Chris Cook
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Comment on: Keep it simple
Well, Tim, it depends how the SPV is done.
The current proposal involves debt and compound interest, and is riddled with conflicts and complexity.
With a little seed funding from Innovation Norway we (Nordic Enterprise Trust) have come up with a partnership framework agreement, rather than an SPV. Our approach leaves the land in public ownership, but shares the revenues from the land, and the capital invested in the land, equitably between the providers of finance (including the value of the land) and a 'managing partner'.
Whether it's the high risk short/medium term 'financing' needed to create new houses, or the medium/long term low risk 'funding' needed for houses once they are built, we believe our partnership model is optimal.
The outcome is a new form of 'public equity' through Units in 'pools' of affordable rentals, and the dramatically reduced financing costs which result from the absence of debt and compound interest.
See pages 8 and 9 here
http://www.scotregen.co.uk/pdf.pl?file=surf/news/Scotregen_46_web.pdf
and this recent presentation
http://www.slideshare.net/ChrisJCook/community-land-partnership-june-2010
One of the problems we have faced is that professional advisers - who are mainly LLPs themselves - are paid by the hour, rather than the outcome, and sometimes have little interest in simple solutions. -
Comment on: Miliband mansion tax to meet benefit bill
@ Alpha One
The Mansion Tax is not the way to tax it, but while money can move, land can't.
Tell me why it's so difficult to tax land rental value? It's not going to go off-shore is it?
If you can think of a way of avoiding it, you can name your own price as an adviser.
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Posted in: Rent-back schemes
We (there's just the two of us) "launched" the concept at last year at Anderson Strathern's (our lawyers) offices in Edinburgh, but our Norwegian funding ran out that point and it's been slow going since.
We are looking for pilot schemes, and had a failed "Community Land Partnership" bid recently for a 300 home development, for instance. We have a couple of good rural prospects.
Essentially we are looking for professional and commercial/ social enterprise partners to work with to develop and implement the concept widely - we are getting a lot of interest up here, particularly post Credit Crunch.
We think that the biggest opportunity lies not so much in developing new properties - which takes a lot of time - but in refinancing existing portfolios of housing debt.
This would free up literally billions.
It creates what is essentially a new form of "Equity" but within an LLP framework, rather than the sort of Plc "Equity" that makes the "Private" sector "Private".
I see these proportional "Units" in rental revenues as a major new asset class - a new form of "REIT" to all intents and purposes - and interestingly enough, one that is Islamically sound at a deep level.
Fighting talk.....but from a background in financial services and product development - I used to be a Director of the International Petroleum Exchange for what that's worth. -
Posted in: Rent-back schemes
I've been working in Scotland with the Nordic Enterprise Trust - a Scottish Charity part funded by the Norwegian Government - to develop new partnership-based solutions using the UK Limited Liability Partnership ("LLP") as a framework.
The "Community Land Partnership" we have developed would essentially transfers "distressed" property ownership to a "Custodian" (similarly to a Community Land Trust) but instead of then granting a lease the "Occupiers" and long term financier "Investors" enter into a "Co-ownership" partnership, with the possibility also of a "Developer/Manager" within the framework.
The outcome is a new asset class of proportional "Units" in the stream of affordable (but index-linked) rentals paid by Occupiers.
Firstly, the rentals are shared proportionally between Investors and Developer/Managers - thereby aligning their interests.
Secondly, anything Occupiers pay in excess of their "Capital Rental" allows them to acquire "Units" and hence quasi "Equity" in their homes.
Thirdly, a CLP creates a new class of "Unit" (similar to a "Real Estate Investment Trust" ) based upon co-ownership of property and carrying a reasonable index-linked return.
Because the resulting rental is affordable, it is more certain, and therefore a lower rate of return is justified.
The affordability of the finance arises out of the fact that:
(a) no capital is being repaid - albeit a maintenance payment is necessary in respect of the value of the buildings;
(b) the rate of return on capital - because index-linked - will be below bank interest rates.
A CLP is simple, but radical.
A very similar "Capital Partnership" has already been implemented in a > £1 bn hotel transaction, while City of Glasgow has 3 "municipal" LLP's with more to come, albeit these are conventionally financed.
Just don't expect simple solutions like the CLP to be supported by professionals paid by the hour, rather than the outcome!