board which

comprises a mix of independent experts and sub regional representatives and oversees and manages the Fund. NWDA also holds the Funding Agreement with the European Investment Bank, which governs EIB's Fund Management services.

Two Urban Development Funds, one for Merseyside and one for the Rest of the Northwest are currently being procured by EIB. NWDA via EIB is investing £72m ERDF/Single Programme into these Funds and has also placed a temporary restriction on title over NWDA sites and buildings of £28m as ERDF match funding, a

situation we understand to be unique in respect of RDA sponsored JESSICA initiatives. (It shoulc!\be noted that NWDA has recently consulted with BIS, CLG and EIB and is progressing a £10m land for cash swap. This entails adding a minimum of £10m of land assets, some of which are specifcally discussed in this Plan, into the JESSICA Holqing Fund in exchange for £10M of cash.) NWDA also acted as applicant for £50m of ERDF funds to support the creation of the Holding Fund and therefore has entered into a Funding Agreement with the

Managing Authority, which includes a number of ERDF obligations. Post closure of NWDA, there wil be an ongoing need to manage the Holding Fund, penormance manage both the Holding Fund Manager and UDFs and ensure compliance with ERDF regulations so as to realise the ultimate receipt. 2.5.2 Considerations

JESSICA is a long term investment tool and given its recyclable nature, JESSICA has the potential to be an important source of finance for the NW in the future. Under the terms of the Agreement for the Fund, NWDA, as the owner of the Holding Fund,

is entitled to receive its cash investment plus its proportionate share of any returns in

2020.

Assuming that the argument to maintain a long term portolio role is accepted, there are a number of different receiving body options that could be considered and overarching principles to factor in. Firstly, the significant value of the Holding Fund means that no one Local Authority or LEP is in a position to purchase this interest from NWDA or indeed inherit NWDA's ERDF liabilties. Equally, the very nature of the Holding Fund means it is impossible to fragment its ownership below its current single body basis. Further, a number of Local Authorities are also now part of the underlying Urban Development Funds, which would create an obvious conflict of interest. In our opinion, this makes the options of disposal to Local,Authorities or LEPs unviable.

The options of a sub national or national receiving body solution are therefore considered most appropriate, at least unti the ERDF obligations ~ave been satisfied at programme closure. Both the sub national and national options would/enable the

continuing penormance management of the UDFs and ensure compliance with

ERDF obligations, with the overriding objective of benefitting from the income generated by the UDF investments in 2020.

The JESSICA Holding Fund is an important funding mechanism for commercial

development in the NW. It is also a considerable source of future income for the proposed development within the NW. There are however, significant ERDF associated liabilities, which wil need to be transferred to the receiving body. 2.6 Oaresbury

Please see Annex 1 C for full details.

This can be considered to fall within the definition of a National Asset as set out in Transition Guidancé Note 1. Following BIS approval, a Joint Venture has been formed with a private sector partner to take on the ownership of the asset and deliver further development over fhe next twenty years. NWDA haJ, two Lôàn Notes linked to the scheme (see Annex 1 C) and this interest, as well' as a"stake ~'in the Joint Venture via a Public Partnership, wil need to be disposed of prior to close. The third building on the site is currently being constructed by NWDA and will be placed into the Joint Venture soon after completion (estimated

mid 2011). Ttlere are therefore some residual legal arrangements to be undertaken prior to disposaL. In addition there is a residual ERDF clawback liabilty to cover investment made in the development of the NWDA estate on the site. There is a back-to-back agreement with the private sector partner to cover this liabilty in some events. This needs ongoing monitoring.

Loan Note A has a value of _ and is an equity stake repayable from any surplus when the partnership is wound up in 2030. The value of this Loan Note has been assigned from NWDA to the Daresbury public sector LLP (the group formed by the NWDA, STFC and Halton BC).

The primary interest of value is Loan Note B. Once the complete NWDA estate is invested into the JV, it wil have a value of _. After a three year holiday, NWDA wil receive interest on the outstanding value of LNB at a rate of 3%.

After a five year holiday the NWDA wil receive capital repayments subject to certain agreed criteria being met. These criteria include the JV's abilty to pay and the need for it to avoid insolvency. Therefore it is not possible to forecast future income with any certainty.

If, at the winding up of the JV, the asset sales produce a surplus it wil be used to finance the repayment of any outstanding LNB value to NWDA and then the value of LNA to the public sector LLP. ,

Considerations

Given the national categorisation of Daresbury and the nature of\ its activities. it is

recommended that discussions are progressed to progress the traJ1sfer of the asset to the Technology Strategy Board, prior to the closure of NWDA. The NW Leaders Board would, however, wish to understand their potential to influence the further ~

development of Daresbury.

2.7 Associated Contingent Liabilties Please see Annex 11 for full details.

The question of contingent liabilties is also sumr,arised in Chapter 5 but it is worth

noting here that two of those Ilabilties relat~ tĂ&#x2021;) Compulsory Purchase Orders which were used to assemble NWDA~s land assets at Ancoats and Rochdale Kingsway and wil therefore need to be considered as'" part" of the transfer of these two major assets.

,. ..

There remain some compensation claims that are yet to be agreed and paid. Whilst every effort is being made to settle all outstanding claims prior to closure, NWDA is unable to guarantee that this wil happen as it is in the hands of the claimants. Under

CPO legislation, the former owners submit claims for the compensation they believe is due wittiin a tirnesĂ¨a~ determined by statute. A period of negotiation then follows. If a valuation cannot be agreed through negotiation, the final settlement is ultimately resolved through a reference to a Lands Tribunal which can, in itself, be a lengthy Proc~edure. \

(a) Ancoats , The project includes a programme of purchases under a CPO. Over the last five years the NWDA has acquired nearly 200 plots of land and repackaged these into a smaller number of plots more suitable for redevelopment. The CPO process enables these acquisitions to take place without the price of each purchase needing to have been agreed with or paid to the former landowners. Over 95% of compensation due has already been paid.

(b) Rochdale Kingsway

In this case, 97 plots have been acquired and incorporated into a single development site which forms the Kingsway Business Park and is being developed by the NWDA's Joint Venture partner, Wilson Bowden Developments. 81 % of compensation due has already been paid.

- ......

