ballater partnership november 2010
TRANSCRIPT
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A Ballater Land Partnership
Chris Cook
2 November 2010
Sustainable Development through Co-ownership
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Two conventional ways of financing productive assets: Credit and Investment
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Investment is typically shares in Limited Companies or units in Trusts
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Legal Dinosaurs
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Credit consists of bank loans secured by legal claims eg mortgages
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Two conflicting financial claims over the same productive assets
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21st Century problems cannot be solved with 20th century solutions
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In 2001 the 21st Century Limited Liability Partnership (LLP) came to the rescue
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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
% %
%%%
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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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Units - redeemable in payment for rental or 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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Capital Partners invested £ 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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..which provides affordable office space for social enterprises and charities
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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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Intractable problem! If they borrow, the rents will be unaffordable
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Solution...an Albion Partnership?
Albion PartnershipAlbion Partnership
InvestorsInvestors
OccupiersOccupiers
Managers
CustodianCustodian
% %
£
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How might a Ballater Land Partnership work?
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Conventional development is transaction-based: Buy, Borrow, Build, and B....r Off
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Ballater Land Partnership
Rental PoolRental Pool
InvestorInvestor
OccupierOccupier
Manager
CustodianCustodian
% %
Rental
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Land remains with, or is transferred to, a Custodian
LandLand CustodianCustodian
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Land Owner invests the value of the land
LandLand
Land OwnerLand Owner
CustodianCustodian
Land Value
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Council invests the value of planning permission
LandLand
CouncilCouncil
CustodianCustodian
Value of Planning permission
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Contractors agree costs and invest at least their profit margin
LandLand
ContractorsContractors
CustodianCustodian
Profit Margin
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Self builders may invest 'sweat equity' - subject to valuation & quality control
LandLand
Self BuildersSelf Builders
CustodianCustodian
Sweat Equity
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Risk-Taker Capital Partners invest £ to pay remaining financing costs
LandLand
Risk-TakersRisk-Takers
CustodianCustodian
£
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Developer invests 'Intellectual Capital' of concept and services
LandLand
InvestorLand-owner, Council,
Contractors, Risk Takers
InvestorLand-owner, Council,
Contractors, Risk Takers
DeveloperCommunity plus help
DeveloperCommunity plus help
CustodianCustodian
Value Value
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Result: Co-ownership of a Rental Pool
CustodianCustodian
InvestorInvestor
OccupierOccupier
Manager
% %
Rental
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An affordable index-linked Capital Rental is set
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Units redeemable in payment for rentals are issued from the Rental Pool
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Investors may keep Units eg for their pension
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Or sell Units to Investors or to Occupiers who wish to invest in their own homes
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Occupiers maintaining the property themselves receive 'Sweat Equity' Units
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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 increases the rental value and therefore the value of Units
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So we go from the '4 B's' transaction model..
DeveloperDeveloperLand
OwnerProperty
BuyerProperty
Buyer
£ £
PropertyBuyer
PropertyBuyer
£
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...to a partnership-based co-ownership model
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Ballater Land 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 an LLP 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 Ballater Equity created by the community for the community
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Thank You
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