Old Town Partnership 08 04 09

An Old Town Partnership?

Chris Cook

8 April 2009

People-centred Development

There are two ways of raising finance......

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....Credit and Investment

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There’s no shortage of credit -money can be printed ‘til the cows come home..

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We have a shortage of the credit-worthy...

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Perhaps we should cut taxes on people and tax privilege instead?

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...and invest massively in public assets.. to get the economy moving

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Investment is either through a Limited Company....

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....a 19th Century legal dinosaur

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...or loans secured by legal claims eg mortgages

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But there’s a new furry animal out there....

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...the 21st Century Limited Liability Partnership (LLP)

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An LLP is a corporate body with limited liability....

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...and...errrr...that’s it!...

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As far as the Tax Man is concerned it is a Partnership

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It’s an “Open” Corporate where we can work with each other

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... even without a written agreement

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Hilton Deal 2002

Capital Partnership LLP10 UK Hotels

Gross Revenues

Hilton GroupCapital User

Consortium LLP Capital Provider

BankProperty

DeveloperHotel

Specialist

% %

%%%

Capital Partnership

Capital PartnershipCapital Partnership

InvestorsInvestors

CustomersCustomers

Managers

CustodianCustodian

% %

£

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“Equity Shares” - % age shares in revenues or production...

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...or Units - redeemable in production

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Example: “The Art of Flirting” – a film incorporated as an LLP

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The actors received “nth’s” of the gross revenues...

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...I got 5%...and the producer the rest...

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...except that we needed lights, cameras, pizza, coffee......

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Two Capital Partners invested £10k for 20% of revenues....

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...if there are any

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Art of Flirting LLP

Art of Flirting PartnershipArt of Flirting Partnership

Financial Capital(Investors)

Financial Capital(Investors)

ViewersViewers

Human Capital(Actors, Producer, Me)

CustodianCustodian

% %

£

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Everyone was on the same side

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Example: Albion Trust...a charity

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..who provides affordable office space for social enterprises

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...due to demand they bought a disused church next door

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...and plan a £4m development

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But if they borrow, the rents will be unaffordable

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Solution? An Albion Partnership?

Albion PartnershipAlbion Partnership

InvestorsInvestors

TenantsTenants

Managers

CustodianCustodian

% %

£

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Let’s see how a Community Partnership might work...

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Conventional development is based on transactions – the “Four B’s”.....

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Borrow, Buy, Build and B...er Off...

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A Community Land Partnership

Community ProjectCommunity Project

InvestorsInvestors

OccupiersOccupiers

Managers

CustodianCustodian

% %

Rental

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First, the land is transferred to a Custodian

LandLand CustodianCustodian

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...and the Land Owners become Investors

LandLand

Land OwnerLand Owner

CustodianCustodian

Land Value

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...the Council invests the value of planning permission (as well as land)...

LandLand

CouncilCouncil

CustodianCustodian

Value of Planning permission

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...the Contractors invest at least their profit margin...

LandLand

ContractorsContractors

CustodianCustodian

Profit Margin

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...and Risk-Takers provide £ to pay Contractors’ agreed costs...

LandLand

Risk-TakersRisk-Takers

CustodianCustodian

€

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....while the Developer invests “Intellectual Capital” of concept and services...

LandLand

InvestorsLand-owner, Council,

Contractors, Risk Takers

InvestorsLand-owner, Council,

Contractors, Risk Takers

DeveloperCommunity plus help

DeveloperCommunity plus help

CustodianCustodian

Value Value

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When the development is occupied...

Community ProjectCommunity Project

InvestorsInvestors

OccupiersOccupiers

Managers

CustodianCustodian

% %

Rental

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Investors may keep Units for their own pension...

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...or sell them to Investors or Occupiers who wish to invest in their own homes

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Occupiers maintaining the property themselves may receive “Sweat Equity”

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For Investors it’s an index-linked, property-based investment...

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Everyone has a stake in the outcome....

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....with an interest in high quality, energy efficient housing ....

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....because this lowers the cost of occupation over time ....

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....which makes the Rental value higher and makes Equity Shares more valuable

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So we go from a transaction model...

DeveloperDeveloperLand

OwnerProperty

BuyerProperty

Buyer

£ £

PropertyBuyer

PropertyBuyer

£

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...to a service provider model where land stays in community ownership...

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...and service providers provide services the community needs

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Community partnerships are not a magic bullet

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Conventional finance requires binding contracts....

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....partnership finance requires consensual agreement...

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...but there may be no magnetism..

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Communities may find they have the wrong partner...

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...and partners fall out...

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...so things can still go Pear-shaped

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A Community Partnership is not an Organisation...

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...it does not own anything, do anything, employ anyone, or contract with anyone...

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...it is simply a framework within which the stakeholders self organise ...

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...with a mutual interest in developing land sustainably and affordably.

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A new class of Edinburgh Equity created by the community for the community

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Thank You

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