"i-. " \ \. \,

As well as these..CPO liabilities, there are also site management expenditure liabilties associated with the NWDA asset portolio that remains post NWDA closure,

that wil need' to be resourced. It is estimated that if the disposals and transfers identified for pre closure are realised, this could amount ~ per annum. There are also ERDF liabilties, where NWDA has applied for ERDF funding in respect of a particular site or activity, that wil need to be transferred with the assets in question. 2.8 Ongoing Management Obligations

Whichever option is selected for the NWDA land and property interests post April 2012, there wil be a cost associated with holding and managing these assets. The key tasks associated with this function have been identified as;

Given these areas of risk, inclusion of the PPP with a portolio is key to the achievement of the balanced solution.

The financial model for the portolio approach for activity identified post closure, has been discounted at a rate of 2.2% over a ten year period and this generates an NPV

of _. See Annex 3. 2.10 Next steps and engagement

The North West has benefitted from a strong history of partnership working and engagement. Preceding the requirement to produce an assets and liabilties plan, a Regional Transition Team7 group dedicated to assets and liabilties was established

under the new Leaders Group as discussed earlier. This group endorsed an approach advocating the retention of the NWDA portolio as a single portolio, for the economic development benefit of the North West region, by HCA. The NWDA engaged with this process providing information on our land and propert assets and

liabilties. We propose that following submission of this Plan to the National Transition Board,

the NWDA reconvene that group of regional partners to develop more detailed, options assessment and due dilgence, in light of any feedback from Government on this initial Plan. The approach would be as follows:

路 For those sites that have been identified as being readily disposable before the final closure date of NWDA we seek approval from NTB to liaise with the

appropriate bodies concerned. These would be the HCA in the case of coalfield sites, individual Local Authorities where zero/Iow value assets can be

readily transferred to another public body, Technology Strategy Board in respect of Daresbury and with the market (which includes Local Authorities as well as private developers) where a site is transferable and a value can be

accrued. 路 For those ~ sites and interests requiring medium-term investment and

management beyond the operational life of NWDA to accrue value in line with

the i principles set for assets and liabilties, we propose that implementation/management options are developed further for the portolio with regional partners which wil consider the following factors: o Governance o Ownership

o Management o Resourcing o Financial Model

7 Whch consists of LA representation from each Nort West LEP area, the HCA and also NWA, although NWA did not advocate any paricular conclusion as we awaited guidance from Governent.

Property Portolio Management - Asset Recovery Management

Management of the Investment Vehicles

Initial estimates have identified a team in the range of . staff would be required

to manage these functions. Assuming an average of per post (incorporating on-costs) and adding administration, legal, accommodation, IT and equipment costs,

a working assumption of .. per annum is made for the purposes of this report. An increase of. in running costs per annum is assumed for each year thereafter.

A detailed business plan around administration and management overheads wil be completed once both a preferred option is agreed and the scope of activity requiring

management is clearly defined. This wil include the estimated costs of transfer and disposal of the activity that has been identified as possible to implement pre close. It will also assess the likely staff adjustments necessary as the remaining sites are disposed of over time. 2.9 Financial Model

The outcome of the Tier One Options analysis for'the directly owned property, third party owned sites and c1awback have been reflected in the supporting financial model at Annexes 1A and B. The consistent conclusion throughout the chapter, is the need to maintain a portolio based approach to ensure a financially balanced splution for Government. Financial

forecasts for this activity post NWDA closure, together with the forecast income

compiled. i1

streams from both the PPP and the JESSICA Holding Fund, have therefore been The model clearly demonstrates that an approach can be developed based upon the portolio approach which balances the assets and liabilties such that no further net call on Government expenditure is estimated to be required to meet the NTB asset and liabilty principles, in particular, the achievement of best value and local ambition.

A key poteptial variant, in the model, is the extent to which the current book value for the directly owned land and properties can be achieved in the future. Whilst the book value figures ,have been included within the model, these must therefore be treated with a degree of caution. It should also,.be stressed that there is a high element of risk involved in securing the

income forecast due from the c1awback and third party sites. This risk relates to the very broad basis applied to calculate/quantify this income and the risk in actually securing/realising income within the timeframe estimated. Given these uncertainties, for the purposes of the financial model and the NPV calculation, this income has therefore been removed from the forecast.

Equally, caution should also be applied to the projected JESSICA return, whilst NWDA is currently entitled to receive its cash investment back from this initiative. JESSICA is a loan fund and there is the potential therefore for a degree of right off. For the NPV calculation, a more pessimistic right off rate of 50% has been applied.

Chapter 3 Financial and Company Interests 3.1 Venture Capital Loan Funds Please see Annex 1 D for full details.

The NWDA, through single programme funds and/or ERDF programmes, has supported the creation of a number of Venture Capital Loan Funds (VCLFs).

Capital for Enterprise Limited (CfEL) has undertaken a mapping and review of RDA operations in VCLFs which has informed the RDA VCLF Transition Proposals. This has concluded that function of responsibilty for VCLF activities wil reside with CfEL

under a framework of national oversight. The VCLF function wil reside with the Secretary of State, with powers delegated to CfEL, while VCLF assets (and any potential liabilties) which are otherwise not committed wil either be contractually novated or pass through the statutory transfer scheme to a separate regional body.

The proposed separate body for the North West is the JEREMIE holding fund, North West Business Finance Limited (NWBF). NWBF has been established as a private sector company, limited by guarantee. NWBF manages a fund of funds and it can oversee the delivery and reinvestment of the NWDA legacy VCLFs. This proposed

strategy supports the NWBF business model and the development of a regional 'evergreen' fund.

The transfer of VCLF assets (and any potential liabilties) to NWBF to manage provides CfEL with close oversight and governance of SME finance provision as it wil replace the NWDA interests as member and on the Board of NWBF. This will ensure the continued effective delivery of, the large North West portolio of SME investment funds and the funding conditions attached to legacy returns.

For clarity, the transfer of NWDA's interests in NWBF to CfEL would entail the following transfer of functions and roles to CfEL: . Monitor NWDA's Single Programme grant of £8.6M to NWBF (covering

operational costs) to ensure compliance with the grant agreement.

· Replace NWaA as Company Member and Board Director.

NWBF is the ERDF applicant for the VCLF and so wil retain reporting obligations and ERDF clawback liabilties. As recipient of legacy returns, NWBF would also take

on the contractual responsibilty to ensure that the legacy funds are managed in accordance with the fund management agreementsl None of these requirements would impact on CfEL.

The funds the NWDA has established are:

The North West Fund

The North West Fund is a new £185m evergreen fund for Northwest businesses (previously known as the Venture Capital and Loan Fund). The Fund is funded by a

£92.4m European Regional Development Fund (ERDF) grant under the 2007-13 programme and is matched equally by private sector loan funding from the European

Investment Bank (EIB) under the Joint European Resources for Micro to Medium Enterprises (JEREMIE) initiative.

