Government-appointed advisers pulled plug on BxB sale

CROYDON IN CRISIS: ‘Improvement Panel’ ordered council to abandon its poor-value deal to sell Brick by Brick, and instead to pay Wates Construction £1.12m to oversee the loss-making builders’ work on 23 sites.

Dropped Bricks: government-appointed officials ordered the council to abandon its sweetheart sales deal

Hamida Ali, the leader of Croydon Council, and the rump of Newman’s numpties who still hang around the Town Hall for their monthly allowances payout, may be in power, but they are not in control.

That was made clearer than ever after the government-appointed commissioners pulled the plug on the sweetheart deal which Ali and the Labour councillors had approved for a quick, cut-price sale of loss-making builders Brick by Brick.

The council had only one preferential bidder for Brick by Brick, and council officials rejected bids from other developers for all or part of the council-owned development firm. The obvious flaw in this approach, minimising the potential value to be realised in Brick by Brick’s site assets, was flagged up to the Ministry of Housing, Communities and Local Government in April.

Now, it has emerged that Tony McArdle, the chair of the improvement board, and his colleague Phil Brookes, a Crown commissioner, issued two reports last month that basically ordered the council to get a much better offer from Urban Splash, or cancel the sale.

Neither of these “advice notes” have been included in the reports going forward to elected councillors ahead of next week’s council scrutiny committee, nor to the council cabinet the week later, even in the secret “Part B” paperwork that is not made public.

Improvement advice: Phil Brookes’ report, which recommends paying a £1m fee to have Wates oversee BxB’s work for the coming months

But Inside Croydon has had sight of the latest advice note, which makes it very clear who is making key decisions at the council – and that is not Hamida Ali, nor is it even interim finance director Chris Buss.

The advice makes it clear that there is little or no confidence in Brick by Brick to ensure that they deliver their remaining developments on time or to budget, nor to be capable of running a competent sales and marketing operation. In effect, the MHCLG commissioners have decided it is time to call in someone who knows what they are doing.

The wait is over: government advisers recommend getting in a real building firm

The first advice note was sent by the improvement board on June 17 to Katherine Kerswell, the council chief executive, and to Buss, who had backed the sale to Urban Splash.

In that note, “The Panel were clear that they do not recommend pursuing the current offer from a third party, and unless that is substantially improved, then the council should pursue the procurement of management support to enable a build out option.”

In a further advice note, dated a week later, June 23, Brookes told the council that instead of selling off the business, they should choose between two established building companies, Wates Construction and Arcadis, to oversee bungling Brick by Brick’s long-delayed “building out” of 23 of the company’s remaining 29 development sites.

Most of the sites – delivering 774 housing units – are supposed to be completed by October this year, though Brick by Brick’s record on delivery has been disastrous.

The £1.12million fee demanded by Wates for this supervisory role over just a few weeks is, according to Brookes, “likely to represent less than 0.25 per cent of the surplus monies generated through the remaining build-out”.

Different skill set: Arcadis have offices in the council’s Fisher’s Folly building

Brookes strongly leans towards Wates (coincidentally the developers who in the 1960s built the residential tower blocks at Regina Road which has been a source of further difficulties for “Apologetic Ali” and her floundering council administration).

It may be that Arcadis is seen to be “too close” to the council and to Brick by Brick: the management services company is one of the council’s tenants in Fisher’s Folly, where they lease office space. And they were used by Brick by Brick and the council on Fairfield Halls and elsewhere, and look how that ended.

Another option, of putting Brick by Brick up for sale on a more open market basis in order to get a more competitive bid has been rejected because it could take at least eight weeks (Urban Splash made their initial approach in February this year).

The view is that the council does not have the luxury of that time to turn its real estate into property sales income on the many previously stalled Brick by Brick schemes while the company’s chief executive, Colm Lacey, in his £1million George Street offices continues to burn through £10million council loans every couple of months.

In his report, Brookes writes, “This note sets out the Improvement and Assurance Panel comments and recommendations for the procurement of management support to [Brick by Brick] should an improvement to the offer in respect of the potential sale of the company not proceed. It follows meetings with two companies who submitted outline proposals to LB Croydon on the support they could offer, Wates Construction and Arcadis.

“The Panel’s view is that both organisations would be capable of providing appropriate expertise and resources to ensure that a build out of 23 sites could be completed in a suitable timescale and in a manner that protects value to LB Croydon.

Sites for sore eyes: the council’s full list of the developments that Brick by Brick has not yet finished, plus six it will never start

“They do however, possess slightly different skill sets.

“Wates operate as a principal contractor on a range of residential developments assuming responsibility from inception through to completion and sale. Arcadis tend to work alongside a developer, offering project and programme management capability and using third parties to support sales and marketing activities.

