Analyse of problem In the fall of 2008 the credit crunch started in The Netherlands. The financial sector in The Netherlands deteriorated with serious consequences for the Dutch real estate market. After years of increases in real estate investment, the investment volume in Dutch real estate decreased in the second half of 2008 (Debenham Thouard Zadel-hoff (DTZ), 2010 in Mierlo, Y.C.M., 2010). Until now the market conditions are extra-ordinary because few transactions take place. (Mierlo, Y.C.M., 2010) The crisis hits the area development, the real estate sector and municipal development com-panies hard. In many projects, progress is coming to a standstill and the cooperation between public and private is under pressure. Due to the economic and financial crisis, financing of projects has become difficult for both private and public parties. The government is withdrawing grants and banks are critical. This applies to both consumers and the investing parties. Banks only look at projects without risk and with a guaranteed positive return. Even then it is not certain that investments are made and buyers in the market let it fail. This provides the market limited space to invest and investors can take less risk. However, area developments in cities are really necessary. The cities must continue to adapt to new social needs and demands. Stagnation often means (relative) decline. (van ‘t Verlaat, 2007) The necessary redevelopments are especially needed in what is sometimes called ‘problem districts’. In these districts multiple problems exist, actually there is a con-centration of problems. In these districts there are additional questions to solve prob-lems with regard to living, working, learning, integration and security. When nothing is done, these problem areas will elapse even further. The (bad) per-formance of such a district presents many social problems (and costs). To maintain the residents of these districts, to preserve the people in a healthy and liveable envi-ronment to live and to let the children grow up, redevelopment is necessary, even in this time. Bospolder Tussendijken One of the defined problem districts where it is necessary that area development takes place is Bospolder Tussendijken in Rotterdam. Currently, Bospolder Tussendijken belongs to the weakest socio-economic districts of Rotterdam. Bospolder and Tus-sendijken were both on the list of ‘Beauty Districts’ (Prachtwijken) of Minister Voge-laar in 2007. Bospolder Tussendijken has been a problem district for a long time. In the urban renewal period a lot has been invested to improve the neighbourhood. Unfortu-nately until today, all investments have not been sufficient to cure the district. Around 2006/2007 an area conception has been created for Bospolder Tussendijken by the subcommunity Delfshaven, Proper Stok developers and Havensteder, the former housing association Com wonen. Havensteder was formed by a merger be-tween Com wonen and the Patrimoniums Housing Association (PWS) and owns about 70% of the housing, mostly social rental housing. Proper Stok developers got involved in the development because of its expertise in creating design concepts for urban area development problems. In the area conception, the problems of the district have been made visible and a direction is given what needs to be done for the district to function properly again. Based on this conception, a land and real estate exploitation of the design is made. This exploitation gave an operating deficit of about 10 to 13 million euro after which the project came to a standstill. The problems of exploitation was due to a number of different points: - Much capital invested in land development through the early purchase of the land. - A strong increase of invested capital by pre-financing in the real estate ex-ploitation. - A large parking garage. (Proper Stok developers, 2010) Definition of a problem Based on the above problem analysis, the following problem is formulated: 1. The current parties (like municipalities, housing corporations and project de-velopers) fail to obtain the needed (pre-)financing for inner city area devel-opment. 2. However, area development in problem districts is required to prevent fur-ther elapse of the district. There may be other ways to finance the necessary redevelopment. You can search for new value carriers (parties who can invest and can bear the value), by making connections to real estate reports to other social urgencies to support/replace the current parties in the area development. (see figure 1) Figure 1: Parties in inner city area development Main question The question is twofold: What ‘new parties’ can participate in the inner city area development and what value can these 'new parties’ deliver? Is this value enough to boost the area devel-opment back on track with the aim of getting the problem districts healthy and in demand again? The main question is answered by a qualitative and exploratory research. The data were collected through a literature review, a case study (Bospolder Tussendijken) and by conducting interviews with various experts. Theory research The definition of value is a wide-ranging concept. The term value is used in this study in two senses: - Objectively, a number that can be assigned to a property of a business, de-velopment, information etc. This is measurable, based on facts. - Subjectively, the assessment of a business, development, information, etc. by a person. Hooijmeier et al. (2001) divides the subjective values into three main species: - Use value: functional suitability, efficient use, efficient construction, man-agement efficiency, consistency, accessibility, interference. - Experience value: identity, diversity, recognition, significance. - Future value: steering effect, efficiency in time, extensibility. Value in (inner city) area development can be controlled in two ways. In the pro-cess (by involving the right parties at the right time) and in the district (by performing interventions). According to Roestenberg (2008) the process actually starts with the end users and ends with the landowner. The value is determined by what the end user wants to pay. Wingman (2011) indicates that this is determined by three factors: - The expected cash flows. - The risk attached. - The moment of the expected cash flows. Mulder (2006) has developed a theory specially about value creation in existing districts. This theory is about the desired and healthy district in relation to creation of value. The idea is that interventions and consequently investments, lead to a higher satisfaction of the residents what is reflected in the real estate value of the district. An investment means that residents will perform better, which will lead to lower costs for health care or social