EIBURS Urban Development Funds in Europe: Opportunities, Structures, Operations Presentation Luembourg 2 February 2012 1 Univ.-Prof. Dr. Chair of Finance RWTH Aachen University Templergraben 64 D-52056 Aachen Phone +49/241/8093649 Fa +49/241/8092163 wolfgang.breuer@rwth-aachen.de www.bfw.rwth-aachen.de Univ.-Prof. Dr. Michael Nadler Chair of Real Estate Development TU Dortmund University August-Schmidt-Straße 6 D-44227 Dortmund Phone +49/231/7557906 Fa +49/231/7552415 michael.nadler@tu-dortmund.de www.immo.tu-dortmund.de
Introduction JESSICA = Joint European Support for Sustainable Investment in City Areas Joint initiative launched by the Commission with the EIB and CEB to Promote the use of financial engineering instruments for sustainable urban development in the contet of Cohesion Policy Develop public-private partnerships Assist Member States in designing and implementing these revolving instruments, in co-operation with regions, cities, national and regional financial institutions and other investors Our EIBURS Project = Urban Development Funds in Europe: Opportunities, Structures, Operations Analyse the entire structure around UDFs Within and outside of JESSICA Research on three major levels with two university partners 2
Introduction European Commission Structural Fund Grants Member State or Region Level 1 Holding Fund (of Member State or Region) Level 3 Return flow Investment Investment Return flow Level 2 Urban Development Fund I Equity Loan Guarantee Return flow Project I Project II Project Equity Loan Guarantee Urban Development- Fund II Return flow Project I Project II Project Cities Banks (public, private) Other investors (public, private) 3 Level 1 = Macroeconomic Level Level 2 = Microeconomic Level Level 3 = Combining Level 1 and 2 for the added value of JESSICA
Introduction Prof. Dr. Dominique Schaeling Chair of Finance School of Business and Economics RWTH Aachen University Prof. Dr. Michael Nadler Stefan Thiel Chair of Real Estate Development School of Urban and Regional Planning TU Dortmund University Fields of research: Corporate Finance Portfolio Management Real Estate Economics and Finance Cultural Corporate Finance, Ethical Inv. Fields of research: Real Estate Economics and Finance Financial Engineering in Urban Dev. Sustainable Regional and Urban Dev. Real Estate Project Development 4 Level 1 Level 2 Level 3
Research approach Level 1 Research Team RWTH Aachen University Objective: Develop a method to determine cities eligible for funding through UDF by an indicator-based macroeconomic analysis Target group: Managing Authorities of regions or Member States systematic assistance and transfer of knowledge 5 Procedures: A macroeconomic analysis of sustainable development for cities is needed as a basis to compare the efficiency of funding for several financial instruments of the capital market for urban finance cities eligible for UDF
Research approach Level 1 Status quo for the determination of urban funding targets from the Operational Programmes 2007 2013: Selection of cities Subjective Black bo Define the In the EU 12 names of cities e.g. in Czech Republic Define the number of cities Thresholds In the EU 15 e.g. Brandenburg E.g. Population number in Spain Funding need for urban development Objective Data based Development indicators Types of cities E.g. in France E.g. growing cities in Romania Competition of specific projects E.g. Brussels 6 Black bo subjective criteria i are opaque No black bo objective criteria i No foundation objective criteria are uneplained Simplicity too simple to capture the comple situation? Foundation in research results Reasonable simplicity capture the compleity High variation member states and regions choose Adequate variation general different (sometimes combined) selection procedures method with slight adaptations
Research approach Level 1 Our approach for the determination of funding targets: 1.Sustainability comparison Method: Principal Component Analysis Input: Indicators for sustainable development Result: Distance to the benchmark Compressed indicator 1 2 Compre essed indicator Benchmark Cities 2.Efficiency of funding Method: Data Envelopment Analysis Input: Change in indicators for sustainable development, funding type (!) Result: Movability Compressed indicator 1 ed indicator 2 Compress 3.Combining the results Input: Distance and movability Result: Funding type candidates Mov vability UDF-Candidates Area Technical-Assistance- Grants Area 7 Distance
