We here at HiP are embedded in the PropTech world and it is true to say that a lot of this world is concerned with the Smart City with all that this entails.
We were intrigued this morning by an article in Propmodo about ways to fund these new advances. After all, once the technology in our cities opens up, the next big barrier is how to fund that technological leap.
Under the title creative approaches the article says:
The funding and financing strategies can also be creative. Instead of making citizens compromise by paying additional taxes, cities can generate funds in creative ways too.
We here heartily agree, but actually creative and innovative ways of paying for property and city-wide examples is the core of what HiP offers. So here are some suggestions of how fractional ownership as offered by HiP could help a council or landowner to fund their next smart city.
Equity release from existing debt free property
A council or landowner could add some of their existing portfolio on to the HiP platform – not necessarily the ones that are being upgraded to “smart”. When funds are required to develop whatever technology needs to be added, then slices of equity can be sold to fund it. It could be a small slice of lots of owned properties or a bigger chunk of one property. This equity can be bought back later – in the case of a council based on any savings or revenues gained by whatever smart technology is employed.
Creating a development project
Normal real estate new development projects use an SPV – Special Payment Vehicle – which acts as an asset in which to add funds. Investors invest in the development, say a new block of flats, which when completed is sold thus paying off investors with their profits. With HiP no SPV is required for property, meaning that although fund raising works in much the same way the investor can choose to keep their investment as an ongoing asset after completion. Plus, with a secondary market, investors can trade their shares at any point to other investors or the owner. In short, development projects with HiP are more flexible for investors and do not have to be sold on completion. This may be an option for, say, a development that is not a building or rentable asset.
Creating a finance product
A council or financial institution could fund their smart city by creating a loan product or algorithm to generate funds. This product could be available only to certain areas and could be a way of the community getting involved. For example a finance product available only in Bristol could fund technology in the city by taking 1% of all profits earned from that product. Finance products are in discussion at the moment and are one of the ways in which the HiP platform will be both open and decentralised.
Read the full article on PropModo: