No progress: Beech Tree Place in Sutton is a multi-million-pound hole in the ground, where no work has been carried out for months, since the council’s builders went bust
A borough council awards a multi-million-pound home-building contract to a firm that has only existed for a couple of years and has no track record of large-scale developments. What could possibly go wrong?
CARL SHILTON reports on a repeat of the Simpson show
Back in the (property) game: Croydon’s former finance director, Richard Simpson
Elderly council tenants, many of them vulnerable, some of them in their 80s, face spending their final days in temporary accommodation after Sutton blundered over a town centre housing scheme which has been hit by soaring costs.
And at the centre of Sutton Council’s decision-making is their finance director, Richard Simpson. That’s the same Richard Simpson who, until 2018, was in charge of the finances at… Croydon Council.
Yes, the same Richard Simpson who oversaw the financial arrangements for the fiasco that became the Fairfield Halls refurbishment (£70million spent on a £30million budget scheme, with few of the required upgrades and improvements ever actually completed).
And the same Richard Simpson who was the first ever director of Brick by Brick, the in-house housing firm that borrowed £200million, built hardly any social housing, and ended up bankrupting Croydon Council.
That Richard Simpson.
In 2019, Simpson took on a senior finance position at neighbouring Sutton Council. It was not long before he was involved in another multi-million-pound housing scheme.
Sutton Council allocated £30million for the redevelopment of Beech Tree Place in the town centre, where elderly council tenants would be rehomed on a new, 92-flat estate. Residents were promised a single move relocation, with their homes not being demolished until after replacements were completed elsewhere on the same site, as part of a phased development.
Planning permission, specifying phased development, was granted by Sutton Council in March 2022. But by that summer, the council had a problem on their hands.
Long-standing business: Dun and Bradstreet’s financial assessment for the Higgins Group, the developer that Sutton Council opted not to hire for Beech Tree PLace
The £30million budget proved to be a gross underestimate, and another £14.2million was needed to go ahead. So in August 2022, an unusual “Urgency Committee” meeting was called to approve the 50% increase in the scheme’s budget.
The contract to demolish 25 existing homes and construct 92 flats at Beech Tree Place was awarded to Real LSE Ltd, a company registered at an address in Sussex which had only formed in 2020, and without any track record of delivering multi-million-pound developments.
There were three councillors at the Urgency Committee meeting 16 months ago: LibDems Ruth Dombey, the Sutton Council leader, and David Bartolucci, who is the chair of Sutton’s housing, economy and business committee, plus Tim Crowley, a Conservative councillor.
Warnings ignored: Tory councillor Tim Crowley
At the meeting, Crowley pointed out that the council had changed the scheme from one of a mix of affordable and rental properties to one of just rented homes, as there was no way the properties could be offered at affordable rates with a build price of £480,000 each.
He also noted that the council had only received bids from two developers, new boys Real LSE and the much more established Higgins Group Plc. But their respective quotes for the project were within 0.1% of each other, something he said had concerned council officials.
“It was only when we went into closed session to discuss the commercially sensitive issues that I could make my concerns about the proposed contractor clear,” Crowley told Inside Sutton.
“We were told by officers that the meeting was not about scrutinising the contract award, as professional officers and consultants had completed their work. The decision was a political one of whether to go ahead with the scheme.
“I found this approach absurd as there were clear flaws in the award of the contract,” Crowley said.
Rookie business: the D&B assessment of Real LSE hardly inspires confidence. This was the bidder that Sutton Council decided to go with
A Dun and Bradstreet report for the winning bidder, Real LSE Ltd, was relied upon by council officials and consultants.
Yet D&B suggested a maximum credit recommendation of just £140,000 for the company, totally unsuitable for a firm undertaking a £44.2million project. In its two-year life, Real LSE Ltd had only produced a single set of accounts, with a turnover of £12.8million and a balance sheet of £360,000.
The only other company pitching for the work, understood to be the Higgins Group, had a maximum D&B credit recommendation of around £4million, with a balance sheet of £49million.
“Given that the bids were almost identical, I found the decision to award the contract to a new company with a proposed credit limit of just £140,000 absolutely crazy, practically suicidal.
“I was ignored and told all was fine.”
Forced out: Beech Tree Place in December 2022, with hoardings going up ahead of the demolition. The phase development promise had been broken
Before the meeting, Crowley had requested copies of the full report of the council’s consultants, CDC, that evaluated the two bids. “I was provided with this report just 50 minutes before the meeting, all 768 pages of it.”
It was not until after the decisive meeting that Crowley had a proper opportunity to examine in detail the CDC report. It was then that, he says, “I realised there were further jaw-dropping flaws in the evaluation of the qualitative proposals from the winning bidder.”
When it came to a vote on the council providing an extra £14million for the Beech Tree Place scheme, Crowley was outvoted, 2-1. The LibDems decided to push on, despite the Tory councillor’s warnings about the project’s poor value.
