MD2362 Creative Land Trust

Type of decision: 
Mayoral decision
Code: 
MD2362
Date signed: 
25 September 2018
Decision by: 
Sadiq Khan, Mayor of London

Executive summary

Culture and the creative industries are at the heart of London’s success, contributing £47bn per year to London’s economy and 1 in 6 jobs. This is underpinned by the individuals and collectives who make up the broad ecosystem of creative practitioners in London. Their work and production take place in the roughly 11,500 creative workspaces which are a fundamental R&D component of London’s creative and cultural infrastructure. However, London’s continued development poses a threat to this cultural ecology. By 2020, 3,500 sites of production are projected to be lost, threatening the continued innovation in the creative industries and cultural economy. Artists have an average income of less than minimum wage, so securing long term affordable space is crucial to their continued production.

The Creative Land Trust provides a solution to this issue - as a new independent trust that will attract public, philanthropic and social investment funds to purchase buildings to provide affordable workspace in perpetuity across the capital.

In November 2016, the Mayor announced a feasibility study for the creation of the Creative Land Trust as an innovative solution to finance affordable creative workspace in London, under cover of ADD2043.

By acquiring and holding property for long term and leasing it to affordable workspace providers, the Creative Land Trust will ensure that artists have access to studio spaces and that crucial production can continue to flourish.

The Creative Land Trust is a key tool in addressing London’s affordable workspace challenge. The Mayor will support the creation of the Trust through a direct grant, managed through a funding agreement.

Decision

That the Mayor approves:

Expenditure of up to £4m from the Culture and Creative Industries Budget (Capital) to be released into the Creative Land Trust via grant agreement (£2m in 2018/19; £1m in 2019/20 and £1m in 2020/21). There will also be a grant to the CLT of £150k revenue funding, as approved by MD2363.

Part 1: Non-confidential facts and advice

Introduction and background

Culture and creative industries are critical to London’s success as a world leading city. The sector is worth £47 billion per year to the UK economy, enabling continued job creation and growth, and one in six jobs in London are in the creative sector. This success is underpinned by the individuals and collectives who make up the full ecosystem of creatives, including fine artists and those working in craft, design and performance. Their work and production take place in the roughly 11,500 creative workspaces across London which are fundamental infrastructure for the research and development of the capital’s cultural strength.

A 2014 study carried out by the Greater London Authority established that research and development spaces for the culture and creative sector were severely under threat. While London’s continued development and expansion brings extraordinary cultural vibrancy and diversity, it is also a threat to maintaining and growing the strong cultural infrastructure needed for success. The research established that by 2020, 3,500 sites of creative production were projected to be lost – 30% of total provision.

An update of the study, commissioned in 2018, has shown that the spaces which were at risk have now largely been lost, with the remainder likely to be lost by 2019, as predicted. New workspace projects are emerging, but the tendency is towards a much lower number of studios dedicated to the very affordable level which serves artistic creation and R&D. Rapid increases in property values have put affordable rent out of reach of the majority of artists. Few creative workspaces are owner occupied which means that they are unsecured against large rent increases or development. London has a strong history of professional affordable workspace providers, but against increasing commercial pressures, they now face major barriers to securing or renewing leases; are up against commercial developers; and / or lack access to financial support to take on development opportunities.

The Mayor’s Good Growth agenda calls for an active approach to maintaining the character of places, and safeguarding cultural infrastructure squeezed out by development pressure. The draft new London Plan has put initial protections in place to secure affordable creative workspace and this is further supported through the Mayor’s new Creative Enterprise Zones programme. The Creative Land Trust will be a significant tool to secure affordable space in perpetuity to be operated by professional accredited providers.

The new independent Creative Land Trust has been established as a company limited by guarantee, and in August 2018 it applied to the Charity Commission for charitable status. The Creative Land Trust will acquire properties that will be leased long term to affordable workspace providers, thereby safeguarding affordability and stability for London’s creatives. It will harness grant and philanthropic funding to attract additional investment and loan funding to purchase property for use as affordable creative space in London in perpetuity.

The Mayor’s draft Culture Strategy supports the need for affordable creative workspace in London to secure talent development and innovation across London’s culture and creative industries. The Creative Land Trust has secured widespread support and stakeholder buy-in and has committed funding partners in Arts Council England and Bloomberg Philanthropies.

Background

The Creative Land Trust emerged following a series of reports highlighting the market failure surrounding creative production in London. These include:

• Artists’ Workspace Study, We Made That (September 2014);
• Making Space: Developing and Sustaining Affordable Artists’ Studios and Creative Workspaces, Creative United; (July 2016); and
• Start Me Up - Why London Needs Open Workspaces for Creativity, Innovation and Growth, IPPR (December 2016) and the Government White Paper on Culture 2016.

