黑洞社区

Croydon council is set to reject an offer by Urban Splash to buy its troubled housebuilding company, despite concluding that it represents good value.

A report published late yesterday for the council鈥檚 scrutiny committee said the council was intending to reject the offer for Brick By Brick 鈥� which it confirmed for the first time was from regen developer Urban Splash 鈥� and instead build out more of Brick By Brick鈥檚 programme itself, before winding the business down.

The likely decision comes as the council attempts to rebuild itself under the guidance of government-appointed inspectors after effectively declaring itself bankrupt last November, with a cash crisis blamed by auditors in part on the failure of Brick By Brick to repay 拢200m of loans.

In February the cash-strapped London borough said it was planning to wind down Brick By Brick, which has built over 300 houses to date, in the autumn this year unless a buyer could be found.

But yesterday鈥檚 report makes clear that council officers are now proposing that Brick By Brick be retained by the authority only until 2023, by which time it will have built almost 800 homes.

This is despite the fact Savills, which had been engaged to assess the offer from Urban Splash, concluded 鈥渢he principles of the offer are not unreasonable鈥�, while PwC found 鈥渘o evidence that the financial standing of the bidder should rule them out as a suitable acquirer of BBB鈥�.

黑洞社区鈥檚 sister title Housing Today understands that Urban Splash鈥檚 offer would have underwritten the vast majority of the debt owed to the council by Brick By Brick, thereby taking it off the Croydon鈥檚 balance sheet and removing the cost and risk associated with build out.

In addition, the council report makes clear that 鈥渢here is no disputing the fact that the build out option has higher levels of risk than the sale option鈥�, with a sale allowing the council 鈥渢o concentrate resources鈥� on other parts of the Croydon Renewal Improvement Plan.

The report also says that 鈥渢he largest risk of build out is management failure and collapse of Brick by Brick鈥� and says it expects to have to bring in a third party firm to manage the business as and when existing staff leave 鈥� the cost of which has not been made public.

However, the report said building out much more of Brick By Brick鈥檚 programme than originally anticipated does have the potential to generate more income to ultimately pay off more of the debt to the council than the sale option.

The report says the net loan write-off required under the build out option would be between 拢27m and 拢53m, while the sale would require between 拢54m and 拢68m to be written off. The build out option will see 23 sites of the 29 sites originally allocated to the firm built out, with the rest returned to the council.

The council鈥檚 recommendation to build out the homes is understood to have been heavily influenced by the Improvement and Assurance Panel appointed by the government, which includes former Balfour Beatty executive Phil Brookes, now a Crown Representative. The report includes a line thanking the panel 鈥渇or their advice and support in the production of this report鈥�.

Brick By Brick staff are understood to feel that the decision to extend the build out endorses the value in its business but were nevertheless hoping the sale to Urban Splash would go through, to ensure a future for the business, once seen as a pioneer in the council housing company space.

Croydon council leader Hamida Ali said: 鈥淥ur priority over the future of Brick By Brick has always been to find a solution that both secures the best possible return for the council鈥檚 investment on behalf of our taxpayers and provides much-needed genuinely affordable homes for local people.

鈥淲e have thoroughly explored our options to find a way forward on Brick By Brick that represents the best possible value for our taxpayers, and I want to thank all our expert external advisers for their important contributions on this.鈥�

Brick By Brick declined to comment.

The scrutiny committee is due to consider this report this Tuesday before a council cabinet makes a final decision on 12 July.