Public Sector Residential Land Disposal & Development Deferred Receipts Mechanisms

1. Public Sector Residential Land Disposal & DevelopmentDeferred Receipts Mechanisms Liam Fennell RBS Property Ventures 23rd June 2009

2. Liam Fennell - Track Record • Director Property Ventures based in Edinburgh (2006-Present) • Focused on Regeneration & Public Sector Joint Ventures. • Scottish Enterprise (1991-2006) • Area regeneration: My Future’s in Falkirk, Raploch URC, Chemical sector initiative, Life Sciences, business property. • Specialist developments: science parks – Aberdeen, Edinburgh Bioquarter, Edinburgh Technopole, Pentlands Science Park, Roslin BioCentre, Stirling University Innovation Park. • Local Regeneration: Exchange District – Edinburgh International Conference and Financial Centre. Accessing ERDF. • Construction & Mining (open cast & deep mines)

3. Property Ventures – Edinburgh • PV work alongside our colleagues in the corporate bank to provide a total funding solution for property deals in the UK and Ireland • PV provide the equity and mezzanine element • Deals cover all property asset classes and transaction types but must have a value driver and a planned exit – typically asset management, development (including speculative) and planning plays • Deals are property specific • No typical deal structure – each deal is tailored to meet the specific needs of the partner and transaction • Deals can be effected via lending with profit sharing exit fees, joint ventures, limited liability partnerships, limited partnerships and direct ownership with profit related fee for partner • Typical deal size is GBP5-150m. Currently PV Edinburgh have over 80 active deals with a total exposure in excess of GBP1.5bn • PV Edinburgh are a team of 14 comprising a mix of property and finance professionals PV fund the gap between senior funding and the amount of equity the partner can contribute

4. Approach – Key Factors • Partner • Partnership – partner as principal • Track record/reputation of partner is key • “Pain” money from partner is required • Property • Quality of asset • Reasonableness of appraisal assumptions – yield, income, costs, timing • Portfolio/ appetite for sector/transaction • Exit – when and for what price? • There needs to be a value driver • Risk vs Reward • Evaluate risks • Profitability of scheme • Potential return vs risk being assumed Partner Property Risk vs Reward

5. Deal Structures • Structures are driven by the specific needs of the partner and the transaction • Control • Transparency • On/Off Balance sheet • PV are currently working in the following structures • Lending with profit sharing exit fees • Joint Ventures (50:50) with minority/majority feedback • Direct ownership with profit related fee for partner • LLPs (Limited Liability Partnerships) • LPs (Limited Partnerships)

6. Property Market Correction

8. • Abbey • Barclays Bank • BLME • Canada Life • Coutts & Co • Deka Bank • Deutsche Postbank • DG Hyp • Eurohypo • Handelsbanken • Helaba • HSBC Investec • Landesbank Berlin • LBBW (Stuttgart) • Lloyds Banking Group • Munich Hyp • Nationwide BS • Nord LB/Deutsche Hypo • Norwich Union • RBS • West Immo Who is lending (June 2009)? – Savills “top 22” with anappetite to lend in 2009 (above £10m) Note: 10 are German lenders, 8 are UK lenders and 4 are other international lenders Source: Savills

9. Funding Re-benchmarked

10. Risk Profile

11. CASE STUDIES

12. Public/Private Regeneration Projects/Vehicles • Isis Waterside Regeneration • English Cities Fund • Blue Print • Igloo • Priority Sites, Welsh Industrial Partnership, Networkspace • ONE Buildings for Business, NorwePP, PxP, ONEDIN • Local Asset Backed Vehicles – Croydon, Tunbridge Wells

13. Infrastructure Funds • Tariff Based Models • English Partnerships Milton Keynes Tariff, Bedford • SWERDA • JESSICA • BIDS (or Tax Increment Finance)

