Maximising Investment Opportunities: releasing value from estates

Barclays Private Equity

15th May 2008

Barclays Private Equity

Estate Transfers

Established residential estate transfer model

University secures capital premium – releases funding for new development or refurbishment Residential Academic Sports facilities General estate reinvestment

University retains long term freehold interest

Operator and Investor takes student demand risk, FM and long term asset maintenance risk

Key basis is a residential partnership with established operator; value drivers are: lease term rent pricing models nomination / reservation arrangements credit and void risk

2

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Market context for releasing value

Business need to secure investment Competitive recruitment environment Student expectations Tuition fees Overseas market

Too much debt on balance sheet constrains a University’s ability to react

Method of release must be such that University is then not overly constrained by the new arrangements; new arrangements must be financially sustainable

University still needs to be able to react to changes in the market going forward

Focus on income stream based business (supported by business cases) not property asset based business

3

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Holding Company

Portfolio of StudentAccommodation and other assets

University

Equity – Private sector partner and University

Shorter term senior debt facilities

External manager

Funds development or purchases

Leases

Development Partnerships

Development vehicle / partnership with University

4

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Development partnership set up on two levels Strategic level (key focus master plan agenda) Delivery level (key focus implementation)

University and Private sector partner represented at Strategic level University sets and controls the agenda Both parties determine the operational aspects at the Delivery level Vfm procurement in force for all contracts let Ability to bring in other parties at Delivery level eg Local Authorities,

other developers and agencies Different development options considered but in the context of an overall

University estates master plan

Reinvestment of proceeds realised as determined by Strategic level

5

Two Tier Approach

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Development partnership analyses different estate options but within a ‘joined up’ approach for: Residential assets Academic facilities Infrastructure Land disposals Aim is to provide an integrated solution

Private sector partner / investor brings Cash Asset management skills Operational capabilities where desired Development management and

procurement skills Development options – land proceeds

6

Integrated Estates Approach

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Development relationship allows greater commercial flexibility Different assets under consideration Range of size of assets Optimum development timescale can be chosen Programme of transactions can be undertaken Different property interests Responsive to different market conditions

Develop a portfolio of accommodation of critical mass to allow subsequent refinancing / rating

University can participate financially in structure as shareholder as well as setting development agenda

7

Generation of Value

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Direction of travel is to facilitate entry of institutional investment into the HE sector

Model contemplates the ultimate funding of a wider range of facilities in an investment portfolio Accommodation Academic buildings Management schools Conference centres Sports facilities Commercial – Science park, business start up facilities

Development partnerships are more applicable funding solution to campus wide development or significant estate overhaul

More vfm and sustainable solution for Universities in terms of access to capital and maximising estate value

8

Conclusions

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Health Warning

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