For more than two years, Inside Croydon has been carefully tracking the difference between Brick by Brick’s budgeted targets and their actual delivery: what they say, and what they do.
Our housing correspondent, BARRATT HOLMES, reports on the multi-million-pound chasm between the two that has seen the council’s loss-making company risk people’s lives by breaking the covid-19 lockdown
BxB CEO Colm Lacey: he didn’t know how many homes his company had sold. But we do…
There is mounting anger among the borough’s residents and some elected councillors, including Labour councillors, over Brick by Brick, the council-owned, loss-making builder, continuing to press ahead with construction on its building sites while also submitting planning applications and holding “virtual” consultations in the middle of the corona-19 pandemic.
Inside Croydon has received reports of angry exchanges between a cabinet member on the Labour-controlled council and a veteran councillor who dared question the wisdom, and probity, of carrying out lip-service consultations on unpopular and contentious building schemes while residents are forced to observe the coronavirus lockdown.
And this week – barely a fortnight after construction was halted in order to comply with the demands of the covid-19 quarantine – building works recommenced on at least one Brick by Brick site (the long-delayed Montpelier Road development, in Purley Oaks), with the construction workers there observed as taking few, if any, precautions to avoid the transmission of the deadly virus.
Other builders, such as Barratts, for example, shut down their sites by March 27 – nearly a week ahead of BxB – and have furloughed their staff, with no immediate plans to return to building works until the crisis is over.
Brick by Brick’s desperation to press on, ignoring the health warnings and risks, can be explained in a single word: money.
Because according to Brick by Brick’s own figures and their most recent business plans, by the end of 2019 the company had managed to sell just EIGHT units. According to BxB, they have 42 other units under deposit.
The Brick by Brick 2019-2020 business plan called for them to have sold 290.
Even if we include as “sales” those properties which have yet to complete but for which a deposit has been paid, that means that Brick by Brick’s chief executive Colm Lacey and his “team” have only achieved 16 per cent of their sales target – a disastrous performance, by any usual measure.
Brick by Brick was registered at Companies House in 2015.
As well as buying their sites from the council at considerably less than market value – a secret subsidy which included six sites which according to the council’s own valuer were sold for just £1 each – Brick by Brick has received loans of at least £260million of public money from Croydon Council.
Unfinished: the new South Norwood library build was meant to have opened in January 2018
In the last five years, Brick by Brick has also managed to complete the grand total of three one-bed council flats on behalf of Croydon Council. Yes, that’s three council homes in five years.
Plans to provide “affordable” housing through shared ownership schemes came a cropper when the company discovered – almost by accident – that it is not a recognised provider of shared ownership homes and that therefore established lenders refused to provide their buyers with mortgages.
None of which ought to inspire confidence in Lacey (who in February told a council scrutiny committee that he didn’t know how many units his company had sold).
The estimated shortfall between the sales achieved and its financial forecasting is more than £100million.
“It’s an appaling picture,” said Nicholas Pane, a Croydon resident with extensive professional experience in managing finances in the construction industry. “The CEO should go.”
Pane has conducted detailed and careful research on Brick by Brick’s finances, checking their business plans over the last three years against the company’s actual delivery.
As Inside Croydon reported in May last year, Brick by Brick had a 100 per cent record: every single one of the 38 housing schemes it was working on was behind schedule.
This includes as-yet-unfinished schemes at Norwood Junction, the Pimp House, where 14 flats – all for private sale – above a new library was meant to be completed by January 2018, and the long-delayed flats on Drummond Road, and another 28 flats, again all for private sale.
Brick by Brick’s 2018 business plan contained a list of 38 “active” sites showing the anticipated start on site dates and anticipated dates for completions. That business plan depended on £88million being received by March 31 2019, from the sale of homes on sites which would themselves only be completed in December 2018.
With Brick by Brick’s first homes only going on to the private market in March 2019, clearly, they failed to raise anything like the £88million.
Drummond Road, with 28 flats intended for private sale, is another long-delayed project
“It’s a massive, multi-million-pound cash-flow problem, basically because none of their building projects are on schedule,” we reported a source as saying at that time.
Since then, things have only got worse – not least because of those new homes the company has completed, Brick by Brick is now struggling to find buyers for them.
By March 2020, the sales figure expected to be achieved were, according to the company’s own figures, £132.3million from the sale of 290 units. As Brick by Brick has sold just eight units, that leaves them more than 80 per cent behind their targets.
Pane, a former finance director of a PLC with experience of residential and commercial property development, asked Croydon Council how many units Brick by Brick had sold by December 31, 2019.
The failure to have a grasp of this important business information about one of council leader Tony Newman’s flagship projects is so grave that Pane believes that Newman and the council’s head of finance ought to resign.
“It shows astonishing incompetence that the council would own a company which is using a vast amount of Council Tax-payers’ funds, but do not hold basic management information three months after the fact to tell them how Brick by Brick is doing,” Pane said.
“Information on construction and sales is at the heart of the management information that all developers must have. If it operated to commercial standards, it would be surprising if BxB did not report December information in their management or board meetings during February.
