To review the proposed 2019/2020 Business Plan of Brick by Brick.
In response to the Chairs question on what the company’s biggest risks and how would they be managed over the next few years, officers said that there were a number of challenges faced. The nature of the sites was challenging in that they were working on some small complicated sites which threw up issues which may be the reason why they had not been developed already. To date all issues have been solved but as they continued to work through the programme there may be other problems encountered which will be dealt with accordingly.
Additionally technical challenges can occur and the company would have to find cost effective ways to manage issues such as exploring ways to deliver building in-house instead of through procurement. As a company that is continuously developing, they were learning from each project. Ensuring that the right infrastructure was available to assist with delivery of projects.
The overall property market posed risks and the company worked hard to build in contingencies to ensure analysis and oversight on what they were able to deliver, the value that could be achieved and worth of schemes. The ability to respond effectively to any changes in the market.
A Member commented on the importance of getting this right due to the financial implications as well as reputation of the Council, the report stated that increased costs were experienced then goes on to say these costs were mitigated. It was questioned whether the situation with Brexit would have an impact on targets and delivery of schemes.
Officers responded that this company had been established by the Council to deliver homes and it would do so in any way possible. If the market changed the company must and would be able to respond and adapt where necessary. Costs were recognised as less of a risk to a development than time delay, although there were actively mitigating costs as necessary.
A Member queried why a risk register was not attached to the business plan, Officers responded that the business plan itself was a strategic document that covered risks at a strategic level. There were various sections that discussed how risks would be mitigated. The annual report deals on a commercial level the risks involved and on a practical level, information was collated and reviewed on an ongoing basis including those that the contractors had to report on a monthly basis.
A Member questioned a reference in the report of £78mil funding needed which would be made up of £58mil borrowing, what rate would be paid and for how long. Additionally £19mil equity investments, who would the investor be and what diligence had been ensured that investment was not pulled in the event of an economic downturn. Officers responded that all of the borrowing came from the Council at a split of 75% debt and 25% equity. In terms of debt, the Council borrows at a low rate and the money is lent to Brick by Brick at market rate. There was an analysis in the report as to how much revenue this lending brings in for the Council. In terms of equity, the 25% gives the Council an additional share in the company which meant that when the company made money, the Council also made additional money.
A Member asked if there would be a designated repairs company responsible for the units, officers replied that they were currently out to tender for an asset management and repairs contract and they were looking at lessons learnt from the Council’s previous contracts to determine which company to appoint.
It was noted that the first properties were nearing completion and questioned when a Croydon resident would be able to move into one of the schemes. Officers replied that Croydon residents would have an exclusive period of prioritisation on purchase, shared ownership or rent of all properties and it was hoped that Croydon residents would make use of this opportunity.
It was further asked if there was any provision to stop people from purchasing the properties and then selling or subletting as it was hoped that many of the schemes would be primarily occupied by Croydon Residents. Officers responded that in terms of the units for sale it was difficult to control outcomes but the schemes were being marketed in a way to discourage investors purchasing. The shared ownership properties were easier to control sub-letting due to the nature of the scheme, but it was difficult to prevent people from purchasing and then selling on. The affordable rental properties would be owned and managed by Croydon affordable homes who will have control and ability to adopt enforcement measures where necessary.
In response to a Member question on how confident the company was to deliver according to the revised programme of delivery date, officers replied that they were confident and had the capacity to deliver units completed and ready to be occupied in line with the 2019 programme target to deliver 414 units.
The Chair thanked officers for the responses to questions and expressed that the Members looked forward to future tours of completed units.
The Sub-Committee came to the following Conclusions:
(i) The Sub-Committee welcomed the update on the progress of the scheme
(ii) Members looked forward to a site visit on completion of the developments
(iii) Encouraged that Croydon residents would have an exclusive period of priority to access the schemes.
(iv) It was important for Brick by Brick to ensure that all risks associated with the delivery of the programme was managed effectively.
(v) It was imperative that the schemes were delivered on time as stated.
(vi) The Members were pleased that a rigorous tendering process was to take place in awarding a repairs contract.