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					Structuring Stable Business Deals in a
Volatile Development Market
Richard A Jones FRICS | April 2010
Unprecedented Times

                       Reduction in residential values
                       Historically high land values
                       High densities
                       Planning gain




                                      Richard A Jones |   October 2009| 2
The Perfect Storm
                     Financial liquidity
                     Mortgage pre-conditions
                     Economic uncertainty




                              Richard A Jones |   October 2009| 3
A Transparent Approach
                      Collaborative and transparent
                      Equitable risk share
                      Strengths and contributions




                                 Richard A Jones |   October 2009| 4
A New Model

               Different deals
               Different approaches
               Everyone is talking
                about it!




              Richard A Jones |   October 2009| 5
Three Main Ingredients




    Asset        Money         Expertise




                         Richard A Jones |   October 2009| 6
Two Main Partnerships



                Public   Sector Partnerships



                Private-Public   Sector Partnerships




                                    Richard A Jones |   October 2009| 7
Public Sector Partnerships

 Local Authorities and the HCA



                                         “Virtual Developer”
                    Asset                Value generation
                                         Ring fenced return
                                         Mutual set of objectives
                                         Self financing
                            Expertise

                    Money




                                        Richard A Jones |   October 2009| 8
Public Sector Partnerships

 RSL and the HCA
                                        Asset
Registered                  Expertise

Social
Landlord            Money
                                         More grant
                                         Equity and investment
                                         Risk share



                    Money




                                                Richard A Jones |   October 2009| 9
Public Sector Partnerships

 Local Authorities and RSL’s



                    Asset                Much needed investment
                                         Regeneration
                                         Value generation

Registered                  Expertise
Social
Landlord            Money




                                        Richard A Jones |   October 2009| 10
Private-Public Sector
Partnerships
 Local Asset Backed Vehicle

                                                 Development Project

                                                 Development Project
                    Asset
                                                 Development Project
                                   SPV           Development Project

Private Sector
                                          Long term partnership
Developer                                 Holistic approach
                   Money                  Value generator
                                          Rationalise working practices
                                          Catalyst for regeneration
                            Expertise




                                               Richard A Jones |   October 2009| 11
Private-Public Sector
Partnerships
 Local Housing Company

                                               Housing Project
                                                                          Affordable
                                               Housing Project
                  Asset
                                               Housing Project
                                  LHC          Housing Project
                                                                            Private



Private Sector
                                         Long term partnership
Developer                                Unlocking stalled sites
                  Money                  Increased housing supply
                                         Risk share between private
                                           and public sectors
                          Expertise      Opportunity for LA to capture
                                           future value


                                             Richard A Jones |   October 2009| 12
Private-Public Sector
Partnerships
 The Joint Venture
                                   Money
Private Sector
Developer             Expertise

                                                 LLP           Development Project

                                   Asset
Registered
Social                                         Clear benefits case for each
Landlord               Money                     stakeholder
                                               Incentivised model
                                               Improved cashflow
                                  Expertise    Risk share
                                               Competitive supply chain



                                                   Richard A Jones |   October 2009| 13
Private-Public Sector
Partnerships
 The Collaboration Agreement


        Expertise   Private Sector    Asset
                                                                   Looser
                    Developer                                       arrangements
                                                                   Less complicated
                                               Money               Quicker
Registered                                                         Pre-cursor to a
Social                   CA                                         more formal
                                                                    arrangement
Landlord
                                              Expertise
Money




                                     Asset
                                                    Richard A Jones |   October 2009| 14
Private-Public Sector
Partnerships
 Residential PFi
                           Constructor         Registered            Private Sector                                Funder
                                               Social Landlord       Developer


                                         Expertise               Money          Expertise                 Money
PFi Credits



                           30 Year Contract
                                                                                Residential
                                               Operating Partner                Regeneration


                                                         30 year partnership
                       Asset
                                                         Service provision including maintenance,
                                                          repair, rent collection, tenancy
                                                          management etc.
              Agreed Performance Outputs                 Performance against “output specification”



                                                                                      Richard A Jones |   October 2009| 15
New Initiatives
                   Upfront investment
                   Infra-structure and other
                    development costs
                   Viability test
                   £1.06bn allocated




                          Richard A Jones |   October 2009| 16
New Initiatives    Higher income yields
                   House Price inflation
                   Build for rent
                   Good rental demand
                   Opportunity to let to Intermediate market




                                     Richard A Jones |   October 2009| 17
New Initiatives
                   Bring into play other Constructors
                   Public sector land
                   Deferred payment mechanism
                   1,250 units initially (500 affordable)




                                    Richard A Jones |   October 2009| 18
New Initiatives
                   Bridges local ambition and national
                    targets
                   A shared vision through shared
                    investment agreements
                   Secure local delivery
                   Positive outcomes for people and
                    places




                               Richard A Jones |   October 2009| 19
Conclusion
 Structuring Stable Business Deals in a Volatile Development Market



  Unprecedented times
  Times of challenge, times of change




  Opportunity
  Remodel and re-engineer housing delivery




                                                      Richard A Jones |   October 2009| 20
Conclusion
 Structuring Stable Business Deals in a Volatile Development Market



  Transparency
     • Clarity on drivers for each party
     • Acknowledgement as to what each
       stakeholder needs from the scheme
     • Transparency on what each party takes
       away from the deal (financial & non-
       financial)
     • Agreement on the risk and reward
       share
     • An agreement which is equitable for all
       parties



                                                      Richard A Jones |   October 2009| 21
Conclusion
 Structuring Stable Business Deals in a Volatile Development Market



  Different and the opportunity to encourage
   new players




  Viability – Look at the upside as well as
   downside




                                                      Richard A Jones |   October 2009| 22
Conclusion
 Structuring Stable Business Deals in a Volatile Development Market




  Risk strategies that provide comfort to the
   key stakeholders

  Benefit, both financial and non-financial


  Holistic business case creates sustainability




                                                      Richard A Jones |   October 2009| 23
Conclusion
 Structuring Stable Business Deals in a Volatile Development Market



  The challenge for individual organisations
   is to understand the direction of change
   and to adapt accordingly


  The challenge for the industry as a whole
   is to see how the new models may be
   harnessed to meet the very much
   unsatisfied demand and need for homes




                                                      Richard A Jones |   October 2009| 24

				
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