services. "A district is healthy is when people live there without stress and worry and if people can develop their talents." (Mulder, K. 2006, lend, M., 2006) Mulder (2006) indicates that if a district is healthy it is automatically desired and vice versa. (See Figure 2) Figure 2: Creation of value (Mulder, 2006) "Generating value in the old districts. That is the key in inner city renewal. Whether it is about subjective or objective value, ultimately the aim is to make a positive return on investment and that the district benefits." (Kam, 2008) The purpose of inner city renewal of an area cannot be characterized. Each pro-cess is a compromise between the wishes of residents, financial and physical capa-bilities, its location, the original design, the historical situation, the actual use and many other factors. (Brouwer, 2008). In this study, the goal of inner city area development in problem areas is that a dis-trict should become a healthy and popular district which provides creation of value of the real estate in the area. To transform a problem district into a healthy and popular district interventions should be made. What kind of interventions that are is dependent on the problems of the district and can range from social participation to the restoration of housing stock. When these interventions can be performed, different values can originate in the district, such as a rise in property value (creation of value). In this study, the parties who receive these value (s) are considered new potential investing parties. To figure out the values originating, the study made use of a case study: Bospolder Tussendijken. Empirical study The case study Bospolder Tussendijken is used to figure out two interventions and see what value is created and which parties receive these values and benefit from it. From the list of benefiters, two parties have been selected to assess the potential value they receive and they can provide themselves. The parties are selected based on three criteria: - Whether the parties have financial capacity to invest in the plan. - Whether the parties are bound to the area. - Whether the parties are truly "new parties" in the world of area develop-ment. The health insurer and the energy company are the "new parties" in the inner city area development which are selected and examined. In the following two sub-sections, the possible contribution of both parties is discussed. The health insurer The participation of a health insurance company in an inner city area development will not be enough to get problem areas healthy and popular. They can add differ-ent types of values to the process of creating higher real estate values in the district. The health insurer may for example invest in the primary care facilities in the district and can ensure social participation by setting up health care programs in the dis-trict. The views of various different health insurance companies differ as a result of which also the investments of each party may differ. Health insurer Agis is very in-volved in the development of Utrecht. They stimulate and coordinate the process of collaboration with primary care providers in the districts. Health insurer Achmea on the other hand does not promote actively and only coordinates when the caregiv-ers themselves come into motion. The values that may result from the investments of the insurer are objective and sub-jective. Objective due to the reduction of health care consumption in secondary care, saving directly on their spending. Subjective because of the experience value and future value. With the programs they improve their image and their attraction and by starting preventive measures they try to reduce health care consumption in the future. These fall in the list of economic subjective values of Hooijmeijer (2001). This means that after the objective values this will give the most value to the finan-cial management of the health insurer. The objective values are the most valuable in the business case of the organization. These values are converted to direct financial gain. The subjective values are not included in the financial business case but are therefore not less valuable. They cannot directly be added as profit but in the future they can indirectly take care of that. The economic value of investing in the health care services in the district depends on three factors: the risk involved, the expected cash flows and the moment of ex-pected cash flows. As investing in the health care facilities is a long-term investment for the health in-surer, there is risk. Costs should be made now with the expectation that, if the health care facilities start working integrally, savings will be made on health care money in the future. When the customers get a healthier lifestyle now by for example eating healthier, or through more exercise, that can lead to less health care consumption later on. But because the future is unknown, this involves assumptions. Besides, it is also not proven that investing in the health care facilities provides immediate objec-tive value to the insurer. Because it are long-term investments, also the expected cash flow returns will come only after several years. Because of this possible positive returns will show up only after several years. On basis of the above arguments, the economic value of investing in health care services will not be very high for the insurer. Investing in health care programs have less of a risk because the investments are lower and health care insurers have more experience with it. Thus, the effects are better known. But also these returns are only visible after a few years resulting in a lower economic value. Energy company As with the health care insurer, participation of an energy company in an inner city area development is not sufficient to get problem districts healthy and popular again. They can just as health care insurers add value to the process of creating higher real estate value in the district. The energy company can invest in the sustainability of existing housing stock to im-prove the quality of life of the current residents. Because of the fear that the current earning models of production, trade, transport and energy supply are not future-proof, energy companies have to innovate their earning models. The energy companies see new earning potential in various markets. These models focus more on current market demand and have an integrated approach. The market demand now focusses more on a sustainable energy plan to realise a de-sired energy reduction. To answer this question an integral look at the various sus-tainable installation options is needed. Only in this way an optimal cut down can be reached. The new earning models include: advice on several (sustainable) energy systems, the