Community land partnership may 2011
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Funding the Future Chris Cook 10 May 2011 Simply does it
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Transcript of Community land partnership may 2011
Funding the Future
Chris Cook
10 May 2011
Simply does it
21st Century problems cannot be solved with 20th century solutions
16/06/10 2
21st Century Problem - Financing & Funding
16/06/10 3
Financing - development of new assets Short/medium term, high risk
16/06/10 4
Funding - use of completed assetsLong term, low risk
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Banks - limited and expensive financing
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Treasury - massive cuts to public funding
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21st Century Solution - Capital Partnership
CustodianCustodian
InvestorsInvestors
OccupiersOccupiers
Managers
% %
£
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Capital Partnership offers a new approach to financing and funding
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Equity Shares - % age shares in revenues or production
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Units - redeemable in payment for production
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Community Land Partnership
CustodianCustodian
InvestorsInvestors
OccupiersOccupiers
Managers
% %
£
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Financing : Land held by/transferred to a Custodian
LandLand CustodianCustodian
16/06/10 13
Land Owners become Investors
LandLand
Land OwnersLand Owners
CustodianCustodian
Land Value
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Councils invest the value of planning permission
LandLand
CouncilsCouncils
CustodianCustodian
Value of Planning permission
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Contractors invest at least the profit margin
LandLand
ContractorsContractors
CustodianCustodian
Profit Margin
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Risk-Takers provide £ to pay Contractors’ agreed costs
LandLand
Risk-TakersRisk-Takers
CustodianCustodian
£
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Developers invest 'Intellectual Capital' of concept and services
LandLand
InvestorsLand-owners, Councils,
Contractors, Risk Takers
InvestorsLand-owners, Councils,
Contractors, Risk Takers
DevelopersDevelopers
CustodianCustodian
Value Value
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Outcome – Co-ownership of a Rental Pool
CustodianCustodian
InvestorsInvestors
OccupiersOccupiers
Managers
% %
Rental
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Rental Pools enable a simple but radical new funding option through Unitisation
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Units – undated credits redeemable in payment for property occupation
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Funding – we create and sell Units in Rental Pools from occupiers of completed houses
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A Custodian is appointed or incorporated
Houses CustodianCustodian
Affordable index-linked rental is set
Houses
Occupiers
CustodianCustodian
Rental
Proportional Share allocated to Manager
Houses
Occupiers
Manager
CustodianCustodian
%
Rental
Balance available to Investors
Custodian
Investors
Occupiers
Managers
% %
Rental
Units are sold to Investors at a discount to the rental value
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The discount determines the return
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Debt: £300k pa will fund <£4m debt over 20 years at 5% compound interest
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Units - £300k (initially) funds £5m @ 6% £10m at 3%; £20m @ 1.5% (index-linked)
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Investors effectively lend to the land – not to the owner
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Occupiers may invest simply by paying rent in advance.....
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...and may receive 'Sweat Equity' Units if they maintain the property themselves
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Surprise! No compound interest + no principal repayment = drastic cut in funding costs
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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 within which stakeholders self organise
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Example – Bruce Road, Tower Hamlets
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10 short - life houses 4 empty
Development – council invests existing land and buildings
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Co-operative refurbishes properties with professional oversight by CDS
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A Pool of £75k pa index-linked affordable rentals is thereby created
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£15k pa index-linked is allocated to maintenance & depreciation
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Leaving £60k pa available for financing and funding
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This would fund only £800k in 20 yr debt at 5% pa.......
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.....but it will fund up to £2m of Units with a 3% index-linked return
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The Co-operative members participate collectively and individually
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LBTH Council may sell Units before, during or after development
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Returns are commensurate with risk
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But always better than selling to a debt-financed purchaser
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Thank You
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