EDEN LAND OPPORTUNITIES FUND

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1 EDEN LAND OPPORTUNITIES FUND Strategic land acquisitions for planning gain

2 THE OPPORTUNITY Throughout history, UK land has been one of the world s most valuable assets. It has been heavily in demand but in limited supply. This has been exacerbated by the 20th century population move to urban centres and in particular, London and the South East of England. This has led to a significant undersupply of housing which is forecast to increase further over the next 20 years. The Fund will purchase plots of land and properties with the intention of obtaining planning consent for either a change of use or an increase in the development area which in turn will result in a significant increase in the value of the asset. The Fund will work with specialist partners, with excellent track records, through joint ventures with a concentration of the portfolio aimed at London and the South East of England which currently has the highest demand/supply imbalance. Our partners are chosen due to their specific relationships and expertise with targeted boroughs and councils and who have demonstrable track records in achieving successful planning applications. One such partner has completed more than 160 successful applications over a 30 year period, with just one application outstanding for longer than 2 years, all of which have produced significant uplifts in value. CBRE, a leading Global Real Estate Agent specialist, will provide investment advice to the Fund and also supply surety of valuation, due diligence and detailed assessment of planning applications and potential profit on each deal. CBRE Group is the world s largest commercial real estate services and investment firm (in terms of 2014 revenue) and are a Fortune 500 and S&P 500 company headquartered in the United States, with approximately 350 offices worldwide, including substantial operations in London and the UK. CBRE offers a complete range of property related services, including market leading dedicated valuation, planning, development advisory and real estate investment advisory teams, which the Fund will fully utilise. The investment opportunity for the Eden Land Opportunities Fund plc (the Fund ) lies in the fundamental imbalance between supply and demand and is augmented by a relaxation in planning rules in January 2014 with the Government s Right to Contest Scheme. This has led to a greater pool of development sites and a greater will to turn unused and derelict land into a variety of different uses as diverse as private residential and social housing, student accommodation, commercial and retail space to name but a few. The average annual supply of new homes in London since 1980 has been around 16,000 per year. The city needs more than 52,000 homes a year. Gráinne Gilmore, Head of UK Residential Research, Knight Frank EDEN LAND OPPORTUNITIES FUND PLC 1

3 RESIDENTIAL HOUSING Residential land markets continue to strengthen, particularly in London and the South East and although it is difficult to see house prices continuing to rise at the levels seen from 2010 to 2014, it is felt that there is sufficient momentum to maintain a sustainable recovery and it is expected that house prices will grow by around 30% over the next 5 years. House price forecast; expected five year growth We expect house price growth of around 30% over the next 5 years CBRE The growth previously seen in the prime London market has begun to ripple into both the inner and outer London boroughs and suburbs. The larger opportunities continue to attract interest from the established developers, however Housing Associations are an increasing factor in the residential market. Local councils, not only in London but across the UK, are also being put under increasing pressure to sanction building of new homes, underpinned by the Governments Right to Contest Scheme. 24% Scotland 29% North East Future house price growth will continue to be driven by the underlying lack of housing supply. The UK s population has increased by 4.4 million over the last decade, yet just 2 million new homes have been built and this divergence in supply and demand is set to continue. 28% North West 29% Yorkshire & Humberside According to the Office for National Statistics, the number of people living in London is expected to grow by more than one million by 2020, an increase of 14% in a decade, exacerbating the already chronic shortage of houses. 29% 28% Wales 28% West Midlands East Midlands 29% East Anglia 30% 30% 30% South East London South West 2 EDEN LAND OPPORTUNITIES FUND PLC

4 COMMERCIAL As GDP, job creation and consumer confidence has grown, the commercial property market has gone from strength to strength. Tenants and occupiers are emboldened to make a move, with a desire for modern, high quality space to accommodate efficient workspace strategies. This, together with numerous large requirements in most of the South East, and many regional markets, has led developers to consider new development schemes whilst funders have grown confident in funding them. Over the last 4 to 5 years the availability of ready to occupy prime office space has been steadily increasing in all of the regional centres. During this period the amount of Grade A office accommodation has fallen by 40%. Recently, as performance in the UK economy has grown so too has business confidence, leading to a number of tenants looking to invest and expand resulting in a huge supply/ demand imbalance. Following the recession, many occupiers who would have upgraded to new office space instead extended or renewed existing leases, leading to a disproportionate number of tenants in outdated or tired office space. Confidence in a strengthening economy has resulted in a surge of occupiers looking for high quality new grade A space at the same time as availability in most of the country is significantly lower than historic averages. Occupier activity is expected to remain strong for at least the next 2 to 3 years. RETAIL Although there has been a downturn in demand for large shopping centre developments nationally there has been a strong upturn in other areas of the retail market. London has the undisputed position as the world s number one retail capital with sales greater than those of Los Angeles, Milan, Rome, Madrid and Berlin combined. The strength of occupier demand is leading to the emergence of new retail areas away from traditional locations. This is particularly the case in Central and Greater London where the Fund is focused. The second half of 2014 saw a number of new entrants to the market from all parts of the globe, including fashion, media and food and beverage operators. Investor demand for prime retail assets remains undimmed. An increasing number of retail outlets form part of new developments and are presented alongside residential homes, student accommodation and office space. Many developers present this multi-use strategy as part of their planning process. Investor demand for prime retail assets remains undimmed Knight Frank Central London Research We are on the cusp of a new development cycle CBRE Commercial Property Report Photo: Kamira / Shutterstock.com EDEN LAND OPPORTUNITIES FUND PLC 3

