Community land partnership june 2010

Introducing the Community Land Partnership Chris Cook 29 June 2010 Asset-based Finance

There are two conventional ways of raising finance...... 16/06/10

....Credit and Investment 16/06/10

Investment is either through a Limited Company.... 16/06/10

....a 19 th Century legal dinosaur 16/06/10

...or loans secured by legal claims eg mortgages 16/06/10

But there’s a new furry animal out there.... 16/06/10

...the 21 st Century Limited Liability Partnership (LLP) 16/06/10

An LLP is a corporate body with limited liability.... 16/06/10

...and...errrr...that’s it!... 16/06/10

As far as the Tax Man is concerned it is a Partnership 16/06/10

It’s an “Open” Corporate where we can work with each other 16/06/10

... even without a written agreement 16/06/10

Hilton Deal 2002 Capital Partnership LLP 10 UK Hotels Gross Revenues Hilton Group Capital User Consortium LLP Capital Provider Bank Property Developer Hotel Specialist % % % % %

Capital Partnership Capital Partnership Investors Customers Custodian % % £ 16/06/10 Managers

“ Equity Shares” - % age shares in revenues or production... 16/06/10

...or Units - redeemable in production 16/06/10

Example: “The Art of Flirting” – a film incorporated as an LLP 16/06/10

The actors received “nth’s” of the gross revenues... 16/06/10

...I got 5%...and the producer the rest... 16/06/10

...except that we needed lights, cameras, pizza, coffee...... 16/06/10

Two Capital Partners invested £10k for 20% of revenues.... 16/06/10

Art of Flirting LLP Art of Flirting Partnership Financial Capital (Investors) Viewers Custodian % % £ 16/06/10 Human Capital (Actors, Producer, Me)

Everyone was on the same side 16/06/10

Example: Albion Trust...a charity 16/06/10

..who provides affordable office space for social enterprises 16/06/10

...due to demand they bought a disused church next door 16/06/10

...and plan a £4m development 16/06/10

But if they borrow, the rents will be unaffordable 16/06/10

Solution? An Albion Partnership? Albion Partnership Investors Tenants Custodian % % £ 16/06/10 Managers

Let’s see how a Community Partnership might work... 16/06/10

Conventional development is based on transactions – the “Four B’s”..... 16/06/10

Borrow, Buy, Build and B...er Off... 16/06/10

A Community Land Partnership Community Project Investors Occupiers Custodian % % Rental 16/06/10 Managers

First, the land is transferred to a Custodian Land Custodian 16/06/10

...and the Land Owners become Investors Land Land Owner Custodian Land Value 16/06/10

...the Council invests the value of planning permission (as well as land)... Land Council Custodian Value of Planning permission 16/06/10

...the Contractors invest at least their profit margin... Land Contractors Custodian Profit Margin 16/06/10

...and Risk-Takers provide £ to pay Contractors’ agreed costs... Land Risk-Takers Custodian € 16/06/10

....while the Developer invests “Intellectual Capital” of concept and services... Land Investors Land-owner, Council, Contractors, Risk Takers Developer Community plus help Custodian Value Value 16/06/10

When the development is occupied... Community Project Investors Occupiers Custodian % % Rental 16/06/10 Managers

Investors may keep Units for their own pension... 16/06/10

...or sell them to Investors or Occupiers who wish to invest in their own homes 16/06/10

Occupiers maintaining the property themselves may receive “Sweat Equity” 16/06/10

For Investors it’s an index-linked, property-based investment... 16/06/10

Everyone has a stake in the outcome.... 16/06/10

....with an interest in high quality, energy efficient housing .... 16/06/10

....because this lowers the cost of occupation over time .... 16/06/10

....which makes the Rental value higher and makes Equity Shares more valuable 16/06/10

So we go from a transaction model... Developer Property Buyer £ £ Property Buyer £ 16/06/10 Land Owner

...to a service provider model where land stays in community ownership... 16/06/10

...and service providers provide services the community needs 16/06/10

Community partnerships are not a magic bullet 16/06/10

Conventional finance requires binding contracts.... 16/06/10

....partnership finance requires consensual agreement... 16/06/10

...but there may be no magnetism.. 16/06/10

Communities may find they have the wrong partner... 16/06/10

...and partners fall out... 16/06/10

...so things can still go Pear-shaped 16/06/10

A Community Partnership is not an Organisation ... 16/06/10

...it does not own anything, do anything, employ anyone, or contract with anyone... 16/06/10

...it is simply a framework within which the stakeholders self organise ... 16/06/10

...with a mutual interest in developing land sustainably and affordably. 16/06/10

A new class of Community Equity created by the community for the community 16/06/10

Community land partnership june 2010

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Community land partnership june 2010