On Monday 20 February Croydon’s Cabinet will approve the business plan for its Brick by Brick (Bxb) development company.
The report explains that BxB will help deliver new homes in Croydon by ensuring ‘that development activity, whilst remaining robustly commercial, more directly benefits local communities.’ It will ‘create much needed new homes of a variety of tenures and priority will be given to local residents through the sales and/or letting process for both private and affordable homes.’
By ‘delivering a number of sites simultaneously’ it ‘allows for commercial efficiencies which have the effect of increasing the overall quantum of affordable housing in the programme – for example, BXB are delivering 50% affordable housing within their smaller residential site programme, far greater than the amount usually achieved on such sites.’
c28 smaller sites have been submitted to Planning, with the potential to deliver 539 units, and c18 sites are currently at pre-planning stage with the potential to deliver 626 units and c45,000 sq ft of new community facilities. It also is responsible for the College Green development, the planning application for which I being considered by the Planning Committee on 23 February (see previous posting).
The officers’ report can be read here
Robert Ward, an engineer and project manager, who organises Croydon Debating Club and writes for Croydon Citizen, has emailed Councillors expressing concerns about the Business Plan.
- ‘There is no projection of sales, revenue and returns to the shareholder? Timing is important. An estimate of project returns from tranches of projects is not sufficient.
- The debt and interest payment forecasts are only for 12 months. This then stops with sunk costs of approaching £300,000,000 and debt in excess of £200,000,000, which is still climbing steeply. What is the (at least quarterly) forecast for debt and interest beyond that time?
- Eight ‘key aims’ is far too many. To help decision making there need to be no more than three key aims.
- There is no mention of constraints. For example, what is the limit to borrowing or how would it be determined? How many projects is too many?
- There is no Board level responsibility for corporate risk management. As the text states, this is a complex programme, with a significant level of inherent risk. It is claimed corporate risk is addressed through its governance processes yet this is not specified as a role for the Board (Item 4.5). None of the senior roles have been assigned this responsibility.
- The house price projections are in my view optimistic but we can argue all day about future house prices, what’s important is that the plan is robust against a lower house price/higher cost/delayed projects scenario. I suggest a one year delay and 0% growth in house price case is tested.
- There are no performance indicators. How will the company, the council (and the public) monitor project delivery (in my opinion this should be quarterly)?’
Robert comments: ‘Property development is not a risk-free business, yet Brick by Brick as an entity is exposed to low risk. The risk is carried by the people of Croydon. Brick by Brick gets a valuable asset (prime building land) which then gets more valuable (through planning permission). If value is then squandered we will see reduced dividends, higher debt and debt interest payments resulting in either higher council tax payments or reduced services. And by then these prime assets will be gone.’
He asks that the Cabinet consider these concerns before approving the business plan.