Financing Asset transfer -Implementing the Quirk Review

Karen ByrneRegional Development Manager

South EastDevelopment Trusts Association

The DTA membership

423 members: full and emerging trusts – in England, Scotland & Wales

Members’ total income £230 million

Of which £75 million earned income

Hold assets of £450 million – with over 80% members engaged in asset development

No typical member - shared approach, belief in our communities and a commitment to change

DTA Model

• Community enterprise

• Asset based development

Stages of Development

1. Investment readiness

2. Capital Spend

3. Revenue Viability

Investment finance

What Do You Want It For?

Development Finance –

Investment finance

What Do You Want It For?

Development Finance – “grow change or die” (for Research & Development, new project development, future planning, early trading)

Investment finance

What Do You Want It For?

Development Finance – “grow change or die” (for Research & Development, new project development, future planning, early trading)

Capital development

Investment finance

What Do You Want It For?

Development Finance – “grow change or die” (for Research & Development, new project development, future planning, early trading)

Capital development – acquiring assets - for refurbishment, new build, equipment

Investment finance

What Do You Want It For?

Development Finance – “grow change or die” (for Research & Development, new project development, future planning, early trading)

Capital development – acquiring assets - for refurbishment, new build, equipment

Working Capital

Investment finance

What Do You Want It For?

Development Finance – “grow change or die” (for Research & Development, new project development, future planning, early trading)

Capital development – acquiring assets - for refurbishment, new build, equipment

Working Capital – monthly turnover/cash flow

Development funding

• Generally not well catered for• Sub Regional Strategic partnerships• Futurebuilders/Adventure Capital Fund• BIG Lottery Fund• The larger Trust Funds• LA provision of professional skills• Professional Help - pro bono support• Sweat Equity

Terms of Transfer

Transfer at less than Open Market Value

– Creates security/value for debt finance/match funding– Section 106– Focus for enterprise– Social return on investment

Loses maximum capital receipt

London South BankCoin Street

Capital Spend

Grants – Community Asset Fund – and beyond

Debt – security for lenders (leases, clawback, fees, covenants, information requirements)

Equity – community shares or capital partners

Using debt

Gearing

• Get it right

Using debt

Gearing

• Get it right - go further faster

- not more than 30% of asset market value; advise not more than 100% of turnover

Using debt

Gearing

• Get it right - go further faster

- not more than 30% of asset market value; advise not more than 100% of turnover

• Get it wrong

Using debt

Gearing

• Get it right - go further faster

- not more than 30% of asset market value; advise not more than 100% of turnover

• Get it wrong - crash and burn

Using debt

Gearing• Get it right - go further faster- not more than 30% of asset market value;

advise not more than 100% of turnover

• Get it wrong - crash and burn

• Understanding when, how and what to borrow

Revenue Viability

• Quality of income stream

• Full Cost recovery

• Secure anchor tenants

• Rent and service charges

• VAT

• Cash flow

LAs: share the journey?

Understand risk sharing

Build a relationship

Negotiate transitional support, provide professional help

Anchor tenancies/procurement of services

Vision: confident communities

Contact Details

Name: Karen ByrneTel: 01303 269 019Email: k.byrne@dta.org.uk

Website: www.dta.org.uk

Community Enterprise Investment Manager

Name: Hugh RoloTel: 01274 491615Email: h.rolo@dta.org.uk