14. Cart Corridor, Renfrewshire • A location specific GBP30m public / private partnership between RBS (50%) Renfrewshire Council (45%) and Scottish Enterprise Renfrewshire (5%) • Established in August 2005 to achieve planning, build, let and sell office, industrial and commercial units at Cart Corridor close to Glasgow Airport • To be developed in 5 phases, Project Life estimated at 5 years • By 2010 the project is intended to create 1000 new jobs with an additional GVA of GBP245m for the Scottish economy

15. Limited Partnership vehicle formed in May 2004 to develop 5 phases of mixed use regeneration scheme Joint venture between RBS (41%), Salford Council (19%), and developers City Spirit (20%) and Inpartnerships (20%) Land remediation was supported by Manchester and Salford Housing Market Renewal Fund. Development to be in ‘Homezones’ of 20-30 units to foster community atmosphere Phase 1 consists of 177 units (apartments and three to seven bedroom houses) and is due for completion by mid 2007 Future Phases will include a community hub, 193 apartments for key worker rental, 60 affordable apartments, 115 units mixed tenure, plus 5,000 sq ft food store and 13,000 sq ft medical centre Over 60% of homes sold off-plan Winner of ‘Best Family Home’ and ‘Best Overall Development’ at MEN Residential Property Awards on 12 October 2006 www.broughtongreen.co.uk Higher Broughton, Salford

16. Established October 1997 as a Joint Venture between RBS (51%) and English Partnerships (49%) Brought together the financial strength of RBS with England’s national regeneration agency. Remit to undertake development of industrial, hybrid and office space in areas of economic need Now renowned as one of the most active speculative commercial developers in England Initial target was 1.3m sq ft of industrial space By July 2007 3.12m sq ft of floor space had been built Over GBP240m had been invested in the regions Opportunities for 6,500 people had been created Further 700,000 sq ft was underway with 900 sq ft in the pipeline www.prioritysites.co.uk Priority Sites

17. Exit route involves the lease of or sale of individual developments to owner occupiers or individual investors, or leasing to occupiers Priority Sites Cannis House, St Austell Croft Business Park, Bromborough Dakota Business Park, Speke Wansbeck, Ashington

18. A public / private partnership between RBS (51%) and Welsh Assembly Government (previously Welsh development Agency) (49%) Established in 2002 to fund and develop industrial units throughout Wales. RBS provided funding up to GBP32.6m WAG contributed GBP0.98m equity and contributed GBP9m investment property portfolio to represent the gap funding appropriate for the development programme WAG undertake the project management and manage the external property advisors Phase 1 consists of 240,000 sq ft in five locations costing circa GBP14m The partnership is being extended until July 2010 and will undertake further speculative developments Welsh Industrial Partnership (WIP) Gemini Court, Baglan Energy Park Integra St Asaph

19. Project Omega, Warrington • 50 / 50 Joint Venture with the Miller Group • Site remains in the ownership of English Partnerships. JVCO has an option to draw down land for a fixed price (subject to overage) on an as needs basis • 500 acre brownfield site (former US military use) at Warrington • Potential to develop up to 7m sq ft of mixed used development • Planning achieved for 1.6m sq ft of logistics / industrial and 1.5m sq ft of offices and ancillary use • 15 / 20 year time scale • www.omegawarrington.co.uk

20. AEquity, mezzanine and debt funding provided to Ecosse to assist in acquiring and obtaining planning for c1200 acres of land at Polkemmet, West Lothian, Scotland Original investment made in April 2002 – long term project Outline planning consent has been granted for 2000 residential units 500k sq ft class 4 (business/offices) 500k sq ft class 5 (industrial) 500k sq ft class 6 (storage/distribution) Two PGA designed golf courses new M8 motorway junction Neighbourhood shopping centre Contract awarded to extract 1.6m tonnes of coal via opencast to provide a development platform and remediate the site Discussions ongoing with residential developers. Options being explored in connection with the commercial land Ecosse Regeneration Ltd