Research approach Level 1 Basis: Sustainability comparison among cities Method: A principal component analysis (with rotation) Input: High number of indicators, for eample Urban Audit Key Indicators Output: Small number of (compressed) indicators that are sufficient to describe the differences in sustainability among the cities 8
9 Research approach Level 1 Working on the input: The input is crucial for robust results! Test the robustness of the revealed small indicator sets over time and among nations: Urban Audit Key Indicators for cities of Germany, Poland, UK Two time frames: 1999 2002 and 2003 2006 2006 with their average values Small set: Determined indicators by the PCA with rotation which are sufficient to represent at least 70 % of the variance in the data (each indicator eplains at least 10 %) Different indicators over time Nation and time frame and nations: Our method needs to be adapted for each Germ many 2003 3-2006 Germ many 1999 9-2002 Polan nd 2003 3-2006 Polan nd 1999 9-2002 3-2006 UK 2003 Indicators Car journey to work Cars Children day care Children householdsh Domestic burglary Employees of employables Household size ISCED 1 2 ISCED 5 6 Male representatives Population Population change 1 Population density Price public transport Road accident deaths Unemployment rate Working age population 9-2002 UK 1999 time frame and for the objects of comparison! Rotation with its strong reduction of indicators suitable only for static comparison? Dynamic approach should be based on more indicators! The initial indicators need to be chosen carefully for our own indicator set (pyramid covering all levels project, urban, regional, national)
Research approach Level 2 Research Team TU Dortmund Objective: Identification and monetarisation of sustainability effects for Integrated Urban Development Projects and development of a method for controlling those projects Target group: UDF management systematic assistance and transfer of knowledge Procedures: Screening, scoring and feasibility of projects, financial engineering and asset allocation for UDFs, deviation analysis of projects 10
Research approach Level 2 1. Conception of UDFs 2. Feasibility study of UDFs 2012 3. Sustainability analysis -Categorisation of indicators to measure sustainability effect -Development of a straight monetary assessment -Development of operationalisation methods -Analysis of active UDFs Indications for research approach What s new? The approach goes beyond the state of the art: Monetarisation of sustainability effects in a transparent and comprehensible way Multi-level approach, a key factor for decision support of sponsoring Target I: Target II: Acceptance on the practical level (process innovations) Finding empirical evidence of sustainability effects 11
First & second steps Start of EIBURS-Program: October/November 2010 First steps: 1. Launch of our website Consolidation of information on JESSICA and our EIBURS project on Urban Development Funds www.immo.tu-dortmund.de/eiburs/ 2. Organisation of a networking meeting in Dortmund on August 26 th 2011 Title: Urban Development Funds in Europe: Opportunities, Structures, Operations Invitation of European universities working on JESSICA, EIB staff, Managing Authorities and urban development practitioners 3. Definition of main focus on level 1 and 2 Second steps: 12 1. Organisation of a networking meeting in Aachen on April 27 th 2012 Title: Efficient Allocation of Structural Funds for Regional and Urban Development Invitation of European universities working on JESSICA, EIB staff, Managing Authorities and urban development practitioners 2. Organisation of visits of urban development funds in operation 3. Further elaboration and etension of research on level 1 and 2
Thank you very much for your attention! Univ.-Prof. Dr. Chair of Finance RWTH Aachen University Templergraben 64 D-52056 Aachen Phone +49/241/8093649 Fa +49/241/8092163 wolfgang.breuer@rwth-aachen.de www.bfw.rwth-aachen.de Univ.-Prof. Dr. Michael Nadler Chair of Real Estate Development TU Dortmund University August-Schmidt-Straße 6 D-44227 Dortmund Phone +49/231/7557906 Fa +49/231/7552415 ih l dl @t d t d d www.immo.tu-dortmund.de lf b @ th h d michael.nadler@tu-dortmund.de 13