The annual report from the council’s loss-making in-house house-builder shows ‘directors costs’ more than tripling in the past year, while spending £1million on rent and renovations to the company’s George Street base
Brick by Brick, the bastard brainchild of Croydon Council’s chief exec, Jo Negrini, made a loss of £774,952 in the 15-month trading period to March 31 this year.
Negrini might try telling her employers – the borough’s councillors – that that is “misinformation”, but these figures come straight from Companies House, and the company’s own, delayed, annual report.
Brick by Brick is the council’s in-house house-builder, a company formed in 2015, but which is not building any council homes, is running late with every single building project they have started, including going over-budget by £11million on the refurbishment of the Fairfield Halls, and which admits it is failing to deliver on its target of 50 per cent of its new homes will be “affordable”.
The report reveals that “remuneration paid to key management”, by which they probably mean Negrini’s appointee as the company’s managing director, former council employee Colm Lacey, came to a cool £122,398.
The accounts also show that staff costs for the 15-month period (Brick by Brick opted to change their accounting year to the end of March, so delayed this report by three months) staff costs were £877,414. This was for “an average” of 11 staff during the period.
The report tells us that Brick by Brick now has 33 staff, up from 14 at the end of 2017. Almost one-third (nine) of the company’s employees were previously on the council’s pay-roll, according to the report.
Brick by Brick now has four directors, three of them only joining the board in 2019.
As Inside Croydon has previously reported, before being handed the top job on a commercial development firm, Lacey had only ever worked as a mid-ranking official at local authorities around London, funnily enough the same councils where Negrini worked: Lambeth, Newham and then Croydon.
As well as Lacey, the chairman of the board is Martyn Evans (appointed earlier this year), also with no direct experience of running a multi-million-pound development firm.
Brick by Brick’s directors have never included anyone – such as elected councillors – who might be seen as representing the people of Croydon, who after all are paying for Negrini’s ego-trip into the shark-infested waters of property development.
But there are a couple of council execs on the board: Shifa Mustafa, who they have given the self-important title of “the executive director of place” (and a council salary of £150,000), and Mark Norrell, the council’s director of facilities management and support services.
Neither Mustafa nor Norrell are known to have any previous experience in the building industry, although before joining Croydon, Negrini-appointee Mustafa had left a previous senior council post, at Waltham Forest, in a bit of a rush and with a £140,000 pay-off, and not long after there was a police investigation into the council’s failure to properly manage grant payments to a business improvement district.
Although, apart from Lacey, they all have other jobs, these Brick by Brick part-time directors are very well rewarded for their efforts in not solving Croydon’s housing crisis. According to the Companies House records, “directors costs” went up from £36,000 in the previous accounts, to a whopping £122,398. Cushty.
From the latest accounts, we learn that the company’s accumulated losses now amount to £1.2million.
This is understandable for a start-up development business, because they have yet to sell anything that they have built – largely because of their problems with delays on every site that they have built on. For instance, the company had hoped to have sold most, if not all, of its new-build properties in Upper Norwood, at Ravensdale and Rushden, in autumn 2018.
This might have shown a handsome return in the accounts, which ought to have been well worth delaying them by three months. But the properties – built on former council land which Negrini’s council sold to Brick by Brick, with planning permission, for just 250 quid – were not made available for sale in March this year.
As Lacey’s directors’ report puts it, “The terms of the purchase of these sites are designed to ensure that the council secures best consideration in terms of the value of the land, including the capture of the land value from favourable future market conditions via overage arrangements that guarantee that the council gets 100 per cent of any increase.”
As well as the £250 for the Ravensdale and Rushden site, the council received what Lacey and Negrini would have us believe is “best consideration” of £1 a time for six other plots of public land.
The company accounts are unable to give any indication as to how well, or badly, the sales of the £600,000-a-time houses in Upper Norwood have gone, though early indications suggest that Brick by Brick has succeeded in setting their prices too high for local people to afford.
The accounts do show that, of the company’s 2018-2019 losses, £153,339 was in interest paid on loans from Croydon Council. So at least the Council Tax-payers are getting something back for their money and property.
In fact, the accounts show that Brick by Brick has received £107,349,576 in loans from the council, made up of more than 30 loan agreements, the council lending the cash on a site-by-site basis. These loans, the accounts state, must be repaid within 12 months of each site’s development is complete, plus interest at 6.25 per cent.
“The council provides development finance to Brick by Brick at market rates on a scheme-by-scheme basis,” Lacey’s directors’ report states, “where Brick by Brick can clearly demonstrate financial viability… The company accrues interest on these loans. All of this allows the council to generate THREE,” Lacey must have left his caps lock on, “income streams from the use of its land: land value (as a capital receipt), alongside interest and profit (as sole shareholder) which can both be used to support the council’s revenue budget, and therefore services.
“The critical feature of this model is that it allows the council to generate revenue returns from the development of land where it would otherwise only generate capital receipt from the sale of land (which has limited use in terms of what the money could be used to fund).”
All of which, of course, remains entirely hypothetical while Brick by Brick remains a loss-making housing developer that is building no council homes.
Despite the delays and lack of sales in the period covered by this business report, Lacey and Brick by Brick appear to have spared no costs on themselves.
As well as the generous expenditure on “directors’ costs”, this year has seen Brick by Brick move out of the council’s offices in Fisher’s Folly – itself a £150million monument on the perils of a council attempting to get into the development industry – and take on a former travel agency shop on George Street.
The ground-level shop area is now used as Brick by Brick’s “marketing suite”, for all those private homes that are too expensive for local people to buy, while the office space above has been converted to create the company’s global headquarters. It is understood that the property’s landlord is the Whitgift Foundation, and that a 10-year lease (with a five-year opt-out provision) has been taken on the property, costing over the term £427,000.
The latest accounts also show that £515,234 has been spent by Brick by Brick on no-expense-spared “leasehold improvements”, and another £166,000 on computer equipment. All in all, a cool £1million on Lacey’s little empire-building exercise.
And all money which will never be spent on council services, or solving the housing crisis.
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