The Artists’ Workspace Study, commissioned by the Mayor of London’s Culture team in 2014 found that there were 11,500 people based in creative workspaces / studios across London. Over 3,500 of these creatives will have lost their workspace by 2019 – representing 30% of creative workspace in the city. An updated study, released in August 2018, confirms this rate of loss: at least 67% (39) sites which were identified as at risk of closure within 5 years from 2014 – 2019 have already closed. In addition, operators are adopting new business models to adapt to the challenging property market, including generating higher rent from ‘other creative tenants’ in a ‘blended rent’ model. The impact of this is that whilst the number of studio buildings is growing, the net number of artists’ studios is decreasing, as is affordable provision.

Creative United’s research set out the pressures faced by affordable workspace providers, makerspaces and the artists that occupy them, such as growing demands for similar workspace by other more lucrative sectors, including open / shared workspace, and increasing property values. This has been exacerbated by the permitted development rights policy, which makes it easier for developers to convert offices to residential use. The study finds that while many affordable creative workspace providers are adept at raising funds from a variety of sources, and sophisticated in debt management, the need to source increasingly large amounts of deposit funding is a barrier.

The financial model for the Creative Land Trust is based on two existing organisations, the Arts Impact Fund, established in the UK in 2014 to invest in arts organisations delivering high artistic and social outcomes, and the Community Arts Stabilisation Trust in San Francisco, established to purchase cultural buildings. Both have advised on the structure and delivery of the Creative Land Trust.

In 2016 the Greater London Authority (GLA), in partnership with Arts Council England, funded Outset Philanthropic Art Fund to undertake a feasibility study which explored financial and organisational models for a Creative Land Trust for London. Social impact investors, Investing for Good were procured to set out the parameters for the fund. Various operational models were considered, including a Creative Land Trust embedded within the GLA, embedded within another national body, a social enterprise model and a straight fund model.

The Mayor’s Culture Unit has developed the financial model in consultation with the project partners, Outset and Arts Council England, the consultants Investing for Good, the Mayor’s Cultural Delivery Group, affordable workspace providers, creative practitioners, funders, investors and leading property figures. An outline business plan has been developed with the project partners and includes a detailed financial model.

The legal framework for the Creative Land Trust has been provided through pro bono legal advice from Dechert LLP.

Operational Model

• The Creative Land Trust has been incorporated as a company limited by guarantee and an application has been made to the Charity Commission for charitable status. This will enable independence and neutrality, allow funding to be leveraged from a wide range of sources (including private foundations).
• The Creative Land Trust will be governed by an independent Board to which Trustees will bring key areas of expertise particularly in property development and financing.
• A Steering Group consisting of representatives from Outset, GLA, Arts Council England and the studio provider sector has been established to support the initial set up of: a) the governance of the entity, b) recruitment of the Chair and the Board (once recruited the Chair will also be involved in wider Board recruitment). Following this, the Steering Group may continue to as an advisory group for the Creative Land Trust board.
• The Creative Land Trust will be managed by a Management Team initially comprising a CEO (separate from the Board) and a Property Manager. These roles will be recruited through an open recruitment process once the Creative Land Trust has been launched.

Guiding Principles for the Trust

Ownership

The Creative Land Trust will secure space through the acquisition of buildings through the following methods:

• Sole ownership: Creative Land Trust may purchase buildings or land outright
• Shared Ownership: Creative Land Trust may provide upfront capital to co-purchase buildings or land with studio operators – the expectation is that the Creative Land Trust will provide up to 25% of the equity required as a capital deposit; and
• Property Repository: Creative Land Trust may receive buildings or land from public bodies (including boroughs and development corporations), and private ownership through gifted ownership transfers and long leases of at least 25 years.

Sources of capital

• The Creative Land Trust will harness grant and philanthropic funding to attract additional investment and loan funding to purchase property for use as affordable creative space in London in perpetuity.
• Grant money (e.g. from sponsoring entities, such as GLA and Arts Council England as well as corporate donors and other forms of philanthropic capital) will be used to attract wider investment capital from social/impact investors. The latter will require a return on their investment in the form of interest across the portfolio of properties and capital return at the end of term. The yield will ultimately be derived from various factors, including the level at which affordable rents are set, the breakdown of the property portfolio and the overall capital mix of grant vs. investment money.
• The ambition is for an anticipated grant component of £8m-£9m of philanthropic funding (of which up to £7.5m is already raised) to leverage in a further £20-30m from institutional social impact investors over five years.
• Confirmed capital to date is from Bloomberg Philanthropies, who have committed £1.5m to the Creative Land Trust, Arts Council England, who have granted £2m to the Creative Land Trust, and this decision seeks approval for the expenditure of up to £4m from the GLA.

