COMMENT | Liverpool still suffering viability challenges

The Liverpool City Region is catching up again. Despite sustained cuts to public sector funding and jobs, its GVA per head, a key measure of productivity, is back above three-quarters of the national average and growing, writes Mark Bousfield of The Chrysalis Fund.

Beneath the headlines, we see encouraging long-term trends in the labour market, like an unemployment rate falling towards the national average after decades of being stuck above.

You can see this progress in the city region’s commercial real estate: a central hotel offer that has established and defended its high occupancy; the renewal of industrial estates, like Knowsley Industrial Park, by owner occupiers and developers alike; and the preparation of strategic projects like Parkside in St Helens.

Yet gaps remain – market failures either not yet overcome by economic growth or whose root cause lies elsewhere. Will the conversion into residential blocks of swathes of Liverpool or Bootle’s office stock push rents enough to make new development viable? Or are we misunderstanding the problem?

Chrysalis’ approach is to focus on risks and to work hard to identify, assess and mitigate every risk that we see contributing towards a viability gap – and that’s over the life of the project, not just in the development appraisal. Once we understand them, we can become comfortable with carrying risks that commercial funders may not, particularly for speculative space and where we see latent demand for new product.

This approach has enabled us to commit debt funding to three speculative industrial projects in Knowsley (two built and let, one forthcoming), for almost 500,000 sq ft.

Similarly, when international cable manufacturer Tratos wanted to expand its UK manufacturing operation, it turned to Chrysalis as part of its basket of funding to help it acquire an additional adjacent site for expansion as well as support the redevelopment and expansion of production facilities on site. The new and expanded facilities houses state of the art production equipment and delivered more than 100,000 sq ft of new and refurbished manufacturing capacity, as well as the creation of 100 new jobs. Without the £3.5m loan from Chrysalis, it would not have been possible.

In the new, grant lite world of property development where the 2014-2020 ERDF programme is a fraction of its 2007-2013 forerunner and a small number of large projects look capable of absorbing much of the Combined Authority’s resources, we see great value in reducing gaps by focusing on risks.

Chrysalis is a key part of the Liverpool area’s funding mix and if you’re involved in any projects that you think may benefit from our input, then get in touch. We’ll be happy to see how we can help. Check us out at chrysalisfund.co.uk

Our offer is flexible finance – whether debt, equity or another instrument – with plenty of project support to make a viable proposition move forward. We do not commit less than £1m nor would any single commitment exceed 20% of the fund’s size or 60% of a project’s value.

• Mark Bousfield is investment manager at The Chrysalis Fund