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6 OTHER ASSET CLASSES Other asset classes for consideration for land development include Student Accommodation, Serviced Apartments and Hotels, and Renewable Energy sites. Whilst student numbers are stable there is a continuing shortage of property in all the core university cities. According to the investment company GCP Student Accommodation, there are 400,000 students in London, but only 60,000 beds in purpose-built accommodation. It is forecast that prime central London demand/supply imbalance will worsen in the next 5 years. An increasing number of developers are working with universities to purchase and develop land to provide new stock as the accommodation that many universities have is outdated. In addition, given the acute affordability pressures of particularly the London housing market, including rising house prices and rents, we will continue to see strong demand for purpose built student accommodation. We forecast that prime central London demand /supply imbalance for student accommodation will actually worsen in the next 5 years. Knight Frank There is an increasing demand for hotels and serviced apartments, particularly in London as it strengthens its position as the world s leading tourist destination. Tourist numbers have steadily increased over the last decade whilst hotel development has struggled to keep pace. This imbalance is currently more acute east of the City where there is more land development in the pipeline. KEY POINTS Imbalance between demand/supply of land. Significant housing shortage in the UK. Relaxing of planning rules in January 2014 (Right to Contest Scheme). Significant potential for uplifts in valuation on successful planning applications. CBRE will provide investment advice to the Fund. Opportunity to achieve planning consent across different asset classes including residential, office, retail and student accommodation. Coupled with this, the requirement for serviced apartments has increased massively to satisfy the demands of businesses worldwide who have either recently established their head offices in the City or have set up branches for their international operations. Indeed, London is home to 33% of European headquarters of Global Fortune 500 companies. Photo: Paul Daniels / Shutterstock.com Renewable energy is one of the fastest growing industries particularly in the UK. There is a huge demand to develop existing waste disposal sites as well as undeveloped land into modern renewable energy sites. This demand is being driven by a number of factors. Local authorities and commercial organisations are faced with the considerable challenges of achieving ambitious recycling and landfill diversion targets the latter being driven by escalating landfill taxes and a shortage of landfill sites. In addition, the Government is offering significant financial incentives in its desire to deliver waste into purpose-built, local, user friendly and reliable facilities. This relatively new sector has developed significantly over the last decade and is set to increase leading to numerous land development opportunities particularly on the outskirts of major cities, including London. EDEN LAND OPPORTUNITIES FUND PLC 5

7 OUR STRATEGY The Fund will focus on land sites that are pre-selected with our partners when there is a very high degree of confidence in obtaining planning consent for a change of use or an increase in the development area. Investment returns for the Fund will be driven by successful planning applications, which are designed to significantly increase the value of the land. There is high demand for land with planning consent and this allows the Fund to sell on to developers at a premium and consolidate investment returns for investors. Regional growth Annual growth in land values Q Q In addition to generating profit as a result of gaining enhanced planning approval, there is also the potential increase in the land value whilst the planning application is underway. This can often be very significant particularly in London and the South East as can be seen from the Residential Development Land indices for England and Wales and Prime Central London (opposite) published by Knight Frank. At no time however will land be acquired simply to hold for an indefinite period for potential sale in the future; a process commonly known as land banking. It is the Fund s intention to only hold plots of land whilst planning consent is being sought, thereby maximising profit over as short a period as possible. An important factor in respect of any land purchased for development is that the Fund will hold security over the asset thereby managing the investment risk. Source: Knight Frank Residential Research A further key component in the Fund s investment strategy is to acquire land off market which can be accomplished due to our extensive range of contacts in the land development market coupled with CBRE s reach and reputation. 6 EDEN LAND OPPORTUNITIES FUND PLC