The JEREMIE fund will run up to December 2022 with an initial investment period up to the end of December 2015.

The North West Fund is the umbrella name for the 6 funds that are now available to Northwest businesses in the form of debt, equity and quasi-equity. These funds are managed by 6 fund managers under contract with NWBF.

Interim funds The NWDA established two interim funds in November 2009 for investment prior to the establishment of The North West Fund: (a) Interim Loan Fund (ILF) Provided debt finance to SMEs seeking development capital between £50,000 and £250,000 and invested £1.92m. (b) Interim Venture Capital (IVC) Provided equity and quasi-equity based co-investment fund, providing growth capital between £250,000 and £1 millon, with total fund value of £3m.

These funds are currently controlled by the public sector holding fund, NW VCLF HF LLP. The funding provided was 50% single programme and 50% ERDF with returns going back to NW VCLF HF LLP for re-investment through the Northwest Fund. The

assets held by these funds wil be transferred to NWBF who will appoint fund managers to manage the investment portolio.

Rising Stars Growth Fund èRSGF) t

Early stage technology fund, established in 2002 with NWDA holding a 47% stake alongside institutional investors, managing £ 19m which was invested by March 2007. The fund invested in seed and start-up companies with unique and protectable technology, and an exceptioñal commercial market opportunity.

Northwest Busines~ irivestment Scheme (NWBIS)

Thislwas established in 2003 to provide seed and venture capital investment to SMÈs, using funds allocated by ERDF for use in the Northwest areas designated as "Objective 2:' or "Transitional", investing until December 2008 and to produce returns by 2015. NWDA is the only investor; with £22.2m ERDF funding invested.

Northwest Seed Fund (NWSF) This fund, which was established in September 2003, provided £4.5m of seed capital

for investment by December 2008. The fund invested in innovative businesses needing to prove concepts before commercialisation. It provided initial investment up

to £100k and further investment up to maximum of £350K per investment. Each business raised investment from other sources to at least match the fund investment.

Transitional Loan Fund (TLF)

This transitional fund provided loans to businesses from £50,000 to £250,000, targeted at established and viable SMEs facing a temporary shortall in their working

capital due to unprecedented combination of credit crunch and global economic downturn. The fund invested a total of £5.6m.

Small Loans for Business (SLfB)

SUB was established to provide loan finance from £3,000 to £50,000 to SMEs unable to secure debt finance from conventional or alternative sources. This loan scheme is managed by NWDA and delivered by five Community,( Development Finance Institutions (CDFls). The overall fund size is circa £20m madê~!'up from slngle

programme and ERDF grants. " ~ ~'; Summary

, l~E.:!.

VCLF

Invested Received

All figures £m

.'i.~

Comments

to date

Risin Stars Growth Fund

8.9

North West Seed Fund

4.5~ ii~iJ,,",,,

Transitional Loan Fund

Sin le Pro ramme Sin le Pro ramme Single Programme and

)?~6

ERDF (ERDF needs to be

Intenm Venture Capital

reinvested Single Programme and

Fund

ERDF (ERDF needs to be

Interim Loan Fund

reinvested Single Programme and

"'f~", 1 ~ 92

ERDF (ERDF needs to be

:;.'Nr~

reinvested CDFls to return Single

Small Loans for'Business

~.~.I,. ~~,:'7. ".,J,:ir'

9.4

Programme and reinvest ERDF

'~t

33.32

It is a re' üire~ent that the Legacy Funds which have been funded with ERDF must, ultimately, be re-invested into SMEs in the region. The NWBIS ERDF returns have already been legally transferred from the NWDA to the NWBF.

The different funds have restrictions placed around the nature, geography and timeframe applicable to the specific re-investment. The proposed transfer of the remaining legacy funds to NWBF would ensure that the legacy returns remain in the

region to which the funds were originally committed in order to be reused for the benefi of SMEs in the region.

There is a need for the JEREMIE holding fund, NWBF, to remain constituted as private sector company with the associated EIB loans staying off the public sector 32

balance sheet. The company structure is the ideal asset-holding mechanism that wil provide CfEL with the national oversight function and a delivery structure retained in the region.

In working with CfEL and BIS on VCLF Transition Proposals we considered the following options:

Option 1 - Novate funds to a separate body NWBF is the separate body that enables the transfer of function and assets of the NWDA interests in these legacy funds.

Option 2 - Wholesale centralisation,,; BIS/CfEL take over the management all of the funds on an individual b'â's,is.

Option 3 - Sale of government interests Disposal of assets - investments sold on open market.

Key Points

Option 1 is the preferred option i.e. the legacy funds wil be novated to NWBF and NWDA's interests in NWBF wil be transferred to CfEL. Options 2 and 3 have been rejected by CfEUBIS as inappropriate or poor value for money. il.'r "'1,:

.'~ ..d

3.2 Corporate Interests ,

'.1,

,:piIg¡¡:AWlf%,~~~_ " ..¡tjiir.

The NWDA currently has an ownership iñterest;iñ 17 companies, as set out in Annex 1 E. The NWDA is also repre~~'ntédj%pn 24~~conipany Boards as Director. As part of

the NWDA's transition & clo.s'ûre!programmé, a review has been undertaken of when it would be appropriate fo'r"lhe ÑVyPA'1èfwithdraw from these companies. All of the Øfr. "li. -;~"_';i.'" NWDA's ownership ~rtereJ?tst\'havêit,~ë statutory basis (through section 5 RDA Act approval) and man~/~i'of tii~girectorships have strategic importance. As such the

NWDA's Board ha a ruyedCttie timing of withdrawaL. ,,- -"I; -.. )"r

For 14 of4¡4hè'i~44 h"companies, the NWDA Board has decided to take action immediately to wíHi~crav.;,our interest by 31 March 2011. This includes 9 of the section

5 cornpanies detailed ,rat Annex 1 E. The withdrawal includes all of the region's URÇšjEÒC~fqr" whièh capacity funding wil cease on that date. Whilst we will stil ," ,o.,q;","' have&,a contraçtUal relationship on funded projects, there wil no longer be a case for

reterlt()n of cO'mpany ownership or Board representation. ~~.:i~~Ç/¡àrtM~N_~ißL:~

For the other 10, the NWDA Board has agreed that the NWDA continues its involvement until the transfer of associated asset, company closure or the end of our legitimate involvement in the company's activities. This includes the Joint Ventures of which we are part (PPP, Rochdale Kingsway, Daresbury etc) which have been

referred to earlier.

