CROYDON IN CRISIS: A publicity campaign – effectively funded by Council Tax-payers – on behalf of the council-owned housing firm in an effort to salvage the managing director’s job has enraged councillors.
By STEVEN DOWNES
Labour councillors were furious today, after Colm Lacey, the former council director installed as managing director of loss-making house-builders Brick by Brick, allowed briefings of the trade press which sought to contradict the Town Hall’s auditors.
And in an interview given with one housing magazine, Lacey fuelled that anger by suggesting that he was seeking private buyers for the company.
“The last time I checked, Brick by Brick is not Mr Lacey’s to sell,” one angry councillor told Inside Croydon today on condition of anonymity.
Another, who chose to use some very intemperate language about Lacey which could not possibly be published on a family-orientated website, suggested that the time had come for the former council employee to be sacked from his six-figure salaried job at Brick by Brick.
“They’ve issued a briefing document which is basically calling the council auditors liars, and calling our interim CEO Katherine Kerswell a liar,” the councillor said.
“This at a time when the company is the subject of a couple of independent reviews because of the way it has been so badly managed over the past five years with Lacey in charge.
“It looks like a case of gross misconduct to me, so no need to give him a Negrini sized pay-off.”
Brick by Brick was registered in 2015 by the council, its sole shareholder, and has since received at least £250million in loans from the council, as well as millions more in hidden subsidies through the below-market-value sale of public property.
Jo Negrini was a colleague of Lacey’s at Lambeth and then Newham councils before she hired him as director of development at Croydon in 2014. She quit as Croydon’s CEO at the end of August, but not before she managed to snare a settlement of £440,000.
Under Negrini, the council’s debts had increased by £545million in three years, including the loans to her brainchild Brick by Brick, to total £1.5billion, while reserves were run down to precariously low levels. The council is now in a cash crisis after spending £70million over its budget this year due to covid-19.
Last month, auditors Grant Thornton criticised Brick by Brick saying it had failed to pay back loans when expected and had delivered no profits on its property deals so far. The audit report showed that, based on Brick by Brick’s own projections and business plans, the council should have received £110million in returns and loan repayments by now.
Grant Thornton recommended the council should halt all future lending to Brick by Brick, and called for it to “review and reconsider” its equity investment in the firm.
The report also raised concern about the “circular” nature of a property deal earlier this year, when the council borrowed a further £30million which it used to buy up flats from Brick by Brick, flats which had been built on council land which had been sold at below the market value, and built with money lent to the company by the council.
The council stepped in when Brick by Brick had failed to sell the flats under shared ownership schemes because the Lacey-run company had failed to register itself as a recognised provider of shared ownership homes.
The auditors also stated that Brick by Brick had broken a covenant with its lenders this year by failing to publish its audited accounts for 2019-2020 on time.
In nearly six years, Brick by Brick has managed to build just 283 homes, only three of which were purpose-built council homes. Under Lacey, the company has never yet reported a profit.
Yet in a statement issued to the trade press, Brick by Brick claimed, “it should be noted that Brick by Brick itself is in good financial health and has strong revenue forecasts for the current financial year”.
Councillors were unconvinced. “What ‘strong revenue forecasts’?” one said. “Lacey’s failed to deliver the annual accounts yet, so we only have his word for it, and he’s been claiming a profit of £250,000, before tax. That’s not what anyone in the construction industry would call a ‘strong revenue forecast’.”
The Brick by Brick statement continues, “We are now entering a new and important phase where the proceeds from sales of our homes provide a significant financial return to the council which can be spent on frontline services, benefitting [sic] the people of Croydon. This clearly demonstrates the success of the Brick By Brick model.”
After being accused by Grant Thornton of failing to scrutinise Brick by Brick’s activities closely enough, councillors are now unwilling to accept such promises at face value.
“It’s all lies and nonsense, isn’t it?” another Katharine Street source said.
“The statement claims they have sold shared ownership homes, when they are not registered to do so, due to their own incompetence. To also claim that, nearly six years after they were formed, we are only now ‘entering an important phase’ in which the council gets a return on its investment is utterly disingenuous.
“Had Lacey and Brick by Brick managed their developments properly, the council would be £110million better off today than it is. The only thing Lacey has clearly demonstrated any success at is poor management and wasting tax-payers’ money. It’s long overdue for him to be fired.”
Some councillors are understood to be considering sending a formal complaint about Lacey’s conduct to Kerswell, who has replaced Negrini as the council chief exec, and to Martyn Evans, the chair of Brick by Brick. Although Brick by Brick is wholly owned by Croydon Council, bizarrely, the council at present has no representatives on its board of directors.
The unforgiving mood of councillors over Lacey’s conduct has been inflamed by an interview which has been published by Housing Today, in which he has effectively put the company up for sale in an effort to salvage his own position, at a time when the council is having to lay off more than 400 staffers.
In the interview, Lacey claims that there “is interest in the market” in his failing development company from the private sector, though he wouldn’t give any specifics of where from (“A classic piece of Lacey bullshit,” according to the Katharine Street source).
Lacey contradicted the council’s auditors, telling the trade publication that Brick by Brick had never missed debt repayment deadlines. Lacey’s publicity drive – which appears to be conducted by expensively hired PR spinners – is clearly a result of his concern that the council’s funding taps are about to be turned off – with him waiting for yet another £108million-worth of funding from the Town Hall next year.
Describing himself as “a responsible chief executive” (“Ha! That’s hilarious,” said a councillor), Lacey told the magazine, “We are exploring options with funders – I have to explore what happens if Croydon decides it doesn’t want to fund us, or if it wants to change ownership. My role is to ensure we can continue to operate if we have different funding in future.
“I think we’d appeal to lots of potential buyers – private equity, housebuilders, housing associations.”
The interview included familiar Lacey excuses for his company’s failures – “There have been delays to projects,” he said, “but I’d expect delays to projects as we deliver very complex small sites, and we’re delivering 30 at once, which takes a huge amount of resource.” Poor lamb.
And Lacey even had the audacity to blame the council’s financial crisis for his company’s certain failure to deliver on its business plan targets this year, by up to 40 per cent, he says.
Not once in five years has Lacey managed to deliver what was promised in the company business plans. But missing targets by 40 per cent would, at least, appear to be an improvement on 2018-2019, when 100 per cent of Brick by Brick’s delivery targets were missed.
Lacey issued a thinly disguised threat to the council, which Housing Today described thus: “If council funding is halted without Brick by Brick having alternative funding in place, this would put the delivery of its pipeline of schemes at risk, jeopardising promised returns to Croydon.”
This left councillors, who have already had their fingers badly burned by the Brick by Brick experience, unimpressed.
“There are two reviews on-going at the moment, one which the council has commissioned through PwC, the other which the government initiated last week,” a councillor said. “Both are due to report by the end of this month. It would be premature, before they have delivered their findings, to start touting around council-owned property.
“But that’s exactly what Lacey is doing here.
“We might very well decide to liquidate our assets in Brick by Brick, to bring in some urgently needed money. But that remains a decision which our council should make, in discussions with our executive leadership team and our advisers and partners from the Ministry of Housing.
“It is not the decision of a mere employee of Brick by Brick.”
If the councillors get their way, that could soon be “ex-employee”.
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