Last year, shadow housing minister John Healey (second right) was given a tour of a BxB site by Alison Butler (second left) and MP Sarah Jones (centre). It seems unlikely he was advised of the company’s struggling sales figures
“If the council really did not have this information, then it shows highly deficient governance over their wholly-owned subsidiary. It really is sufficiently serious that the council leader and head of finance should in my view resign. The Council also very clearly needs to bring people in to review its governance role as sole shareholder, its management information system and the finance department efficacy.”
In dogged pursuit of the details of Brick by Brick’s sales performance, Pane asked the company for its figures. Eventually, those numbers were forthcoming.
“In their 2019-2020 business plan, Brick by Brick anticipated that by December 31, 2019, they would have completed 290 units for sale. BxB’s answer to my question indicates that they have completed eight homes and taken over a further 42 homes on sites where building work is continuing.
“This total puts them 83 per cent behind budget.”
Someone hadn’t told John Healey the whole story. Croydon has built three council homes since 2015
The principle of Brick by Brick was that it was supposed to convert unused and unwanted scraps of council property into cash and provide much-needed homes. Half of all its new-builds were supposed to be “affordable”, though that is another target that Brick by Brick is failing to deliver on. The failure to deliver homes for social rent in appreciable quantity by Croydon’s Labour council is a growing scandal.
And instead of delivering profits to the council, Brick by Brick is just contributing a whole heap of debt.
Pane is critical of the council’s judgement in getting involved in a commercial property scheme, involving hundreds of millions of pounds, just as the country was embarking on four years of uncertainty caused by Brexit. Coronavirus has made a bad situation much worse, in Pane’s view.
In fact, he says that Brick by Brick is facing disaster.
“With projects already on average seven months behind plan when the financial year commenced, the end of year position would appear to be disastrous. Debt is building up, sales are almost non-existent, and under their construction contracts BxB are unlikely to be able to slow their expenditure sufficiently to stop debts rising further.”
None of this has not been predictable. Even in July 2018, it was reported that slow progress being made by Brick by Brick had created a £63million “slippage” in the council’s already under-pressure budget.
At its most recent Town Hall budget meeting, held last month, figures showed that council borrowings stood at £1.4billion at the end of 2019. A large portion of that money is what has been borrowed to hand over to Brick by Brick.
Pane probably speaks for many Croydon residents when he says, “It is time that Croydon Council and others were brought to account. As one of the most indebted councils in England, Croydon has bet their balance sheet on a commercial venture which is notoriously cyclical and inherently high-risk. This was wrong, and it is failing.
“Those responsible, both at Brick by Brick and the council, should pay with their jobs.”
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Bricks by Pricks. Newman’s predecessor Mike Fisher had to go after pushing through a comparatively paltry pay rise for himself. Newman is letting Lacey, Scott and Butler flush millions of pounds of our money down the pan for years to come, and is either too stupid or too weak to put a stop to it.
Why too stupid or too weak? Both actually apply perfectly!
Where can we see the proposed start dates for new building site, proposed by Brick by Brick.
Check their 2020-2021 business plan – but for sites that have yet to be granted planning permission, that detail won’t be determined until the council rubber-stamps the applications.
Dear Editor: it’s unlike you to make a typo!!
Surely you mean “Brick by Brick” is a disaster” rather than “Brick by Brick faces disaster” ?
Thank you, Arno, our diligent as well as loyal reader.
But the headline was decided upon after deep consultations with Ebeneezer Grabbitt, of our crisis management and PR legal advice team at Sue, Grabbitt and Runne.
This situation with Brick by Brick is beyond ridiculous now! After all of these findings and articles when the hell will this shambolic company be put to a stop. How can the council possibly be granting new planning applications while there are so many behind schedule swallowing up public money??? Surely they should concentrate on the finishing g projects first and if the sales for the non affordable affordable housing aren’t happening surely they should be considered for the housing crisis we have to actually help families within the borough get rehoused. The council would then be getting revenue from rent and council tax rather than getting deeper into debt!
The one unique thing about Croydon Council is that it’s CEO has a so-called building planning background. For years Negrini has tried to get recognition from the RIBA – and after many cocktails she finally did.
So HOW has this Brick-by-Brick sham fiasco happened under her watch? How? When BB gets unassembled, Negrini must be sacked. The borough’s huge debt is on her shoulders.
Why wait until BxB is dis-assembled, let’s just get of the expensive Negrini together with the rest of the cadre now and save a huge amount of money immediately?
Fascinating attempts to regenerate various rundown areas of Croydon, from an interesting point of view, but you know its not fair competition as the Council is giving these pieces of land away or very nearly, then crowing like an overinflated rooster at how big and clever they are.
Are Croydon Council really serious that they are in the property development game?
If they are they aren’t selling any units and need to close, although a good land flip – bit like Fairfield site would help finances, but aren’t these short termism’s ? and once the lands been sold to new developers at ahem mates rates with loose planning permissions anything can happen.
giving away the crown jewels to prop up a dying badly conceived firm like BXB is bad business.