It should be noted that in addition to corporate interests, NWDA staff are also engaged with a large number of other bodies (204) in the region on a more informal basis, including attendance at organisational committee and steering group meetings etc. The timing of withdrawal in these cases is another aspect of the transition and

holder

closure programme and has been considered in relation to ongoing stake

relationships, legacy, succession and our ever reducing resource capacity. The majority of these withdrawals wil also take place by 31 March 2011 and have been agreed by the NWDA's Executive Management Board.

It is emphasised that withdrawal from corporate interests is purely a question of exit

prior to closure and does not impact on the question of transfer of assets and liabilties, other than in one particular case which is set out below. The NWDA needs BIS consent to dispose of its interest in Maryport Developments Ltd (MDL). The NWDA "inherited" its interest in MDL. This was part of the transfer of assets and liabilties from English Partnerships (EP). The Company was set up in 1987 with the principal objective of regenerating Maryport Harbour. Other

shareholders comprise Cumbria County Council; Allerdale Borough Council predecessor to; West Cumbria Development Fund. In 1993 English Estates (EE)

(fOrmerly.lp subscribed for 101 redeemable preference shares for a subscription price of to enable MDL to continue harbour regen~ration works. The ~

shares are currently valued at The original agreement gives NWDA the right to receive the original subscription price but the company's accounts demonstrate that if this clause was invoked, the company would have to sell all its assets and the harbour would close.

In 2001 EP obtained DTI/ HM Treasury approval to create an endowment fund of _ to provide an income stream in perpetuity for MDL to maintain the harbour as

a key component of the regenerated marina and surroundings. The endowment provides funding for periodic dredging works and certain capital projects that are set

within the 30 year business plan, whilst preserving the capital value of the endowment for future years income. The NWDA's shareholding and the endowment

(current estimated value of _) need to 'be transferred to another body to secure

the future management and operation Q! the harbour.

Chapter 4 Operational Estate 4.1 Freehold and leasehold properties Please see Annexes 1 F, 1 G and 1 H for full details.

NWDA owns three freehold sites and occupies 15 leased properties. These leasehold properties capture:

· 8 properties in strategic locations across the NW England. · the RDA National Secretariat offce in London.

· 6 overseas offices (held on short term leases/licences) used for inward investment activity. I~

NWDA has taken out leases of varying length. All of the buildings are usedtfor staff accommodation. The types of lease agreement vary, ranging fro~ ~ot dê~k facilities in our overseas offices to head office accommodation (39k sq.ft) in Warrington. Some of the existing leases will expire before 31st March 2012, but the ma'ority wil run be ond. B far the biggest lease commitment is for the Head Office.' In addition to lease costs there are associated running costs to consider, ~uch as Service charge, Rates, Security and Maintenance. Some of the associated costs would be incurred even if the buildings are left unoccupied.

Type of Premises Freehold Properties (car parkloffce spaC?~/industrial)

The NWDA has 3 freehold/250yr leasehold properties, all of which incur costs in relation to rates, service charge and maintenance. . , . ... ," than 5 years remaining on lease Long leasehold Propertiesl(offces)~

The NWDA holds leases on three properties which extend beyond the NWDA closure

date. These also incur costs in relation to rent, rates, service charge and maintenance.

Short leasèhold Properties (offces) c: than 5 years remaining on lease The NWDA holds leases or licences on 12 properties of which four extend beyond the NWDA closure date.

Business Link NW premises

Business Link have 3 leasehold premises, all of which have less than 5 years remaining on their leases and will expire prior to the NWDA closure date. BLNW have made provision in their exit strategy to cover the cost implications of closure and termination of its leases.

Strategic Options One property is used as the NWDA's records archive store and this may be required for the storage of records post closure pending transfer to the national archive. In view of this ongoing operational requirement, immediate disposal is not an option and

it is proposed to include this in the broader Land and Property asset portolio described earlier in this Plan.

Options for the remaining two Freehold premises are as follows:

1. Continue to utilse the premises/land up to NWDA closure whereupon they wil

transfer to successors. 2. Market the premises/land with immediate effect with a view to disposing as soon as possible.

The preferred option is Option 2. The premises/land are no longer essential to ongoing operations, given reductions in staff numbers, and early disposal wil reduce

the NWDA's ongoing administrative operational costs as well as yield a capital receipt. Options for the Long & Short term leasehold premises are as follows:

1. Let all leases run their course and, with the exception of the leases which expire prior to NWDA closure, be transferred to successor bodies. This means

that successors would need to pick up ongoing costs and take their own decisions on whether to use the buildings for their own purposes, meet lease surrender costs or seek assignment.

2. With the exception of buildings which are required up to NWDA closure, negotiate surrenders with Landlords with a view to leases being surrendered

prior to the lease termination date. However we would not be in a strong negotiating position. We have no break clause or other right of exit. The cost of an early settlement agreement would likely be punitive. It would be diffcult to quantify the cost of this option at this stage but the maximum would be the value of the outstaJ1รงling Ie,ase periods at 31 March 2012 which totals_. 3. Market forthwith all premises with a view to assigning the remaining interest in

leases thereby mitigating ongoing costs in respect of rent, service charge, rates, maintenance and dilapidations. Any leases remaining with the NWDA upon closure wil reven to BIS (as confirmed on 28 January by the BIS

Commercial Directorate). The preferred option,is Option 3 as it avoids additional cost to NWDA in our final year and minimises ongoing costs to be picked up by BIS. This would be, by far, the least

cost option. As an.example, in January 2011, we have successfully disposed of one of our short terms leases by assigning to a third party and saving in excess of _ in 2011/12 on'rent, rates, service charges and dilapidations. Options for NWDA Overseas Offices are as follows:

1. Let all leases run their course 2. Serve notice to terminate at pre-determined time and then withdraw 3. Serve notice immediately and withdraw

The preferred option is Option 3. Regional inward investment activity through the overseas offces wil wind down from March 2011 onwards, enabling all offces to be closed by 31 March 2012.

A summary of the NWDA's freehold and leasehold estate and the proposed exit solutions described above is set out in the following table.

Item

Current

Exit strategy

No.

