CROYDON IN CRISIS: Last night’s cabinet meeting agreed to flog off 15 sites around the borough, as the council seeks to pay down its £1.5bn debt. But they will struggle to recoup the £35.7m paid for a hotel just three years ago.
By STEVEN DOWNES
The council has given the green light to flogging off the Croydon Park Hotel, potentially at another massive loss to the bankrupt borough’s coffers, as it begins probably the biggest fire-sale ever seen in south London.
The council’s 2018 purchase of the 4-star hotel at East Croydon has proved to be hugely controversial, not least because the council leadership authorised paying £5million above the asking price for the site’s freehold.
The owners of the 210-room hotel had it on the market at £25million. Sources in the property business suggest it was being offered to potential buyers in early 2018 for £18million.
In July 2018, Tony Newman, the then council leader, and Simon Hall, his finance chief, pushed through a decision at cabinet which saw the council buy the hotel for £35.7million (including VAT). Their commercial property policy under which this purchase was made would not be agreed by the full council until October 2018.
Last year, auditors Grant Thornton, in their Report In The Public Interest, stated, “The council’s approach to borrowing and investments has exposed the council and future generations of taxpayers to significant financial risk.
“There has not been appropriate governance over the significant capital spending and the strategy to finance that spending.”
Newman, Hall and deputy leader Alison Butler used guillotine procedures at council which, as Grant Thornton described it, meant “there was insufficient time to discuss and challenge the strategy”.
One challenge to the strategy might have been to have carried out due diligence on the company operating the hotel – who were to become the council’s tenants. In 2018, their business was already struggling.
The company which operated the hotel went bust last summer, leaving no one to pay rent to the council.
Last night, a virtual cabinet meeting agreed it was time for the council to cut its losses and flog off the hotel and another 14 sites around the borough, to help pay down the council’s debts and reduce its costs. The sale of the hotel site, the meeting was told, should go through by September.
Ozay Ali, the council’s interim director of “homes and social investment”, described the choice of properties to be flogged off as “quick wins at the start of the process”.
With covid-19 laying waste to the hotel industry, it seems highly likely that the council will seek interest from developers who want to build residential blocks on the Croydon Park Hotel’s town centre site.
The appendix to the official report last night laid out five options considered for the future of the hotel, including finding a new operator or converting the building into temporary or emergency accommodation.
All were dismissed, with the exception of the sale to property speculators, with the council apparently prepared to exploit its position as local planning authority to hint heavily that consent for residential towers of 20 storeys or more will be forthcoming for any buyer.
Specialist consultancy firms advised the council, the report states, “The recovery of demand (occupancy) and room rates will take a number of years to recover to pre-pandemic levels. While the cashflows that can be derived from hotels are going to suppressed for a prolonged period, it is an attractive time to consider alternative uses.
“Given the location of the hotel, it clearly presents a significant opportunity for intensification of the large 1.54-acre site. Immediately surrounding schemes such as Altitude 25 and Pocket Living’s Addiscombe Road scheme are developed to in excess of 20 storeys.”
Only by holding out the prospect of planning permission for the site can the council have any hope of recovering even £15million-worth of the money it paid for the hotel, as Croydon embarks on a fire sale of its property assets to try to pay down its £1.5billion debt and plug the £66million covid-shaped hole in its annual budget.
According to Stuart King, the new deputy leader of the council who was bringing forward the report last night, the hotel currently represents “quite a considerable holding cost to the council”.
“It’s essential that we achieve best consideration,” King said, demonstrating mastery of the statement of the bleedin’ obvious.
Today, the council issued a statement which claimed it had a “new strategy, which is based on providing best value for taxpayers’ money”. Presumably, this is different from the old strategy, which must have been based on providing worst value for the borough’s residents.
The council said, “All 15 sites are either surplus or no longer key to delivering council services, and include buildings needing major refurbishment or vacant land that could be sold for private redevelopment.”
And there will be more sales to come. The sites listed in this first tranche do not include any of the borough’s libraries (a consultation on the future of five public libraries in the borough has been extended to March 14; the council wants to close them in advance of possible sales), nor any of the waste and recycling dumps, which are also expected to be sold off in due course.
The council claimed today that, “The strategy, which will also look at the council’s wider property requirements, is designed to ensure a high level of transparency and governance around any sales.”
The council said, “Before any future sales are agreed, officers will develop a business case, receive an independent property valuation, give details of any requirements to carry out public consultation and appoint specialist estate agents to market the sites.”
The council is also looking at selling off sites and land which it had previously earmarked for development by loss-making house-builders Brick by Brick.
“The council has a number of sites we no longer need which could bring in much-needed income and reduce expensive running costs if we were to sell them,” King said.
“This strategy gives the council a clearer process around deciding how to get best value for Croydon taxpayers on selling in the right way and at the right time sites that we no longer require. We will also ensure that all buildings and land we keep are properly used and continue to meet our residents’ needs.”
Read more: Administrators accuse council of forcing hotel out of business
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