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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