Freeholds - Record archive

- Office

Retain until closure and then add into land and property portolio. Market for disposal pre closure. ,i'.r

- Car park

Market for disposal pre closure. ,Jr-

Long Leaseholds ~5 yrs

Seek to assign pre closûre but hign~jrišk that they wil revert to BtS.\ ;'

Exit pre c10sy e

Short Leaseholds c: 5 yrs

::'ir-¥'

- Expire pre closure - Expire post closure

Seek to assl9n p~ "~210sure but high risk that they wil revèrtJo BIS';~J

'1~. ~'

Business Link NW

leaseholds Key Points "-f.

,:,.:lt~*!

Apart form the archived records store, freehold properties should be marketed immediately for disposal prior to closure. All offce leases should be marketed immediately for assignment prior to

closure with any remaining leases reverting to 81S. NWDA should withdraw from short term leasesllcences on overseas offces as soon as practical in 2011/12.

4.2 ¿;'~: Furiiitur" ì

Pleas ',see,AAnex 1 F for full details '''~,~:iiF:~'''

The NWDA has in the region of 4,000 items of equipment/furniture, most of which are located in its operational accommodation but with some held in storage as offices are

closed. The equipment is generally in good condition and consists of the usual furniture associated with office use, Le. desks & associated fittings/chairs/ storage cupboards and meeting room furniture. In addition the NWDA's subsidiary company, Business Link NW, has in the region of 700 items of equipment/furniture located in its operational accommodation (Liverpool and Preston). The equipment is generally in good condition and consists of the usual

furniture associated with offce use, Le. desks & associated fittings/chairs/ storage cupboards and meeting room furniture. Options for retention/disposal are as follows:

1. Furniture in offices which are transferred to a successor body remain in situ and other furniture in storage (or to be placed in storage as offces are disposed of prior to closure) be disposed of 2. Gift furniture to successor/partner organisations, e.g. LEPs, local authorities 3. Sell furniture to successor/partner organisations, e.g. LEPs, local authorities 4. Dispose of furniture through OGC framework 5. Donate furniture to charities 6. Gift (where no book value) or sell furniture at market value to NWDAlBLNW employees and dispose of remaining items as detailed in above options

We have consulted with the Head of Infrastructure in the BIS Commercial Directorate during the production of this Plan and received clear advice that we should dispose

of all furniture and equipment prior to, or upon, closure. Therefore the preferred options are 3 and 4 and any items not sold wil then be gifed or sent for re-cycling.

4.3 ICT Equipment Please see Annex 1 F for full details.

ICT assets includes desktops, laptops, monitors, printers, photocopiers, servers, network switches, routers and other as,sociated equipment. No individual item is valued at more than ÂŁ150k.

The current arrangement is for laptops, desktops, monitors and printers that are no longer suitable for business purposes and have no "book value" to be provided

without softare to North West charities upon request. It is proposed to continue with this provision.

In addition, it is proposed, subject to NWDA Audit Committee approval, to implement

a scheme to allow employees to purchase a maximum of one each of laptops, desktops, monitors and printers at a market rate valuation. Again no softare will be provided and the equipment wil be provided on an "as seen" basis.

It is considered highly likely that there wil stil be a significant number of residual laptops, desktops, monitors and printers once the demand from of charities and employees have been satisfied. In addition, the more bulky equipment (e.g. photocopiers) and specialist equipment (servers, routers and switches) wil stil be 4

available. The potential options for disposal of the residual equipment are to either transfer it to a successor body or sell it through an appropriate third party broker.

4.4 Vehicle Leases Please see Annex 1 G for full details.

All Vehicles leases are for vehicles used by NWDA staff. There are currently 46 agreements in existence. There are nine individual existing agreements which are scheduled to run beyond 31 sI March 2012. The latest expiry date is 30 April 2013.

The average annual cost per agreement is £5k. We have a single provider, which is Lex Leasing.

The only practical option is to manage the vehicle fleet to lowest cost option Le. swap out vehicles based on leavers and lease expiry dates with any outstanding leases at 31 March 2012 to be surrendered. 4.5 Softare Licence Agreements

Please see Annex 1 G for full details. There are a number of contracted Softare Licence Agreements in existence which

run beyond 31 sI March 2012. There are two significant agreements:

Wide Area Network - expiry date April 2013, annual cost £160k Microsoft Enterprise agreement - expiry date Decemèer 2012, annual cost £90k

The only realistic option available to the NWDA is to attempt to negotiate an early settlement with the respective suppliers.

At this point it is worth noting that the task of managing out uncompleted projects wil not just be one of paying expenditure claims but wil also involve a range of other project management and monitoring actions which might include output monitoring, project audits, c1awback reviews etc. One project is subject to payments up to 2014 from funds paid into escrow by NWDA to meet the demands of the project partners and this requires monitoring to ensure the funding is used for its intended purpose.

In some cases, the expenditure "tail" is associated with ongoing payments on site management and maintenance under contracted land regeneration programmes and in one case NWDA is contracted to make such annual payments until 2029. An exit solution in such cases is to pay endowments prior to closure, based on robust assessment, in order to remove the ongoing liabilty. In the past, NWDA has been prohibited from entering into such arrangements as this is deemed to represent payment in advance of need but it is suggested that Treasury's policy position on this should be reviewed in the light of RDA closure.

5.2 Compulsory Purchase Orders

The NWDA has two CPOs (Ancoats and compensation claims have not et been settled

5.3 Clawback Liabilties (a) ERDF i

There is a large number of NWDA led projects which have been part funded by ERDF Le. NWDA has received ERDF grant as applicant. These include grants under the c'urrent 20p7-13 programme, the previous 2000-06 programme and grants from the programme before that which were obtained by English Partnerships and for which liabilty transferred to NWDA upon our establishment. The potential provisions

relating to ERDF claw back represent an onerous monitoring requirement and potentially significant claw back liabilty to any successor body. Projects can be audited by the European Court of Auditors up to 20 years after completion.

