Co-ownership

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 its a UK Limited Liability Partnership
  (LLP)
• Q. What is it if its not a partnership?
• A. A corporate body with limited liability
  ander, thats 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 Moneys 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