Richard Douthwaite has an article in Construct Ireland, exploring the potential of Limited Liability Partnerships to turn debt into equity and transform underutilised NAMA-land properties into rental accommodation.
The model involves setting up an ‘equity partnership’ in which all the participants have ‘equity shares’ which are millionths of the flow of rentals to be paid by the occupiers. Thus, with a new development, the landowner would get shares for his/her land, and the investors for their capital. Once the development was complete, the occupiers would pay rent in money or ‘money’s worth’ of services for the use of the capital which had been invested.
The initial rent would be set at an affordable level and would rise or fall according to an agreed index of inflation. The occupiers would also pay for the maintenance/depreciation and possibly heating of their buildings. The developer or a management company would run the development in return for equity shares in the rents. If occupiers chose to pay more than the basic rent, the extra would be invested in equity shares and they would build up stakes in the property in which they lived. Once they had acquired enough shares, the income from them would cancel out the rent they had to pay. If they owned equity shares and ran into problems paying the rent they would be able to sell off shares to meet the shortfall.
