Co-ownership & Asset-based Finance – a New Approach Chris Cook Partnerships Consulting LLP

1. Co-ownership & Asset-based Finance – a New Approach Chris Cook Partnerships Consulting LLP

2. What is Asset-Based Finance? • Ownership of assets and their revenue streams • Legal “wrapper” around assets and revenues • Limited Liability Company • Trust • “Open Corporate” Limited Liability Partnership

3. What is Deficit-based Finance? • Interest-bearing (from Credit Institutions) • “Asset-backed”/ Secured by a claim on assets (mortgage or “charge”) • unsecured • Non interest-bearing (from suppliers or staff)

4. Asset-Based Finance – Companies • Types • Limited by Guarantee • Limited by Shares • Private • Public • GM eg IPS, CIC • Issues • Conflicts – ”shareholder value” and CSR • Management – the Principal/Agency problem

5. Opromark • Property Exchange bringing together Investors with properties • Separate Limited Company for each property • Numerous flaws: not “scaleable”

6. Asset-Based Finance – Trusts • Examples • Canadian Income/ Royalty Trusts • Macquarie Bank business model • Common Law – judge made • Issues • Risk Aversion • Management • Taxation • Legal complexity and cost

7. Asset-Based Finance - LLPs • Q. When is a partnership not a partnership? • A. When it’s a UK Limited Liability Partnership (“LLP”) • Q. What is it if it’s not a partnership? • A. A corporate body: with limited liability: and………er, that’s it!

8. Why an “Open” Corporate? • Open to any “stakeholder” to be a Member, as long as they subscribe to the “Member Agreement”. • A legal “wrapper” – like a “trust”, but without the drawbacks - for any assets or revenues anywhere in the world. • Tax transparent.

9. Introducing the “Capital Partnership” • “Capital User” Member • “Capital Provider” Investor Member • Jointly acquire a productive asset • “Capital Rental” - user pays Investor a revenue share in Money (or “Money’s Worth”) for as long as Capital is used • Rental paid before due date is Investment • Outcome “Co-ownership”

10. Hilton Deal 2002 Revenues 27yr term Capital Partnership LLP 10 UK Hotels % of Revenues % of Revenues Hilton Group “Capital User” Consortium LLP “Capital Provider” £350m % % % Bank Property Developer Hotel Specialist

11. Community Land Partnership Occupiers Capital Rental LLP Trustee Ownership % % Investors Managers

12. Community Land Partnership • Trustee Member • Investor Member • Developer/ Manager Member • Occupier Member

13. The Legacy funds the Olympics • Land placed in Trust (as in CLT) • 9 Pension Fund Investors each invest in 500 units • Pension Fund Members become Occupiers and pay Capital Rental to Investor • Overpayment of Rent = Savings/Investment

14. Outcomes • New pension asset-class – quasi REIT • New form of “ Co-ownership” Tenure • No call upon council tax-payers • Property is never sold again, although Occupiers and Investors may change

15. Additional Policy Options • Occupiers may be subject to income sharing within CLP agreement • Occupiers may be subject to land-use/ location benefit pooling/sharing

16. Current Land Law • “Property” is a relationship not an Object – Bentham • Paradox of “Alienation of Land and Fragmentation of Benefit” • Complex and costly UK hybrid legal system • Statute (1925) gives 2 Tenures • “Equity” – judge-made Trust law deals with rights of use

17. Co-ownership in “Open Corporate” • CLP encapsulates the relationship between “Owner” and “Occupier” in a new way • Consensual agreement