Adrian Stott wrote: > Nick Atty <[EMAIL PROTECTED]> wrote: > >> On Mon, 23 Oct 2006 17:22:40 +0100, Adrian Stott wrote: >> >>> AIUI (confirmation, Eugene?) BW manages its investment property >>> using >>> the conventional principle that real capital value must be >>> maintained >>> or increased as the *first* priority, and income generated and taken >>> second. > >> Returning to the idea of funding the waterways through property, what >> happens if there is a property value slump or living by canals >> suddenly >> becomes unfashionable? Or what happens if the management decide to >> do >> something that sounds very reasonable - albeit slightly risky - and >> end >> up getting badly burned? Suddenly we are back in the position of no >> money for the waterways. > > The first aim of sound investment is capital preservation. If the > market starts to fall, it is usually thought prudent to reduce your > exposure to it (i.e. cash out, and wait for a bottom, after which you > start reinvesting). > > However, a decrease in capital value would not imply "no money for the > waterways", as what BW is spending on the waterways is the *income* > from the portfolio, not the capital. Most commercial real estate in > UK is on long (e.g. 25-year) leases, and the (typically) 5-yearly rent > reviews are "upwards only" - i.e. the rent is reset to market, but > only if the market rent is higher than was being paid to date; the > rent is never reduced. The tenant is obliged to keep paying until the > end of the term. In other words, the income is dependendable over a > longer period, typically longer than the market cycle of property > (capital) values. > > It is therefore reasonably unlikely that "Suddenly we are back in the > position of no money for the waterways" would ever occur. > > Steve Wood <[EMAIL PROTECTED]> wrote: > >> If we fund waterways through property sales as opposed to rental >> income >> etc., which is what Adrian implied previously if I'm not mistaken, we >> will run out of property and therefore money in the none to distant >> future. > > Yes. > >> TBW taught us in the 80s that selling the family silver was a >> sound way to run the economy ;-) > > It is hard to get income out of silver. If you need income, you > should indeed "sell the family silver" and put the resulting capital > into something productive. > > Steve Wood <[EMAIL PROTECTED]> wrote: > >>> My impression (I'm too lazy to do the tedious investigation) is that >>> the value of the portfolio has been growing steadily, as well as >>> providing useful income (again, confirmation, Eugene?). >> >> If you're never going to sell it why the interest in whether it is >> managed on that basis? > > The income (i.e. return) an investment produces is usually a > percentage of its capital value. Assets in the same class (e.g. > commercial office buildings of the same quality) tend to produce about > the same percentage return. So, the higher the capital value of the > portfolio, the higher the return it is likely to produce. Which means > you need at least to retain the real (i.e. inflation-adjusted) capital > value of the real estate porfolio, to ensure that the income you get > from it doesn't decline in real terms. > >> I do think BW >> should retain the parts of its property portfolio that define the >> waterside environment, but for heritage not commercial reasons. By >> that >> I mean the physical infrastructure of the canal, plus related >> (listed) >> buildings, ancient monuments etc. They would still be free to derive >> income from those buildings but the focus should be on heritage. > > AIUI, that is exactly what BW does now. > >> It may well be very old fashioned to say it but I do believe that BW >> is >> a national asset and belongs in the public sector. It is not a viable >> business in a commercial sense simply because it has insufficient >> sources of income. > > I agree that BW cannot support itself on income from boating. I > acknowledge this means that the difference between that income and > BW's expenses must be funded by government, if the waterways are to > survive. > > BW is currently owned 100% by the government. I see no reason to > change that. I'm not against it philosophically, I just can't see any > benefit from doing so. > > However, none of that means that BW should not be run in a > businesslike manner. Business principles are most likely to produce > an efficient use of resource IMHO. Neither does it imply that it must > be supported by an annual and undependable handout. Having a more > secure source of income (such as from a property endowment) will make > the waterways more secure, which I think is something most waterway > enthusiasts want? > >> Most of its customers (walkers etc.) don't pay to use it and there >> is no easy way to get them to pay except through general taxation. > > I agree (with some minor exceptions). The endowment would, > indirectly, have been provided by general taxation. > > Adrian
I think everybody sees your solution as having a lot of merit...but how to stop future governments plundering the then much larger "treasure chest" and the new National Navigation Authority destroying heritage? -- Neil Arlidge - NB Earnest Follow the travelled TNC at : http://www.tuesdaynightclub.co.uk Visit this site and help save our waterways from the DEFRA cuts http://www.savethewaterways.org.uk/ Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/canals-list/ <*> Your email settings: Individual Email | Traditional <*> To change settings online go to: http://groups.yahoo.com/group/canals-list/join (Yahoo! ID required) <*> To change settings via email: mailto:[EMAIL PROTECTED] mailto:[EMAIL PROTECTED] <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