Sutton’s independent and Labour councillors, with the backing of the Tories, tried to get the decision debated at a meeting of full council. But Tim Martin, the borough’s most senior legal official, refused the wholly constitutional request. “Democracy in Sutton died that day,” said one of the opposition councillors.
The reason given for the refusal was the council’s need to secure extra grant funding by making a meaningful start on the development.
Drastic change: the council’s vision for Beech Tree Place replaces 25 homes with 92 flats
After the contract was formally awarded to Real LSE Ltd, Sutton Council also saw a quick way to save a bit of money – up to £3.5million – by reneging on its promise to phase the developments, allowing the residents to make just one move from their old homes and into the new ones.
The power to do this lay in the hands of Richard Simpson, Sutton’s finance chief.
This decision meant the residents, all aged 60 or older, were forced into temporary accommodation, allowing demolition to begin in January 2023. The residents were decanted often miles away from their former homes, often splitting them from their families and friends. Some have said how they fear they might die before ever returning to a home in Sutton.
Residents relate that their enforced moving home was more like an evacuation. One councillor described it as a form of “social cleansing”.
When some Beech Tree Place residents were moved to sheltered housing nearby, it was left to them to move all their possessions and furniture on their own.
“I saw people just a week before demolition began using shopping trolleys and wheelie bins to cart their possessions around to Thomas Wall Close,” one eyewitness said.
“It took them several runs, and a lot of unwanted stuff was dumped on the roads. There seemed to be no assistance from the council.”
Work continued on site until August 2023, when builders downed tools and left the site. In September, under-capitalised Real LSE Ltd announced it was in administration.
All the predictions of the opposition councillors had come true.
Abandoned: Beech Tree Place last week – there has not been any builders working on the site for almost four months
Sutton Council is now desperately scurrying around, seeking a new contractor in the hope that work might restart early in 2024. Estimates of additional costs caused by delays and the changeover suggest Sutton Council could be looking at having to find an extra £10million.
If that is the case, then the cost of building every new flat on Beech Tree Place will have risen to a cool £587,000 per unit.
In a debate at full council on October 30, the issue of Beech Tree Place was raised, and Crowley and his colleagues revealed much of the concerning content of the winning bid, including the £140,000 credit line available to the contractor.
The Real LSE corporate pitch document had told of other local builds that were completed, but these were by different companies with only a loose connection to Real.
Housing failure: David Bartolucci
Real LSE claimed the credit for the £14.5million regeneration of Durand Close in Carshalton, which was actually built by Rydon and began in 2009 – a full 11 years before Real LSE even existed.
Real’s headline example was a £17.5million care home built in Banstead, but by another company in their group called Real Places Ltd. Real Places has since gone into voluntary liquidation, while a number of other Real group companies are in administration.
Councillor Bartolucci, the housing committee chair, meanwhile claimed that the failure of Real LSE could not have been foreseen, and that the opposition were using hindsight to criticise the council. Bartolucci appears to have forgotten the warnings he was given at the urgency meeting in August 2022.
“This was not hindsight,” Crowley said.
“This was foresight from me, and from the other opposition parties, all of whom saw the blatant dangers.”
Read more: #PennReport: Cover-ups and denial over Brick by Brick failure
Read more:#PennReport wanted police probe into possible misconduct
Read more: Negrini’s gone silent over secret subsidies to Brick by Brick
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The relationship between Rydon and Real is a real (sorry) mare’s nest. Trying to understand it is harder than trying play Spock’s 3D space chess.
Rydon, we should remember, is up to its neck in Grenfell.
As a result, a group company was excluded from Help to Buy (HTB) and London Development Plan 2 work, and Robert Jenrick (yes, him) said that Rydon shouldn’t bid for further Govt. work until the final Grenfell outcome – not expected until sometime next year.
The brand is toxic.
And Lo! It sells its south eastern businesses to Real.
Real LSE also used to be called Rydon LSE and was incorporated by the guy that controls Rydon. He was also a director of four other Real companies, all of which have gone pop.
Some of the Real businesses turned good money and Rydon’s sales are interesting as it has a number of charges over them and will now be their secured or preferential creditor.
You get the impression that Sutton had no sense of these relationships, nor Rydon’s involvement with Grenfell, or held its nose when signing Real (for what reasons, who can tell).
As it was, when construction inflation and interest rates went mad in the last 18 months, it looks like the Real house of cards fell in (although some companies are still trading).
Rydon will pick up the pieces thanks to its various charges and I would expect the whole lot to phoenix at some point, with Rydon (or its owner) again somewhere in the background.
As an aside, Dun & Bradstreet (in my experience and opinion) exists primarily as an arse-covering for procurement and finance depts. who can point at it and say “look, diligence” when their choices turn out to be poor ones.
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