In March 2018 the GLA Corporate Investment Board approved the following in principle:

• A GLA grant from the Culture and the Creative Industries capital budget
• The proposed approach of supporting the creation of a Creative Land Trust as an independent company limited by guarantee.

This Mayoral Decision builds on previous decisions ADD2043 and ADD2194 which cover research towards a Creative Land Trust and seeks formal approval to progress the grant to the Creative Land Trust and the formal announcement.

Objectives and expected outcomes

The following outputs are indicative and are anticipated to be delivered by the Creative Land Trust, which will exist as an independent entity. Final outputs will be approved by delegated authority and incorporated within the GLA grant agreement with the Trust once approved by the Board of Trustees. It is expected that the Creative Land Trust’s final corporate structure, its financial model once approved by its Board of Trustees and the finalised terms of the GLA grant agreement will also be approved by delegated authority to ensure these are satisfactory to the GLA and consistent with this Mayoral Decision.

Creating conditions for resilience and clusters; underpinning affordable workspace policies and support for creative industries and Creative Enterprise Zones as outlined in the draft London Plan:

• The Creative Land Trust is modelled to secure a minimum of 1000 affordable creative workspace for cultural production in London within 5 years, this constitutes an uplift of over 100% of the existing permanent space of this kind.

Consolidating the cultural and creative industries, supporting talent, regeneration and skills development and supporting growth in sustainable commercial floorspace for SMEs (artists and creative businesses):

• Remove financial barriers for London–based artists by providing space at significantly lower than market rates and supporting a diverse range of creative practitioners.
• More stable creative clusters, with consolidated supply chains, supporting a creative ecology and information sharing.
• More tangible local benefit from workspace provision – artists and creatives active in an area will be there long term, supporting local activity and benefiting from as well as contributing to regeneration.
• Increased quality of creative output – better exchange and networks facilitating higher level professional output and skills development.
• More targeted skills development opportunities by consolidating affordable workspace providers – so that space provision can be linked with skills programmes for artists and local people.

New public and private investment model for the culture sector:

• An innovative structure for financing the arts, with reasonable terms for investors, supporting affordable workspace for artists.
• Blended funding model with de-risking and leveraging benefits, largely driven by private sector investment.

Equality comments

Under Section 149 of the Equality Act 2010, as a public authority, the Mayor of London must have ‘due regard’ of the need to eliminate unlawful discrimination, harassment and victimisation as well as to advance equality of opportunity and foster good relations between people who have a protected characteristic and those who do not.

The GLA contribution to affordable creative workspace as set out in this decision will enable the continued creation of employment opportunities for Londoners, creating both positive social and economic impact in the capital.

Under Section 149 of the Equality Act 2010, as a public authority, the Mayor of London is subject to public sector equality duty and must have ‘due regard’ to the need to (i) eliminate unlawful discrimination, harassment and victimisation; (ii) advance equality of opportunity between people who share a relevant protected characteristic and those who do not; and (iii) foster good relations between people who share a relevant protected characteristic and those who do not. Protected characteristics under section 149 of the Equality Act are age, disability, gender re-assignment, pregnancy and maternity, race, religion or belief, sex, sexual orientation, and marriage or civil partnership status (all except the last being “relevant” protected characteristics).

It is not anticipated that the project will have a negative impact on any protected groups identified under the Equality Act 2010. It will be developed and delivered in compliance with relevant Codes of Practice and in line with the requirements of the public-sector equality duty to ensure that the following issues have been considered:

• The proposed Creative Land Trust will enable the continued creation of employment opportunities for Londoners, creating both positive social and economic impact in the capital, including artists who, statistically, have a low annual income.
• The Creative Land Trust will provide opportunities for organisations from a range of cultural and business sectors to engage with each other to work collaboratively and actively foster closer working between a diverse range of both organisations and individuals.
• The grant agreement will stipulate that any workspace providers occupying spaces secured through the Creative Land Trust must have equality policies in place at their organisations and proactively apply the principles of the Equality Act 2010.