21. Summary/Conclusion • Regeneration is a Long Term proposition • Public sector can generate confidence for private sector by investing and reducing risk e.g. planning, site assembly, decontamination, pump priming, public realm, related investment etc • Clear objectives required, value driver(s) and a planned exit • Flexibility to respond to changing market demand and conditions • Pricing will reflect level of risk • IPD research indicates returns in regeneration areas comparable with other property classes • But there are barriers to investment: • Risk – lack of coherent strategy, lack of track record • Cost – high upfront bidding, heavy investment in infrastructure, timescale • Demanding – of people, time vs opportunity cost with other projects • Scale – single site vs portfolio approach • Premature or ill conceived proposals • Clear understanding and expectation of the private sector partner’s role and contribution

22. This document has been prepared for information purposes only. The investments and investment services PVrred to are not available to private customers within the meaning of the rules of the Financial Services Authority, nor for persons who are subject to US securities laws and should not be distributed in the US or to any US person nor in any jurisdiction in which its distribution would be prohibited. It should not be construed as an offer or solicitation to buy or sell any securities or any interest in securities. The information in this document is confidential and is intended for use only by the recipient. It should not be reproduced or disclosed to any other person without our consent. This document remains our property and must be returned to us on request and any copies you have made must be destroyed. [Include where relevant: The information contained herein has been prepared by us on the basis of information provided by the [Transferor/Issuer] or one of more of its affiliates to assist interested parties in making a preliminary analysis of [Describe Transaction] and does not purport to be all-inclusive or to contain all of the information that a prospective investor may require to make a full analysis of the transaction. The terms of this [Preliminary Term Sheet/Presentation] are qualified in their entirety by the Offering Circular, which will be made available by us in respect of the transaction described herein, which will supersede the terms hereof.]* This document is distributed on the express understanding that, whilst the information in it is believed to be reliable, it has not been independently verified by us. We make no representation or warranty (express or implied) of any nature, nor do we accept any responsibility or liability of any kind, with respect to the accuracy or completeness of the information in this document. This shall not, however, restrict, exclude, or limit any duty or liability to a person under any applicable laws or regulations of any jurisdiction, which may not lawfully be disclaimed. Each recipient of this document should make its own independent evaluation of the transaction and of the relevance and adequacy of the information in this document and should make such other investigations as it deems necessary to determine whether to participate in the transaction. The Royal Bank of Scotland plc ("RBS"), and its affiliates, connected companies, employees or clients may have an interest in the securities (or related securities or other financial instruments or their related derivatives) ("Securities") mentioned in this document. This may involve activities such as dealing in, holding, acting as market-makers, or performing financial or advisory services, in relation to any of the Securities PVrred to in this document. It may also have acted as a manager or co-manager of a public offering of such Securities, and may also have an investment banking relationship with any companies mentioned in this document. Neither of us should rely on any representation or undertaking inconsistent with the above paragraphs. This document is issued by RBS, which is authorised and regulated by the Financial Services Authority. Any views or opinions (including statements or forecasts) constitute our judgement as of the date indicated and are subject to change without notice. [Additional paragraph for Asset-Backed issues: Average lives of, or the potential yields on, any security cannot be predicted as the actual rate of repayment on the underlying assets, as well as a number of other relevant factors, cannot be determined. No assurance can be given that the assumptions on which the possible average lives of, or yields on, the securities are made will provide to be realistic. Information about possible average lives of, or yields on, the securities in this document must, therefore, be viewed with caution.]* * Delete as applicable N.B. Advisory Areas are: Structured Capital Markets (including Transaction Execution, Securitisation, Debt Structuring, CDO’s and Risk Finance); Origination (including: UK Origination, Europe Origination, Frequent & Public Sector Borrowers, Financial Institutions Group Originations, High Yield Origination, Private Placements, Syndications); Group Treasury and FM Investment Management (Agency Treasury Services is a Trading Area for the purposes of these disclaimers) The Royal Bank of Scotland plc. Registered in Scotland No. 90312. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. The daisy device logo, 'RBS', 'The Royal Bank of Scotland' and 'Make it happen' are trade marks of The Royal of Scotland Group plc. Registered in U.S. Patent and Trademark Office and internationally. Global Disclaimer for Presentations by Advisory Areas to Investors