Ballater Partnership November 2010

A Ballater Land Partnership

Chris Cook

2 November 2010

Sustainable Development through Co-ownership

Two conventional ways of financing productive assets: Credit and Investment

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Investment is typically shares in Limited Companies or units in Trusts

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Legal Dinosaurs

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Credit consists of bank loans secured by legal claims eg mortgages

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Two conflicting financial claims over the same productive assets

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21st Century problems cannot be solved with 20th century solutions

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In 2001 the 21st Century Limited Liability Partnership (LLP) came to the rescue

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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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As far as the Tax Man is concerned it is a Partnership

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It’s an Open Corporate where we can work with each other

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... even without a written agreement

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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

Capital PartnershipCapital Partnership

InvestorsInvestors

CustomersCustomers

Managers

CustodianCustodian

% %

£

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Equity Shares - % age shares in revenues or production

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Units - redeemable in payment for rental or 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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Except that we needed lights, cameras, pizza, coffee

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Capital Partners invested £ for 20% of revenues

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If there are any....

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Art of Flirting LLP

Art of Flirting PartnershipArt of Flirting Partnership

Financial Capital(Investors)

Financial Capital(Investors)

ViewersViewers

Human Capital(Actors, Producer, Me)

CustodianCustodian

% %

£

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Everyone was on the same side

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Example: Albion Trust...a charity

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..which provides affordable office space for social enterprises and charities

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...due to demand they bought a disused church next door

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...and plan a £4m development

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Intractable problem! If they borrow, the rents will be unaffordable

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Solution...an Albion Partnership?

Albion PartnershipAlbion Partnership

InvestorsInvestors

OccupiersOccupiers

Managers

CustodianCustodian

% %

£

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How might a Ballater Land Partnership work?

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Conventional development is transaction-based: Buy, Borrow, Build, and B....r Off

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Ballater Land Partnership

Rental PoolRental Pool

InvestorInvestor

OccupierOccupier

Manager

CustodianCustodian

% %

Rental

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Land remains with, or is transferred to, a Custodian

LandLand CustodianCustodian

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Land Owner invests the value of the land

LandLand

Land OwnerLand Owner

CustodianCustodian

Land Value

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Council invests the value of planning permission

LandLand

CouncilCouncil

CustodianCustodian

Value of Planning permission

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Contractors agree costs and invest at least their profit margin

LandLand

ContractorsContractors

CustodianCustodian

Profit Margin

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Self builders may invest 'sweat equity' - subject to valuation & quality control

LandLand

Self BuildersSelf Builders

CustodianCustodian

Sweat Equity

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Risk-Taker Capital Partners invest £ to pay remaining financing costs

LandLand

Risk-TakersRisk-Takers

CustodianCustodian

£

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Developer invests 'Intellectual Capital' of concept and services

LandLand

InvestorLand-owner, Council,

Contractors, Risk Takers

InvestorLand-owner, Council,

Contractors, Risk Takers

DeveloperCommunity plus help

DeveloperCommunity plus help

CustodianCustodian

Value Value

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Result: Co-ownership of a Rental Pool

CustodianCustodian

InvestorInvestor

OccupierOccupier

Manager

% %

Rental

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An affordable index-linked Capital Rental is set

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Units redeemable in payment for rentals are issued from the Rental Pool

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Investors may keep Units eg for their pension

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Or sell Units to Investors or to Occupiers who wish to invest in their own homes

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Occupiers maintaining the property themselves receive 'Sweat Equity' Units

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For Investors it’s an index-linked, property-based investment

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Everyone has a stake in the outcome....

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....with an interest in high quality, energy efficient housing ....

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....because this lowers the cost of occupation over time ....

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....which increases the rental value and therefore the value of Units

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So we go from the '4 B's' transaction model..

DeveloperDeveloperLand

OwnerProperty

BuyerProperty

Buyer

£ £

PropertyBuyer

PropertyBuyer

£

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...to a partnership-based co-ownership model

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Ballater Land 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 an LLP framework within which the stakeholders self organise

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...with a mutual interest in developing land sustainably and affordably.

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A new class of Ballater Equity created by the community for the community

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Thank You

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