Yet more public money is being used to bail-out the council’s failed house-building company, as it flogs off 85 flats intended for shared ownership. Our housing correspondent, BARRATT HOLMES, reports
In the latest admission of the abject failure of Brick by Brick, the council’s loss-making house-builders, an announcement was sneaked out on Christmas Eve of a rushed sale of 85 of its homes for £29million to investment firm Residential Secure Income – or ReSI.
There’s no information about this important bit of business published on the Brick by Brick website, nor were the borough’s elected councillors advised that this deal was going through, even though Croydon Council is the company’s sole shareholder.
Brick by Brick was set up by Croydon Council in 2015 with the promise that 50 per cent of the homes it built would be “affordable”.
It turned out that the bulk of what it intended to be affordable housing was to be sold under far-from-affordable shared ownership schemes – but as Inside Croydon revealed 12 months ago, no one at Brick by Brick had ever bothered to get the company registered as a recognised provider of shared ownership homes.
That meant that dozens of hopeful prospective buyers were left high-and-dry, denied their new homes because banks and building societies would not provide mortgages on Brick by Brick properties intended for shared ownership.
It was the latest gargantuan dropped bollock in a long series of errors and failures at Brick by Brick, and it meant that the company was unable to fulfil interest payments and loan repayments to Croydon Council, leaving a £110million black hole in the Town Hall’s accounts, a major contributor to the local authority’s financial collapse earlier this year.
This was acknowledged in a statement given by Colm Lacey, Brick by Brick’s chief executive, who said that the multi-million-pound sale to ReSI would “accelerate the returns we provide to our shareholder Croydon Council”.
The hapless Lacey fails to explain how you can “accelerate” something that, to date, has remained stubbornly static – Brick by Brick has so far repaid precisely £0 of the £250million it has had in loans from Croydon Council.
And evidently, despite having promised to resolve the mortgage situation for its prospective buyers within a few months, Brick by Brick remains unregistered as a supplier of shared ownership properties.
With the council’s magic money tree no longer available to Lacey, there seemed to be a real risk that the badly managed company might struggle for cashflow on other, part-completed building sites.
An attempt by Alison Butler, the former council deputy leader who was in charge of Town Hall housing policy, to push through a £30million purchase of BxB flats in July – when the council finances were already in meltdown – was effectively blocked by the borough’s auditors for being too “circular”.
ReSI is a REIT, a real estate investment trust, a company that owns and often operates properties, usually assisted with significant tax breaks. It is part of Gresham House Group, an asset management company, and – unlike Brick by Brick, it is a registered provider of shared ownership homes. The Brick by Brick deal is part-financed by a government grant – so yet more public money is being used to bail-out the council’s failed house-building company.
ReSI’s biggest investment in social housing prior to buying the Croydon homes was in Lambeth, where it owns and operates the Clapham Park Estate, the former council-run estate. The Clapham Park Estate was sold by Lambeth in 2006, when Steve Reed OBE – now the MP for Croydon North – was the leader of that council.
The homes being bought by ReSI in Croydon include 23 one- and two-bed £315,000-plus flats in Flora Court in Thornton Heath which have been standing empty for a year because of Brick by Brick’s clusterfuck over shared ownership. Other homes in Upper Norwood and Purley Oaks intended for shared ownership form part of the deal.
In their Christmas Eve press release to announce their purchase from Brick by Brick, ReSI say that, “The transaction will allow Brick By Brick to offer these homes as shared ownership, accelerating the delivery of much-needed affordable homes and returning the proceeds of the sale to the London Borough of Croydon to be spent on frontline services.
“The homes will be held by ReSI’s wholly-owned registered provider of social housing, ReSI Housing, and part-financed by government grant.”
ReSI’s announcement claims that 90 per cent of the properties are already reserved for buyers, who will be offered deals starting at 25 per cent of the full purchase price on 250-year shared ownership leases.
And while the multi-million deal might buy Brick by Brick some breathing space, ReSI is not doing this as any kind of charity gig.
“Upon occupation,” the asset investment managers state in their press release, “each home will be fully income-generating, with an expected inflation-linked leveraged yield which supports ReSI’s 8 per cent total return and c.5 per cent dividend targets.”
The sales numbers won’t appear on Brick by Brick’s bottom line until next year – their 2019-2020 accounts, due to be released at the start of August, have yet to be published. But by liquidating these assets in this way, there is a slither of hope that Brick by Brick might at last be able to repay some of the chunk of money it owes to the bankrupt council.
ReSI might even be back for more. “We see this as the start of a long-term partnership with Brick By Brick to facilitate its delivery of much-needed affordable homes,” was the spin offered by ReSI’s Ben Fry.
“To facilitate its delivery of much-needed affordable homes“. If only… In the near-six years since it was established by the council, Brick by Brick has delivered precisely three purpose-built council homes.
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