(b) Other income

As with ERDF, we would not normally recognise 'Other Income' as a Contingent Liabilty (Le. too remote). However we have identified certain categories of 'other government grants' received by NWDA that could possibly be subject to clawback if certain conditions are no longer met (e.g. Department of Trade of Industry grants, 41

Chapter 5 Programme Liabilties and Post NWDA Activity This chapter describes current estimates of programme liabilties that wil exist on 1 April 2012 (which BIS need to be aware of but may not need to take action on) and outstanding activities and actions in relation to projects (which wil require action post

NWDA closure, subject to decisions BIS need to take on the value of certain monitoring activities). Liabilties are:

. Programme expenditure beyond March 2012 - also an ongoing activity which wil definitiely require action post NWDA closure (section 5.1) . CPO actual and contingent liabilties (section 5.2) . ERDF and other funding contingent c1awback liabilties (section 5.3) . Business Link contingent liabilties (section 5.4) . Any obligations from expired contracts (section 5.5)

Post NWDA programme activities are (section 5.6): . Management of projects stil in delivery, including payments and monitoring. . For completed projects:

o Outstanding payments o Output monitoring o Clawback monitoring

; i

5.1 Programme expenditure beyond March 2012

The NWDA's December 201 0 commitment~ return identifies budgeted expenditure of circa ﾂ｣79M on existing programme commitments which is scheduled to occur after closure. As part of our closure plan we are currently determining the extent to which

these can be reduced by aﾃｨc~lerated project completion and payment. However

there wil inevitably be a number of projects which, due to their nature, cannot be completed early and where it is not in the interests of safeguarding public funds for payments to be accelerated. The task of managing out those projects and meeting

expenditure liabilties wil therefore fall to successor bodies. From a legal perspective, the options for outstanding projects are as follows:

" ' l

~q Statutpry Transfer to a single successor body e.g. BIS or Residuary Body. o Novation/Assignment to a third part by agreement.

o Paymﾃ確t in advance, thus requiring no actions by successors. NWDA has not formed a view on who the successor bodies might be and awaits the NTB's own proposals on a RDA Residuary Body which might penorm this function.

Other viable options are diffcult to identify. For example, the role cannot be easily devolved to Local Authorities as these are, in many cases, the recipients of the grant

funding in question. The same applies to LEPs in the sense that they are largely controlled by the same Local Authorities. HCA may be an option in respect of

physical development activity but are unlikely to have the required knowledge to administer funding for business development activity.

Department of Work and pensions (DWP), Heritage Lottery Fund (HLF) and Department of Environment, Food and Rural Affairs. These wil also require ongoing monitoring. Some of our c1awback liabilties are against grants which were used to develop land and property assets and in such cases, we wil seek to transfer the clawback liabilty with the corresponding asset. The extent to which this is possible may depend on who the assets transfer to.

Our options for the balance of c1awback liabilties are limited. As stated, c1awback is a liabilty which could possibly be triggered at some point in the future, if a project is in breach of a grant funding covenant. It would be a futile exercise to try to quantify any future claw back potential liabilty.

We are itemising all projects with ERDF and other government grant contributions, and providing as much relevant project data as possible in order th~t the appropriate residual or successor bodies are aware of the scale of ongoing monitoring

requirements.

We can only highlight the potential risks of future liabilties to bodies taking over the responsibilty for managing / monitoring the relevant projects. 5.4 Business Link NW Liabilties Business Link Northwest operates as a Company.Limited by Guarantee with NWDA

as the sole member and the service, went live on 2 April 2007, integrating the previous sub-regional bodies into a single entity. The organisation is due to close in

November 2011 and though the details around this closure are still to be resolved, the likely route wil be via a members solvent voluntary liquidation which has the advantage no scope for the company to be restored to the register, and so the liabilty of directors and members comes to an end immediately on winding-up.

At the formation of the Company and the wind up of the operations of the previous sub -regional bodies the NWDA was required to ~emnities in respect of the

~n Merseyside Cumbria _ and Lancashire

_ These are indemnities against future claims that are made to the

liquidators of the prdvious Business Link organisations and wil remain a contingent Iiabillty post abolition of Business Link NW and the NWDA. The last indemnity period (Lancashire) expires in 2012.

In addition, Business Link NW has a number projects that have received ERDF

funding. These are either inherited projects novated at the time of its establishment relating to the 2000 - 2006 programme or new projects which Business Link nW received funding for from the 2007 - 2013 programme. Attempts wil be made to novate the latter to relevant bodies in the region as these are live projects which

others may wish to continue. Other clawback liabilties wil transfer to our statutory successors. There are also a number of intangible assets that wil have limited commercial value but may be of some use post closure to successor bodies and this wil be dealt with as part of the Agency Knowledge Management Inventory .

5.5 Expired Contracts The NWDA has set up a Review Team to review those contracts which have expired or have been terminated but which place on-going obligations onto NWDA which wil need to transfer upon closure. This work is expected to be completed by September

2011. 5.6 Post NWDA Programme Activity Chapter 2 (Land and Property) discusses the different types of clawback which apply to physical development projects and the different options for futur~,;1monitoring. In addition, grants awarded under the national GBIISFI and GRAND prógCrammes \,have

a specific requirement to monitor projects for a period of 5 years itôni the;~first payment to review whether targets have been met. If targets'~''are, not -'1rtief then c1awback of grant can be requested. 60~ grants fall into thi~~rnonitôri~!g';ccw~g"ory post

March 2012 (see table below). In addition, NWDA ha~i'3\¡GBI ca~es that have a ,;"','::i:'_ ~. repayable element which, if the triggers for repaymeDfare me!. wi,lL be subject to

repayment post March 2012. ;,/;"''!);!j~:~~"y, ,;! .:.. .p' :f;i:~l

The table below provides a comprehensive analysis!'of the volume of projects which, at the current time, have activities fallng due'ãfterl,~Nw.E)~'S closure, either in respect

of outstanding delivery (Le. they wil not be';;physlcaITý'ë~tnpleted at 31 March 2012), outstanding payments, require ongoing;~monitoririgii,cof outputs or require ongoing c1awback monitoring. It is emphasised that,tlÎis data¥¡is provisional pending detailed project reviews which are currentJytunèlepnåY:'iari,elfdecisions yet to be taken on early completion of projects. The num6ers of prbjedš~ represented in the table are across the Single Programme as aóNhoìê\and ittClude the c1awback cases referred to in Chapter 2. It should benoied!~tb.at'Yìl~e 1-;- ~i:"", ...;:f ß~tegories under "completed projects" are

over-lapping Le. if a p,rojechJs subject" to outstanding payments and outstanding outputs it is recorded,jtWiCê ;the tablè'. ':;¡\

Clearly, projects',',t,yv,Qif.,n,,)re n Jt'physically complete and fully paid for at NWDA's closure wil need tö\be"fíã'ñäed over to successors. A choice exists regarding whether ,:,r:ilrti§,i::;.,', '':J

resources ~lioulä~,p"e in~e~ted in ongoing outputs monitoring and ongoing monitoring of penarmã~nce related clawback. .~../t.l-4L 'rtip,~ '~~

Cate 0

No. of ro'eets

Nurnber of projects stil in delivery - Single Programme

,' - GBI/GRAND

54 17

Completed Projects

Outstanding payments Outstanding outputs

23 49

Clawback monitoring . Third party assets/overage (as listed in Annex 1 B)

. Default/non-performance

. GBI/GRAND non-performance (10% sample)*

197 106 60

. National scheme requires 10% of grants to be monitored. post completion. 600 grants wil be in .Conditions Monitonng", hence 60 will require monitonng activity,

We estimate that the managing out of p~cts stil in delivery wil initially require.