8 Sites will be sought which have the potential for comprehensive redevelopment for single or mixed use which may include residential or student housing, commercial and retail, with location and proximity to transport links being key components. Sites that have legal problems, contamination, existing tenancies, technical issues and prior planning refusals will be considered if it is felt that these issues can be overcome as they will lead to potentially higher returns. In these circumstances due diligence will be carried out pre-offer to negate risk. To maximise investment performance, the Fund will diversify its approach between shorter term applications, between 6 to 9 months, and more typically longer term applications of up to 18 months. Monies invested in each project will normally be between 1 million and 5 million but as the Fund matures it may look at higher investment levels if opportunities arise. Mezzanine funding will also be considered as this can achieve consistent investment returns over a specified period. Risk is managed through primary and secondary security over assets backed by extensive due diligence from CBRE. The combination of these strategies will be significant in managing risk and liquidity whilst blending investment performance with risk mitigation. KEY POINTS Prime central London development land values increased by 18.7% over 12 months to September Development land values in Greater London rose 13.2% over a similar period. Fund targets plots with high confidence in obtaining planning consent for change of use. Joint ventures with key partners who have excellent track records of successful planning applications with specific concepts. London and South East focused to maximise growth. Risk management key to acquisition policy. Range of strategies to blend investment risk, including mezzanine funding, with the objective of achieving consistent investment returns. EDEN LAND OPPORTUNITIES FUND PLC 7

9 RISK MANAGEMENT LIQUIDITY Confidence in larger and longer term development sites is growing Jim Ward, Director of Residential Research and Property, Savills The Fund s Directors will manage risk at acquisition level and continue management of the portfolio throughout the planning process. Land sites will only be purchased with the sole intention of achieving successful planning consents. This process will be facilitated through our relationship with our joint venture partners and with CBRE who will provide additional due diligence to the Fund. CBRE, one of the UK s leading valuation experts, provide valuations on a range of assets and we can be confident in our aim of buying plots at value to market prices and evaluating potential profit once planning consents are granted. Our contacts within the land development market, and CBRE s reach in this field, will also allow disposal of assets once planning consent has been obtained, thereby crystallizing investment returns in the Fund and assisting cash liquidity management throughout the lifetime of the Fund. The Directors recognise that liquidity is a key component of an open-ended investment fund. The Fund s strategy will focus strongly on this requirement by maintaining sufficient cash balances whilst managing the flow of cash into the Fund through the sale of assets at successful planning consent stage. This will, we believe, provide the potential for higher cash liquidity than most other property based funds that have strict buy and hold policies with emphasis on yield. Planning applications typically average between 6 and 18 months. Our diversified approach to acquisitions, by investing in shorter to medium term planning opportunities, some with pre-planning already in place, will help the Fund balance liquidity requirements and risk management of assets. 154 billion value of new private housing needed to meet demand over next 10 years Knight Frank Development Land Report SECURITY The Fund is incorporated in the Isle of Man which is widely recognised as a leading offshore jurisdiction for international life companies and fund groups. Credit rating agency Moody s reaffirming the Isle of Man s Aa1 status said it reflects a resilient economy and robust government finances. The Isle of Man has international regulatory standards and its parliament, Tynwald, is the oldest continuous democratic government in the world. The Isle of Man is a great example of sustained economic success, an international financial centre which can be relied upon by its investors to provide a stable, pro-business environment in which they can flourish and by other countries as a responsible and reliable partner. The Hon William Edward Teare MHK, IOM Government Treasury Minister 8 EDEN LAND OPPORTUNITIES FUND PLC

10 INVESTMENT ADVISER The Directors have appointed CBRE as investment advisers to the Fund. They are fully independent and provide third party advice and valuations on land transactions. CBRE s origins date back to 1906 when they were formed as Tucker, Lynch & Coldwell, before being renamed as Coldwell, Banker & Co in Following the acquisition in 1998 of Richard Ellis International Ltd, which traced its roots to London in 1773, the Company changed its name to CB Richard Ellis before adopting the name of CBRE Group in CBRE are recognised as one of the world s leading property advisory companies operating through more than 300 offices worldwide with approximately 44,000 employees. Its operation extends across 50 countries in Europe, The Middle East, Africa, The America s and Asia Pacific. CBRE was ranked at 387 in the Fortune 500 in 2013 and was the highest ranked company in the real estate sector. It has total assets of in excess of $7 billion, and following its acquisition of ING s real estate investment management business in Europe and Asia, and also its listed securities business, the Company now has more than $90 billion of assets under management. CBREIIS Ltd is a subsidiary of CBRE Ltd which is authorised by the FCA in the United Kingdom. Over a period of approximately 18 months leading up until the end of 2014, CBRE s London based UK land agency and planning team, who the Fund will be working closely with have: Transacted on 15 million square foot of developable land across 35 sites in London and the South East Sold 300 acres of land of which 270 acres were in London and the South East Sold 5,500 consented units Secured planning permission for approximately 10 million square foot covering 10,000 new units/ houses CBRE carry out more valuations in the UK than any other company and we can be confident that both our offers for land and projections of profit on successful planning applications are underwritten to the highest standards. EDEN LAND OPPORTUNITIES FUND PLC 9

