Download - Keith Community Partnership
Community Asset Partnerships
Simply does it
Chris Cook
Keith 29 June 2011
Financing - development of new assets Short/medium term, high risk
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Funding - use of completed assetsLong term, low risk
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Conventional funding 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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Two conflicting claims over the same assets
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But there’s a new creature 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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Over 70,000 LLPs are now in pervasive use for purposes never intended...
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...even in the Public Sector, where Glasgow has five municipal LLPs
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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
CustodianCustodian
InvestorsInvestors
UsersUsers
Managers
% %
£
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Equity Shares - % age shares in revenues or production...
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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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But we needed lights, cameras, pizza, coffee
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Two Capital Partners invested £ for 20% of revenues
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If there are any
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Art of Flirting LLP
CustodianCustodian
Financial Capital(Investors)
Financial Capital(Investors)
ViewersViewers
Human Capital(Actors, Producer, Me)
% %
£
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Everyone was on the same side
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Example: Albion Trust...a charity
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They provide 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 planned a £4m development
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But if they borrow, the rents will be unaffordable
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Solution - an Albion Partnership?
CustodianCustodian
InvestorsInvestors
TenantsTenants
Managers
% %
£
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Conventional Development FinanceBorrow, Buy, Build and B...er Off
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Developer as middleman: a transaction chain
DeveloperDeveloperLand
OwnerProperty
BuyerProperty
Buyer
£ £
PropertyBuyer
PropertyBuyer
£
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Community Land Partnership
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Land held by or transferred to a Custodian
LandLand CustodianCustodian
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Land Owner becomes an Investor
CustodianCustodian
Land OwnerLand Owner
Land Value
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Council invests the value of planning permission
CommunityCommunity
CouncilCouncil
Value of Planning permission
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Contractors invest at least the profit margin
CustodianCustodian
ContractorsContractors
Profit Margin
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Risk-Takers provide £ to pay Contractors’ agreed costs
CommunityCommunity
Risk-TakersRisk-Takers
£
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Developer invests 'Intellectual Capital' of concept and services
CommunityCommunity
InvestorsLand-owner, Council,
Contractors, Risk Takers
InvestorsLand-owner, Council,
Contractors, Risk Takers
DeveloperCommunity plus help
DeveloperCommunity plus help
Value Value
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Result – 'Co-ownership' of a Rental Pool
CustodianCustodian
InvestorsInvestors
OccupiersOccupiers
Managers
% %
Rental
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Units – undated credits redeemable in payment for property occupation
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Units are sold to Investors at a discount to the rental value
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eg a £1.00 Rental Unit sold for 80p gives a 25% return
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But the rate of the return depends on whether the property yet exists....
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...if so, whether rent is being paid....
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...and how many Units have been issued
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Investors may keep Units eg for pension or for care
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...or sell them to Investors or Occupiers
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Occupiers maintaining the property themselves may receive 'Sweat Equity'
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Everyone has a stake in the outcome....
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....with an interest in high quality, and energy efficiency....
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....because both lower the cost of occupation over time ....
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....which makes the Rental value higher and makes Units 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 is owned by a custodian or steward
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A loan to the land – not to the owner
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Community Energy Partnership
Energy Pool – Mega Watts
CustodianCustodian
InvestorInvestor
CommunityCommunity
Energy Energy
Energy
ManagerManager
Manager receives %age of production
Supplier may invest equipment & materials: must invest agreed % profit
Investors provide development finance by purchasing Units at a discount
Outcome: turbine funded by selling part of Energy Pool of future production
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An Energy Loan to the turbine – not the Community
Nega Watts - energy savings - cheapest energy of all
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Energy loans – to the property, not the owner
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Repaid out of energy saved
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Sell 100 Units of 1 Mega Watt Hour @ £50/MWh Result: £5k interest-free energy loan
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Or sell 10,000 Units of 10 Kilo Watt Hours @ 50p per Unit
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Reduced energy bill paid to power supplier for energy consumed
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Energy loan repaid through buying Units from the Pool at the market price
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Energy Pool is a new approach to direct investment in energy financing and funding
“If you want to keep a cow healthy, you don’t regulate what comes out of it……”
“……you regulate what goes in….”
Energy pooling enables a Carbon currency based upon the intrinsic value of energy…
..rather than a market in value-less Units of CO2 emissions, imposed by governments …
Problems: taxation, regulation
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Solution: a Company Limited by Guarantee as Custodian.....
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.....and a little imagination
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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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Sometimes partners fall out
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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 agreement enabling communities to self organise
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There may be a shortage of Money
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But there's plenty of money's worth: land, energy and intellect
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We lack only the mutual agreement to deploy these resources
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It's not Rocket Science
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Thank You
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