An Old Town Partnership? People-centred Development Chris Cook 8 April 2009

There are two ways of raising finance...... 09/06/09

....Credit and Investment 09/06/09

There’s no shortage of credit -money can be printed ‘til the cows come home.. 09/06/09

We have a shortage of the credit-worthy ... 09/06/09

Perhaps we should cut taxes on people and tax privilege instead? 09/06/09

...and invest massively in public assets.. to get the economy moving 09/06/09

Investment is either through a Limited Company.... 09/06/09

....a 19 th Century legal dinosaur 09/06/09

...or loans secured by legal claims eg mortgages 09/06/09

But there’s a new furry animal out there.... 09/06/09

...the 21 st Century Limited Liability Partnership (LLP) 09/06/09

An LLP is a corporate body with limited liability.... 09/06/09

...and...errrr...that’s it!... 09/06/09

As far as the Tax Man is concerned it is a Partnership 09/06/09

It’s an “Open” Corporate where we can work with each other 09/06/09

... even without a written agreement 09/06/09

Hilton Deal 2002 Capital Partnership LLP 10 UK Hotels Gross Revenues Hilton Group Capital User Consortium LLP Capital Provider Bank Property Developer Hotel Specialist % % % % %

Capital Partnership Capital Partnership Investors Customers Custodian % % £ 09/06/09 Managers

“ Equity Shares” - % age shares in revenues or production... 09/06/09

...or Units - redeemable in production 09/06/09

Example: “The Art of Flirting” – a film incorporated as an LLP 09/06/09

The actors received “nth’s” of the gross revenues... 09/06/09

...I got 5%...and the producer the rest... 09/06/09

...except that we needed lights, cameras, pizza, coffee...... 09/06/09

Two Capital Partners invested £10k for 20% of revenues.... 09/06/09

...if there are any 09/06/09

Art of Flirting LLP Art of Flirting Partnership Financial Capital (Investors) Viewers Custodian % % £ 09/06/09 Human Capital (Actors, Producer, Me)

Everyone was on the same side 09/06/09

Example: Albion Trust...a charity 09/06/09

..who provides affordable office space for social enterprises 09/06/09

...due to demand they bought a disused church next door 09/06/09

...and plan a £4m development 09/06/09

But if they borrow, the rents will be unaffordable 09/06/09

Solution? An Albion Partnership? Albion Partnership Investors Tenants Custodian % % £ 09/06/09 Managers

Let’s see how a Community Partnership might work... 09/06/09

Conventional development is based on transactions – the “Four B’s”..... 09/06/09

Borrow, Buy, Build and B...er Off... 09/06/09

A Community Land Partnership Community Project Investors Occupiers Custodian % % Rental 09/06/09 Managers

First, the land is transferred to a Custodian Land Custodian 09/06/09

...and the Land Owners become Investors Land Land Owner Custodian Land Value 09/06/09

...the Council invests the value of planning permission (as well as land)... Land Council Custodian Value of Planning permission 09/06/09

...the Contractors invest at least their profit margin... Land Contractors Custodian Profit Margin 09/06/09

...and Risk-Takers provide £ to pay Contractors’ agreed costs... Land Risk-Takers Custodian € 09/06/09

....while the Developer invests “Intellectual Capital” of concept and services... Land Investors Land-owner, Council, Contractors, Risk Takers Developer Community plus help Custodian Value Value 09/06/09

When the development is occupied... Community Project Investors Occupiers Custodian % % Rental 09/06/09 Managers

Investors may keep Units for their own pension... 09/06/09

...or sell them to Investors or Occupiers who wish to invest in their own homes 09/06/09

Occupiers maintaining the property themselves may receive “Sweat Equity” 09/06/09

For Investors it’s an index-linked, property-based investment... 09/06/09

Everyone has a stake in the outcome.... 09/06/09

....with an interest in high quality, energy efficient housing .... 09/06/09

....because this lowers the cost of occupation over time .... 09/06/09

....which makes the Rental value higher and makes Equity Shares more valuable 09/06/09

So we go from a transaction model... Developer Property Buyer £ £ Property Buyer £ 09/06/09 Land Owner

...to a service provider model where land stays in community ownership... 09/06/09

...and service providers provide services the community needs 09/06/09

Community partnerships are not a magic bullet 09/06/09

Conventional finance requires binding contracts.... 09/06/09

....partnership finance requires consensual agreement... 09/06/09

...but there may be no magnetism.. 09/06/09

Communities may find they have the wrong partner... 09/06/09

...and partners fall out... 09/06/09

...so things can still go Pear-shaped 09/06/09

A Community Partnership is not an Organisation ... 09/06/09

...it does not own anything, do anything, employ anyone, or contract with anyone... 09/06/09

...it is simply a framework within which the stakeholders self organise ... 09/06/09

...with a mutual interest in developing land sustainably and affordably. 09/06/09

A new class of Edinburgh Equity created by the community for the community 09/06/09

Thank You 09/06/09