“In light of the immediate need to significantly scale up the sales and marketing activity for the completed properties, on balance, the Wates offering was more compelling.

Phil Brookes: prefers Wates

“They had visited a number of developments and highlighted opportunities to accelerate this critical requirement. They also highlighted the risk of a number of staff leaving {Brick by Brick] in the short term leaving the company short of the capacity it needs to complete the development work. Wates are confident that they have resources available to mitigate this risk.”

And this is a good bit, for the growing Colm Lacey Fan Club: “They also suggested that there are savings to be made in the current management overheads due to the prevalence of staff who are unlikely to be needed given the reducing portfolio of work.”

Brookes’ report lays out some drawbacks in Wates needing 12 weeks to put together an assessment report, described by him as “impractical” and “too disruptive”.

Brookes has been a Crown representative at the Cabinet Office for the last six years, with expertise in facilities management and construction. His brief when parachuted into Croydon Council by MHCLG was asset disposal.

He joined improvement panel after having worked last year on a similar review of Nottingham City Council, where Kerswell had a brief spell as an emergency interim CEO and McArdle was chair of their panel.

The full set of recommendations from the Improvement Panel, contained in their advice note of June 23 which ordered the council to drop its proposed sale of Brick by Brick

In his latest report, he advocates avoiding the cheapskates’ option.

“Although a revised proposal for the initial appraisal from Wates is going to be more expensive than Arcadis, the Panel consider that premium is more likely to provide a solution that achieves a greater outturn position through the build out.

“The premium is likely to represent less than 0.25 per cent of the surplus monies generated through the remaining build out and therefore this decision is about appointing the most capable supplier for the unusual circumstances Croydon face and not the least cost for this initial exercise.”

Read more: Council to pick up £69.2m costs of failed Fairfield Halls refurb
Read more: Conflicts of interest, incomplete contracts, unlawful payments – how the Fairfield Halls refurbishment cost Croydon £50m-plus
Read more: Making a Splash: big bailouts behind Brick by Brick’s buyers

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This entry was posted in Brick by Brick, Chris Buss, Colm Lacey, Croydon Council, Hamida Ali, Housing, Improvement Board, Katherine Kerswell, Planning, Tony McArdle and tagged , , , , , , , , , , , . Bookmark the permalink.

11 Responses to Government-appointed advisers pulled plug on BxB sale

  1. krautview says:

    What a sorry tale but a brilliant piece of local investigative journalism

  2. badly advised to the very end…..

    It’s well known in the industry if Urban Splash was a fish it’d be a shark, but with lipstick and a funny hat. The depths of Croydon Council’s gullibility is staggering and the poor advice they attract is something to behold.

    Should all important decisions just be removed from local government in Croydon?

  3. miapawz says:

    I am still not clear where all the BxB money has gone = they have sold many properties – where is the money?

    • The point is that they have not sold many properties. Most of their projects are years behind schedule, soaking up overspend millions, while failing to generate any surplus. You really ought to read Inside Croydon…

      • miapawz says:

        I have been reading avidly of course, but my confusion comes from a company frequentlk given plots of land for £1 and building flats for sale for £500,000 and not having any money……. now you explain they have not sold any of the £500,000 flats it makes more sense. Pawz

  4. Dan Maertens says:

    “The depths of Croydon Council’s gullibility is staggering and the poor advice they attract is something to behold”.

    Yes, indeed. And it’s been going on for years.

    Remember the costly, idiotic plans to build a huge stadium right next to East Croydon Station that had no adequate parking for the acts’ lorries or the cars of the public?

    It also placed the Warehouse Theatre into jeopardy, from which never recovered.

    All important decisions SHOULD be removed from local government in Croydon.

    • They were promoting the Croydon Arena (Stadium) scheme during my time at the Council. I remember querying the logic given the development of the 02 Arena. My Director just didn’t want to listen as it was his pet project. £000’s wasted.

      • Name names, David. Who was the director? And who was the responsible cabinet member of the time?

        • It’s no secret as on the ‘net. Director was Phillip Goodwin and Cllr Adrian Dennis was the key Cllr at the time. Not sure if there was a Cabinet system throughout the time the scheme was being promoted. The saga of the related compulsory purchase order went on for ages.

  5. Lewis White says:

    On the basis that companies with silly names, whether based on fake Greek or Latin (remember Consignia, aka The Post Office, who even with their original name turned out to be the author of the scandalous false accusation and impoverishment of innocent local Post Masters,) or anything that bigs itself up with inflated self-defining publicity guff (normally featuring such cliches as “Ground breaking, innovative, cutting edge ” etc), are likely to be fatuous and incompetent—- I go with Wates.

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