FTE staff although this could reduce to . FTEs at the end of 2012/13 on the basis of current estimated project completion dates. It is possible that the work involved in

dealing with outstanding pa.ĂŹents on the 23 completed projects could be accommodated by the same _ FTEs. Therefore, based on an assumed cost of

.. per post (including on-costs), a provision of _ in 2012/13 would be required to manage this ongoing work with the potential to reduce to _ at the

end of that year.

Staffng projections in Chapter 2 (land and property) cover third party assets and overage c1awback. Therefore the only additional resource required relates to ongoing

monitoring of project outputs and default / no!!enormance c1awback on ~ projects. This could probably be managed by . FTE but the cost of this _ would need to be compared against the value of the activity and likely minimal financial returns.

ÂĄ ĂŹ

Chapter 6 Key Milestones and Activities An outline implementation plan is set out in this chapter which contains the key activities that wil need to be undertaken to secure the disposal or transfer of assets and liabilties by 31 March 2012. Clearly, this cannot be developed in detail until the

key decisions are taken regarding transfer solutions and successor bodies and implementation plans are agreed with those bodies. Furthermore the time

lines set out here make a number of key assumptions, as

follows:

. NWDA wil present its plan to the National Transition Board in time to receive the NTB's response and approval to the Plan by the end of Mรกrch. . Apart from key questions over the Land and Property portolio, approval at the

end of April wil allow NWDA to:

o implement the disposal and transfer of stand alone assets o review and then close out low value c1awback

o transfer legacy venture capital loan funds and NWDA's interests in Northwest Business Finance o take action to dispose of operational assets and leases/licences

. Decisions on national or regional control and management of the Land and

Property portolio, and its precise content, wil take a little longer to be reached as they require further detailed modelling and consultation, and may not be known until the end of June (the timelines indicate a single portolio transfer but it is acknowledged that more than one transfer wil be required if there is a decision to, say, separate out sites from other income streams). . Notwithstanding the process for receiving, reviewing and approving this Plan,

NWDA is free to continue to implement certain closure activities Le: o normal asset disposal and income generation to achieve assumed

income levels in the 2011/12 budget, subject to compliance with any requirements for approval o exit from company interests subject to any required approvals from BIS o return of vehicles as leases expire

. In relation to programme liabilties which cannot be passed to an alternative

successor, Ministers wil have made final decisions on a RDA Residuary Body

by end June and RDAs will be able to start discussing handover arrangements with that body in the summer with a view to handovers taking place in the last two quarters of 2011/12.

2012

2011 Jan to Dec

TASK

Q2 Q3

General

Submit Assets and Liabilties

Plan Present Assets and Liabilities Plan to NTB NTB Response to Plan

Land and Property

Agreement on portolio transfer solutions Implement portolio transfer(s) Transfer of stand alone assets Review and close out low value clawback Business as usual asset

disposal/Income generation

Venture Capital Loan Funds Transfer legacy funds to NWBF Transfer NWDA interest in NWBFto CFEL

Corporate Interests First phase exit from 14,;I

Companies Ongoing exit from+1qr!,~"j,

Companies "_ "',¡"

::~T.'æ.::y'!A, r.t

~~l: :'::

Operatlona,1 Estate '"

DisP9seof ~t~~,hOld re~grds

archive store ás'part of Land P Pòrtolio"'''~'''

Mar~~Udispose ''of two

remainihg freeholds MarkeUassignment of all

Leases Serve notice and terminate leases/licences for overseas

offces Disposal of offce furniture Disposal of ICT equipment Expiry of vehicle leases

Negotiation/Early settlement of softare leases

TASK

Q2 Q3

Programme Liabilties NWDA identify scope for early

project closure BIS decisions on succession arrangements for ongoing projects and related liabilities (e.g. Residuary Body)

Discussion and agreement on hand

over arrangements

Project handover

Key

2012

2011

task must complete to trigger activity

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Chapter 7 Financial Summary 7.1 General

This Plan provides a comprehensive review and analysis of the options and preferred exit strategy and rationale for each category of assets and liabilties held by NWDA, both real and contingent. In this chapter we have sought to show the impact on the Financial Statement of Position (Balance Sheet) of

those assets and liabilties where we can recognise a financial value. It is therefore naturally narrower in focus than the preceding chapters. 7.2 Financial Information supporting the Plan

NWDA has prepared a number of schedules to support the Plan narrative and is attached at Annex 2. The financial information included is as follows:

· Projected Statement of Financial Position for the years ended 31 March 2011 and 31 March 2012

· Journal adjustments arising from the movement of assets and liabilties in accordance with the Plan

· Supporting detailed schedule of treatment of Financial Investments during the financial year 2011/12

· Supporting schedule of Development Asset forecast valuation as at 31 March 2012

· Supporting schedule of treatment of Operating Asset · Calculation of net present value (NPV) of long term liabilties (primarily building leases and ongoing Programme commitments) 7.3 Reflection of Planned Closure Strategy

The exit strategies we have reflected from the Plan in respect of each category of assets and liabilties are as follows:

· With the exception of NWDA's clawback liabilities as applicant, all assets and Iiabilties related to the ERDF Programme 2001-13 are to transfer to DCLG in July 2011

· All investments in Venture Capital funds are to transfer to Capital for Enterprise during 2011 at the prevailng market value. · Development assets shown on the Financial Statement of Position at closure are those which we expect to transfer to a Residuary Body.

· Liabilty provisions for compulsory purchase orders wil follow the development property asset. · The share of the PPP assets and loan notes shown on the Financial Statement of Position at closure are those which we expect to transfer to a successor body.

7.4 Presentation of the Financial Statement of Position The major assumptions we have used in compiling and presenting the financial statements are as follows: . The financial statement as at 31 March 2011 is prepared on a going concern

basis.