Other considerations

Key risks and Issues

Governance

The GLA will enter into grant agreement with the Creative Land Trust, which will be subject to established GLA grant processes of scrutiny, evaluation, and ongoing monitoring. The Culture and Creative Industries Unit will oversee compliance, and monitor delivery progress through quarterly Budget and Performance Review meetings. The GLA lead officer will be responsible for reviewing the activity of the Creative Land Trust in line with the agreed programme and the original approval and grant conditions. The Creative Land Trust may seek to invite the GLA to observe Board meetings. Board involvement will likely be restricted to observer status in order to avoid a conflict of interest, given the GLA’s role as a major donor; and legal advice will be sought in accepting any such offer (before being accepted (or otherwise) in the normal way through a Mayoral letter).

Operational Model

In the event that the Creative Land Trusty does not secure Charitable status immediately, it will not impact on the GLA’s ability to enter into grant agreement. The partner funding is also not contingent on this point.

Security of Investment

Consideration will be made, with legal advice, what provisions will be included in the funding agreement to help ensure that the GLA is able to recover its grant in the event that Creative Land Trust does not deliver the agreed outputs. Availability of funding after the first year (i.e in 2019/20 and 2020/21) will be subject to the GLA’s satisfaction with Creative Land Trust’s performance in the first year.

Legal Compliance

Officers will need to ensure that ongoing understanding of Creative Land Trust’s income as between public and private sector donors, as well as the extent of any works that Creative Land Trust may undertake. Officers will need to use the data provided to assess and ensure continued State aid and procurement law compliance.

Links to Mayoral strategies and priorities:

Manifesto

Supporting small business, protecting business space and the character of high streets. This initiative will help realise the full potential of our high streets, town centres, industrial and opportunity areas by securing appropriately specified and affordable commercial floorspace in future developments and existing buildings.

Draft Culture Strategy

Supporting and helping to protect creative and artist workspaces, particularly where they are affordable. This initiative will complement and add impact to the Mayor’s actions to strengthening planning protections for small industrial and creative workspaces and create a pro-cultural planning framework through his draft new London Plan, safeguarding existing cultural facilities.

City for All Londoners

This project, structured around the Mayor’s principle of Good Growth, will help to ensure Londoners can play an active part in their communities. It supports the priorities set out in a City for All Londoners particularly under Accommodating Growth, Economy, a City for All Londoners, and Housing.

Emerging Strategies and priorities

This project addresses a number of Mayoral priorities. It directly supports the draft new London Plan policies: E2 (affordable artists’ workspace), E4 (No net loss of industrial floorspace capacity), E7 (Intensification, co-location and substitution of land for industry), E8 (Sector growth opportunities and clusters), SD1 (Opportunity Areas), SD6 (Town Centres), SD10 (Strategic and local regeneration), and T2 (Healthy Streets). It aligns with and develops priorities set out in the Mayor’s Draft Economic Development Strategy, in particular, a fairer, more inclusive economy, Creating the conditions for growth, and Supporting London’s sectors. It directly supports the Participation and Equality strands of the Mayor’s Strategy for Social Integration. It is a key priority in the Mayor’s draft Culture Strategy.

Impact assessments and consultations

To date, officers have engaged with a wide range of representatives from interested parties and stakeholders through intensive consultation, modelling of potential pilot projects and market testing. The initiative has generated significant interest from the social impact investment sector, and has the support of workspace providers, Local authorities and industry organisations including Arts Council England, Arts Impact Fund, Nesta, University of the Arts London and National Trust. It also has support from across the development industry and from large scale property investors such as Aviva.

The following GLA teams have advised on the structure for the fund: Regeneration, Housing & Land, Planning and Legal. The Steering Group comprises public and private sector partners, including Arts Council England, and independent experts in affordable workspace provision and property management.

Financial comments

Approval is being sought for capital grant payments of up to £4m to the Creative Land Trust to enable the acquisition of buildings. The grant payments are expected over three years as follows:

£2m in 2018/19; £1m in 2019/20 and £1m in 2020/21.

Match funding has been secured from Arts Council England (£2m) and Bloomberg Philanthropies (£1.5m). Further match will be sought from private donors to create an initial seed fund of up to £8.5m.

£150k towards revenue costs is being approved under MD2363 from the Mayor’s Strategic Investment Fund arising from the London 100% business rates retention pilot for 2018-19. This funding covers the financial period 18/19 and 19/20.

Activity table

Activity

Timeline

Key Funding partners secured

February 2018 - complete

Legal Company formed

February 2018 - complete

Application submitted to the Charities Commission

August 2018 - complete

Grant agreement for revenue set out

September 2018

Chair Recruitment

August 2018 – October 2018 – in process

Charity Commission submission outcome

October 2018

Grant agreement capital funding

October 2018

Public Announcement

Autumn/Winter 2018

First investors formally approached

Autumn/Winter 2018

Open Recruitment Executive Director and Trustees

Autumn/Winter 2018

First building acquisition

Spring 2019