Regeneration nhf - manchester 23-01_14

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Regeneration nhf - manchester 23-01_14

  1. 1. Funding Regeneration in an Age of Austerity Back to the Future? Chris Cook Manchester 23rd January 2014
  2. 2. “21st Century problems cannot be solved with 20th Century solutions”
  3. 3. Resilience Resilience - the enduring power of a body or bodies for transformation, renewal and recovery through the flux of interactions and flow of events Resource Resilience – Natural Grid Financial Resilience – Open Capital
  4. 4. Financial Resilience – Open Capital Prepay – credit returnable in payment for value Protocol – consensual interactive 'two way' agreement
  5. 5. Prepay Tax
  6. 6. Tax Prepay Tax Prepay – credit returnable in payment of taxes Tax Return – 'stock' part of tally stick returned to Treasury Rate of Return - rate over time at which stock is returnable for cancellation eg Prepay £8 for £10 tax - £2 profit 25% pa rate of return - not fixed - depends on existence & quantity of flow
  7. 7. Rental Prepay Credits Credit returnable in payment for £1.00 of Rent 10,000 Credits sold for £8,000 give a 25% absolute return (£2k profit / £8k investment) If Rent is £10k pa Rate of Return is 25% pa If Rent is £5k pa Rate of Return is 12.5% pa If Rent is £2k pa Rate of Return is 5% pa etc etc
  8. 8. Protocol - Capital Partnership Occupiers Occupiers Rental Custodian Custodian Prepay Investors Investors 16/06/10 % Managers 8
  9. 9. A Capital Partnership is not an Organisation 16/06/10 9
  10. 10. It does not own anything, do anything, employ anyone, or contract with anyone 16/06/10 10
  11. 11. It is simply a framework agreement within which the stakeholders self organise 16/06/10 11
  12. 12. Conventional property development is a transaction model: developer as middleman Land Owner £ 16/06/10 Property Property Buyer Buyer Developer Developer £ Property Property Buyer Buyer £ 12
  13. 13. Borrow, Buy, Build and B...er Off... 16/06/10 13
  14. 14. Financed by Equity (ownership) and Debt (from credit institutions) 16/06/10 14
  15. 15. Capital Partnership offers a new approach to financing and funding 16/06/10 15
  16. 16. Financing - for short/medium term, high risk development of new assets 16/06/10 16
  17. 17. Funding - for long term, low risk use of newly complete or existing assets 16/06/10 17
  18. 18. Financing : Land held by/transferred to a Custodian Land Land 16/06/10 Custodian Custodian 18
  19. 19. Land Owners become Investors Land Land Custodian Custodian Land Value Land Owners Land Owners 16/06/10 19
  20. 20. Councils invest the value of planning permission Land Land Value Custodian Custodian of Planning permission Councils Councils 16/06/10 20
  21. 21. Contractors invest at least the profit margin Land Land Custodian Custodian Profit Margin Contractors Contractors 16/06/10 21
  22. 22. Risk-Takers provide £ to pay Contractors’ agreed costs Land Land Custodian Custodian £ Risk-Takers Risk-Takers 16/06/10 22
  23. 23. Developers invest 'Intellectual Capital' of concept and services Land Land Value Investors Investors Land-owners, Councils, Land-owners, Councils, Contractors, Risk Takers Contractors, Risk Takers 16/06/10 Custodian Custodian Value Developers Developers 23
  24. 24. Capital Partnership creates a Rental Pool Occupiers Occupiers Rental Custodian Custodian Prepay Investors Investors 16/06/10 % Managers 24
  25. 25. Rental Pools enable a simple but radical new funding option through Prepay 16/06/10 25
  26. 26. Rental Credits – returnable in payment for property occupation 16/06/10 26
  27. 27. Funding - Equity Release by creating Rental Pools from portfolios of completed houses 16/06/10 27
  28. 28. Existing owner becomes the Custodian Houses Custodian Custodian
  29. 29. Affordable index-linked rental is set Occupiers Rental Houses Custodian Custodian
  30. 30. Proportional Share allocated to Manager Occupiers Rental Houses Custodian Custodian % Manager
  31. 31. Balance of Rentals to Investors Occupiers Rental Custodian % Investors % Managers
  32. 32. Prepay Credits returnable in payment for rentals are created and sold to investors 16/06/10 32
  33. 33. Example – Pool of 1,000 houses has affordable rents of £4m pa 16/06/10 33
  34. 34. After (say) 25% for maintenance etc £3m pa is available for funding costs 16/06/10 34
  35. 35. Debt: £3m pa will fund <£40m debt over 20 years at 5% compound interest 16/06/10 35
  36. 36. Prepay 20 Years' rent = 60m x £1.00 credits: @ 50p raises £30m: Rate of Return = 100%/20 yrs = 5%pa @ 66.6p raises £40m: RR = 50%/20yrs = 2.5%pa 25 Years' rent = 75m x £1.00 credits: @ 50p raises £37.5m: Rate of Return = 100%/25 yrs = 4%pa @ 66.6p raises £50m: RR = 50%/25yrs = 2%pa
  37. 37. Rental Credits – value proposition for Investors not dissimilar to a REIT 16/06/10 37
  38. 38. Except that, crucially, Rental Credits are returnable in payment for rent 16/06/10 38
  39. 39. Rental Credits – as rental levels rise or fall rate of return increases or falls 16/06/10 39
  40. 40. A Rental Pool will have a 'common bond' – geographic or otherwise 16/06/10 40
  41. 41. Occupiers are natural buyers and acquire rental credits by paying rent in advance 16/06/10 41
  42. 42. Occupiers who care for their property may receive 'Sweat Equity' rental credits 16/06/10 42
  43. 43. 21st Century Problem Retiring Generation -'long' of Property and 'short' of Care for themselves and their property - poor returns on deposits (loans to banks) Working Generation – burdened with bank property debt Young Generation – long of Care but short of Property
  44. 44. 21st Century Resolution Retiring Generation - exchange rental credits for care - invests directly 'Peer to Asset' in rental credits Working Generation – direct investment in rental credits replaces bank property debt Young Generation – care exchanged for rental credits
  45. 45. 21st Century problems cannot be solved with 20th century solutions.........
  46. 46. …....21st century solutions pre-date modern finance
  47. 47. Thank You 16/06/10 47

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