ATTRACTING INSTITUTIONAL INVESTMENT INTO REGENERATION: NECESSARY CONDITIONS FOR EFFECTIVE FUNDING

Alastair Adair, James Berry, Norman E. Hutchison and Stanley McGreal

ERES from European Real Estate Society (ERES)

Abstract: At an international level governments are increasingly seeking to ensure greater involvement of the private sector in the financing and delivery of regeneration and sustainable communities. Regeneration is currently at the forefront of the UK Governmentís priorities (Urban White Paper, 2003: Miliband, 2005). In order to attract more private finance the public sector is being encouraged to take on a more strategic role, which creates confidence for the private sector to invest. However the success of such an approach will depend on meaningful engagement between the public and private sectors and in particular with the financial institutions. Currently there is a substantial weight of institutional money that could be attracted into regeneration. The financial institutions are major players in the UK capital markets, controlling assets in excess of £1,500 billion. Research into the size and the structure of the UK commercial property market has estimated that at the end of 2003 the value of commercial property was of the order of £254 billion (Key, 2005). Just over half of this stock is of investment grade, the majority of which is owned by institutional investors. The aim of the paper is to understand the needs of investing institutions and to identify the likely constituents of a working model suitable for encouraging institutional investment and bank finance into regeneration schemes. A cross-asset perspective (property, bonds/fixed income, equities, private equity, hedge funds and alternatives) is adopted, enabling an understanding of both the asset allocation decision-making process and the criteria used in the investment selection procedure of respective asset classes. A survey of investment fund managers across each of the principal asset classes was conducted, taking the form of structured discussions, the interviews considered the investment decision-making process, risk/return criteria and potential sources of regeneration funding. By considering the views of decision makers, a profile is constructed of the factors and inputs necessary in designing a regeneration investment vehicle that would prove attractive to the financial institutions.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2006-01-01
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