exploitation of (sustainable) energy systems and local energy supply. The values that may result from these investments from the energy company can also be divided into objective and subjective values. Objective as giving advice, the exploitation of sustainable installations and setting up a local energy company can add immediate value to the financial management of the energy company. Subjectively, as the company improves its image by helping the problem districts in innovative ways. Besides it can contribute to the sustainability ambitions of the company such as for example Eneco, by supplying sustainable energy to everyone. As previously mentioned, the economic value of investing in the existing housing stock in the district is depending on the cash flow and the risks. During advising and operating sustainable installations cash flows are fairly stable. During the exploitation an x amount per period will be received. The risk here is that homes become or that homes get demolished within the exploitation period. The risks of locally generated energy are more complex and higher because many assumptions have to be made about the future. Thus it is assumed that the price of energy rises in the coming years (p. 83) making it profitable to generate energy lo-cally. Which does not have to be the case. Also in this case the risk of vacancies apply. Implementation of new parties If the health care insurers and energy companies start to participate in the area development processes they should be involved in the initiation phase. In the initial phase the most value can be gained according to Roestenberg (2007), because at this point the most choices can be made. A disadvantage is that there is also little information known at this stage, complicating the cooperation. When one looks at the supply chain process (see figure 3 the coalition model) both parties participate in the property and management exploitation. With their inter-ventions, both parties are focused on the management and not on the ground and real estate operation. With redevelopment processes, the initial phase is the management phase. This coalition model is aimed at this and thus starts at the current value of an area. Figure 3: Coalition model Implementation in Bospolder Tussendijken The overall objective of inner city area development in problem areas is that a dis-trict should become a healthy and popular district providing creation of value of the real estate in the area. This goal is also pursued in Bospolder Tussendijken. To create value in the district, two specific objectives are formulated: - Increasing the housing quality and diversity of supply of housing and resi-dential environments in Bospolder Tussendijken for the current residents and new residents. - Investing in increasing the opportunities for upward mobility for the current and future residents. An emphasis here is on youth and families with key-words connect and progress. (Theuws, P., and van Haeften, P., 2009). To achieve these goals, a number of interventions have been identified for the dis-trict. In 2009, a regional vision was drafted with ten key strategies for Bospolder Tus-sendijken. These strategies are tested against the interventions from the literature review for consistency and completeness. This produced a list of interventions that can provide creation of value and a healthy and popular district Bospolder Tus-sendijken. Figure 4 shows these interventions. It can be seen that from the cause (to improve the qualitative residential demand and quality of life) the interventions were deter-mined that can realise the goal (of creating value by creating a healthy and popu-lar district) achieve. In Bospolder Tussendijken, Achmea is the market leader in the field of health care insurers and Eneco in the field of energy suppliers. Both parties cannot implement all interventions to get the district healthy and popular again but they can invest in a number of interventions from Figure 4. Figure 4: Cause and interventions in the area development Bospolder Tussendijken Health care insurer Achmea could invest in the intervention of health care services and social participation. They can financially support the care providers in the dis-trict if they are going to migrate to provide comprehensive care or they can insti-gate (health care) programs in the district that improves the participation of resi-dents in the district and make the residents healthier. These investments can be linked to current earning models of Achmea. This can produce objective and subjective value for Achmea. The economic value of inter-ventions is not very high. There are a number of risks and potential returns will show only after a few years. Partly because Achmea thinks that the duty regarding wel-fare is more the task of the municipality, the chance that Achmea will invest in the district Bospolder Tussendijken is not very large. Eneco could invest in the existing housing or in the renovation of rental properties. In cooperation with the housing corporation Eneco could invest in sustainable systems for the housing such as an HR++ boiler or solar panels. This would produce objective and subjective value to Eneco. The risks are not as high in the installation of sustainable equipment. But whether the exploitation is feasible in the district Bospolder Tussendijken is questionable. The houses are losing a lot of energy by the poor quality and facilities by which almost certainly a profit can be achieved. But despite that residents eventually will profit, it is not certain whether all residents are willing to pay Eneco for a sustainable system. Conclusion Bospolder Tussendijken As previously mentioned, the new parties can not improve the area development in such a way that the goal of a healthy and popular district is achieved. They can make a contribution. Both the health care insurer Achmea and the energy supplier Eneco can help to execute the interventions in Figure 4. Both parties are parties that can make small steps in the area. The parties can focus on one or more interventions. To remedy the current (investment) problems of Bospolder Tussendijken, one can look at a step by step development. As was the outcome of the core team Bospolder Tussendijken it is not the time for big (pre-) investments by one party. The core team is aiming to work at one devel-opment at a time, for example, only first the Visserijplein. When this is completed there may be looked at the following development, such as for example the shop-ping area Schiedamseweg. But during these minor developments one have to look at the bigger picture. Does it also fit into the district if only this development is exe-cuted and does if fit in the district as we carry out multiple interventions in the fu-ture?