11 WHY INVEST IN THE EDEN LAND OPPORTUNITIES FUND There are a number of reasons why potential investors should consider investing in the Eden Land Opportunities Fund: Normally, private investors would not have the opportunity to access investments of this type due to the high minimum entry level required. There are potential tax planning opportunities by investing via a Fund, however an investor should seek tax advice from their Financial Adviser or Accountant. An investor gains access to expertise and diversity of investment approach. Risks are managed due to investing across a broad range of land developments at any one time rather than just one development. HOW TO INVEST The Application Form for Shares can be obtained from info@edencm.com Once completed and signed, the Application Form can be mailed to the Administrator. Alternatively, application may be made to the Administrator by fax to +44 (0) or via to eden@apex.im In the event that the application is submitted by fax or via , the signed original must be sent to the Administrator immediately thereafter at Exchange House, Athol Street, Douglas, Isle of Man, IM1 1LB. Telephone +44 (0) Photo: Cedric Weber / Shutterstock.com 10 EDEN LAND OPPORTUNITIES FUND PLC

12 SUMMARY Imbalance in demand and supply of land. Significant housing shortage. Right to contest scheme (January 2014) relaxation of planning rules. Strategy to pin point key land plots with the intention of significantly increasing value as a result of successful planning applications. Diversification of approach targeting 6 to 18 month strategies to blend risk / reward management. Liquidity strategy to increase flow of cash into the Fund combined with management of cash reserves. CBRE independent investment adviser to the Fund assisting in deal flow, valuation in title, due diligence and research. Joint ventures with partners specialising in knowledge of boroughs and councils giving confidence to achieving successful planning applications. Independent custodian, auditors and administrators. EDEN LAND OPPORTUNITIES FUND PLC 11

13 CHARGES DIRECTORY Charges are fully detailed in the Offering Document, a copy of which can be obtained from the Administrators. This brochure is for information purposes only and should be read in conjunction with the Offering Document. Fund prices may fluctuate and are not guaranteed. Past performance is not necessarily a guide to future performance. Land assets can only be firmly determined upon sale and therefore valuations in the interim are the opinion of the professionals involved in the industry and cannot be taken as fact. The Fund makes every effort to maintain liquidity levels to meet normal redemptions and cash needs but in the unlikely event of extreme circumstances the Fund could be forced to delay encashment whilst assets are being made liquid so as not to prejudice existing investors. Eden Land Opportunities Fund plc is an open ended investment company which is incorporated under the laws of the Isle of Man and has been established as a specialist fund under the Isle of Man Collective Investment Schemes (Specialist Fund) Regulations Investments will be accepted solely on the information set out in the Offering Document and can only be accepted from persons who are specialist investors as defined in the Offering Document. Further information and a copy of the Offering Document, as well as the latest Report and Accounts, can be obtained by contacting the administrator; Apex Fund Services (IOM) Ltd at eden@apex.im The Administrator is incorporated in the Isle of Man, Company Number V and having its registered office at Exchange House, Exchange House, Athol Street, Douglas, Isle of Man, IM1 1JD. Apex Fund Services (IOM) Ltd is licensed by the Financial Supervision Commission of the Isle of Man EDEN LAND OPPORTUNITIES FUND PLC Administrator Apex Fund Services (IOM) Ltd Exchange House Athol Street Douglas, Isle of Man IM1 1JD Auditor PWC Sixty Circular Road Douglas, Isle of Man IM1 1SA Banker The Royal Bank of Scotland International Royal Bank House Victoria Street Douglas, Isle of Man IM99 1NJ Board of Directors Lawrence Frampton Kirrie Jenkins Robert MacDonnell David MacKenzie Philip Scales Custodian Cayman National Bank and Trust Company (Isle of Man) Ltd Cayman National House 4 8 Hope Street Douglas Isle of Man IM1 1AQ Investment Adviser CBRE Henrietta House Henrietta Place London W1G 0NB Isle of Man Legal Appleby (Isle of Man) LLC Athol Street Douglas, Isle of Man IM1 1LB Contact Office Tel: + 44 (0) info@edencm.com 12 EDEN LAND OPPORTUNITIES FUND PLC

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