We assume that the Public Bodies Bil wil not have been fully passed by the time our 2010/11 Financial Statements are signed off, and therefore this is consistent with the format we expect to present for this year's Accounts. . The financial statement as at 31 March 2012 is produced on a non going

concern basis, with the attendant assumptions of:

o Redundancy costs settled on or before closure, and funded from a separate closure budget :i

o Building leases are assigned to a third party and therefore there will be no ongoing liability and are not shown in the financial statement on closure. We have included the impact of the lease obligations at NPV in Annex 2 for information. . In accordance with standard accounting practice (IFRS) we have not included contingent assets, such as overage or c1awback, or contingent

liabiliies which are considered remote, such as ERDF liabilties, in the Statement of Financial Position.

. For accounts prepared on a non going concern basis, all assets and liabilities would normally be classified as short term, but for clarity and to aid understanding we have kept the standard short and long term classifications.

Chapter 8 - Risk Management 8.1 Introduction The management and delivery of the Assets and Liabilties Plan is a core activity within the closure programme of the NWDA and the management of its risks is wholly aligned to the corporate processes adopted to enable the successful delivery of this programme in order to meet the Government's objectives to close the NWDA by 31 March 2012. The key principles of this are set out below.

o There wil be a rigorous approach to the management of risk with regular risk reviews and clearly defined escalation routes. " "

o Day to day management of the risks within the plan wil be ul1der:~ken ,,ithin

the work stream assigned responsibilty for its delivery. '\i. "''';'''1,,,,'' o Corporate reporting and escalation routes for significant risKs~\,ia the NWDA's, i t:.~:JE!'¡j.t: ,

Executive Management Board, Audit Committee anc1 main 'Boarckas 'required

and defined by NWDA process. ¡j"~="+\it,,, \( ,fP i~:yg~. ".\:', "f;;t;~~'i.;i" ~':',::;__'p

An initial review and consideration of the key risks assoèiated with'(¡the delivery of the plan are set out below but clearly as and when approval tò~tb.e principles and options

set out within this plan are received, more detàiled añ"(j:e'solution specific risk identification, assessment and managemeptl'will ber8quired from both a strategic

and operational perspective.l""" "\e,,,~'" ,,'~, ",1~ \1. "'n...

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8.2 Assets and Liabilties Plan Risk,J~,egi$~,r ) ;JNiyt: ..;p

Ref Risk Summary 1.

There is a need to ensure that

appropriate and

Potential Consequences Inability to

Likelihoo Impact

Owner Mitigation

deliver to ais and

Agency's Resource Plan

Government targets resulting , in signifidai:t unresolved~:J,'" .

adequate staff and matters by'lVarch 2012 ii! I~ t;J.;_',:~.:~; financial resource '~"'\".f3. is applied to enable delivery of.';:: 'si

CEX

but abilty to deliver the

the Assets and '

Assets and Liabilties Plan is dependent upon timely decisions from Government.

Liabilties plan given thej

complexity of its compositiôn.

Commitment to additional funding of asset and liabilty

§i~::i:i;'b.~~. 1;;~\~ ','r:

disposal of transfer costs.

li '¥,'"t " ,'"'

as assumed in this plan

t!!

Market conditions do nót

it'

perm

Early, active and on-going engagement with identified

On going responsibilty for

residuary body or succsor

disposal'of sites

parters (including HCA.

and properties identified for sale up to and

DLPRP

including 31&1

March 2012 3.

The wilingness and abilty

proposed recipients to

accpt the trnsfer of stand alone

provides for delivery of required activity with ongoing monitoring required in relation to staff remaining in post to deliver that activity

Significant operational and day to day management required following Agency closure with transfer of responsibilty to a potential residuary body or successor

sites/assets Potential for inerta in relation to significant land holdings and developments with lost

develo ment 0 ortunities,

LA's LEP's and private sector developers) to ensure maximising of opportunity to dispose of the identified sites, Maintain Partner dialogue while awaiting ais Approval and assess requirements in relation to proposed transfers including any consideration for dealing with associated liabilties

Ref 4.

Risk Summary

Potential Consequences

North West

to benefi from the

If approval to this is not granted this may affect the ability of Northwest Business Finance to trade effectively

on going returns

and also affect the abilty to

from legacy venture capital

deliver an evergreen fund for the Region

funds The abilty to

Results in outstanding leases

Commence marketing as

having to be transferred with their associated un-budgeted liabilties to BIS.

soon as BIS approval is received and actively market all leasehold properties in an effort to limit

Business Finance's ability

dispose of operational leases is affected by

Likelihood

Impact

Continue to work with BIS and CfEL to ensure delivery of preferred option,

current and future market conditions

future liabilties,

Delay or deferral

Wil create uncertinty with

in decision on

grant recipient bodies and

successor

result in projects not delivering

arrangements for

specified outputs and

ongoing monitoring and

outcomes particularly if decision is taken not to engage in future monitoring.

management of

Programme Liabilties post closure.

Mitigation

iNoork with BIS to define

optilTum s6iution to meet

botlî':gòvernment and ~Portólio solution "'requirements

Abilty to monitor potential

Work with grant recipients to ensure that projects progress smoothly and that

clawback and overage income

handover arrangements to a

important to the portolio

successor are effective and well managed.

solution may also be impaired

";:'1 i:~f: :

Potential Liabilties as a result of

ur:.kn~wn "~~~,t?'¡P -'l

projects where NWDAisthe

and amount andlltlpendent

Review records and documents associated with historic and inherited projects to ensure completeness of records and obtain missing documents where possible.

Unquantifiable potential Iicibility,poth incl,i:,nns of timing

ERDF Applicant

(and those

diH'i. ri'

~r~~~~e:s:~~ 'ò"l,~,f¡~,

bodies) ~ere the EC niay seek

Review those contracts

where back to back arrangements are in place with Developers to see

claWback åS'a ,¡ièsult of any'd,f'R';i,\,~,_

¡'defaults ,.,."

whether Companies are stil trading and therefore if Clawback occurs there is

potential stil to recover. Maintain level of project

management and monitoring on on-going projects to ensure ERDF

requirements are met and that succsor bodies aware of these r uirements

Key Likelihoo

5. Catastrophic

3. Probable

3. Significant 2, Moderate 1. Minor

2. Unlikelï 1. Almost Impossible

15-25 = High _ Medium _

Impact

5. Almost Certain 4 Highly Probable

Overall Risk Rating = Likelihood x Impact:

4. Substantial

6-14=

1-5=

Risk Owners CEX - Chief Executive

DLPRP - Director of Land and Property HBF - Head of Business Finance DLE - Director of Legal and Estates

DPRO - Director of Programme :.,

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Low _