Issue - meetings

Ongoing Review of Brick by Brick Croydon Ltd and the future of the company

Meeting: 12/07/2021 - Cabinet (Item 99)

99 Ongoing Review of Brick by Brick Croydon Ltd and the future of the company pdf icon PDF 749 KB

Cabinet Member: Leader of the Council, Councillor Hamida Ali

Officer: Interim Chief Executive, Katherine Kerswell and Interim Director of Finance, Investment & Risk and Section 151 Officer, Chris Buss

Key decision: yes

Additional documents:


The Leader of the Council delegated authority to the Cabinet to make the following decisions:


Cabinet RESOLVED (acting, where relevant, on behalf of the Council exercising its functions as sole shareholder of Brick by Brick Croydon Ltd) to:


1.           Reject the offer for the purchase of Brick by Brick (Croydon) Ltd.


2.           Agree that a modified build out scenario of 23 sites will be implemented and to note that in order to deliver that, Brick by Brick will require additional management and technical support, the costs of which are factored into the costs shown in this report and as further consequence of this decision that Brick by Brick will return 5 sites to the Council on the basis that they will be marketed for sale (and on the basis that site ownership will either remain with Brick by Brick or transfer to the Council, whichever is most efficient for maximizing value or the efficiency of the sale process). The remaining site of Belgrave and Grosvenor to be deferred pending the completion of the stock survey being undertaken in adjoining council buildings and to be brought to a future Cabinet meeting for final consideration.


3.           Agree that the decisions made under this Report shall take effect as amendments to the current Business Plan of Brick by Brick (and as a shareholder decision under the Articles of the company). In addition, and also as shareholder, the Council will require Brick by Brick to issue monthly reports to the Council to update on its financial position, progress with development of sites, sales, any key contractual issues and any other relevant matter (as needed). Such reports are to be presented to the Cabinet on a quarterly basis.


4.           Confirm that, in accordance with the February Cabinet report, sales receipts may continue to be recycled by Brick by Brick and agree that the S151 Officer, in consultation with the Chief Executive and Monitoring Officer be given authority to approve those ad-hoc sales receipt recycling requests from Brick by Brick, up to a total amount of £5m in any one transaction and following the terms of the consolidated loan agreement, reporting on a quarterly basis to Cabinet.


5.           Delegate authority to the Section 151 Officer, in consultation with the Chief Executive and Monitoring Officer, to make any necessary formal shareholder resolutions in order to give effect to the above recommendations and to authorise the entering into any of the necessary formal legal documentation that arise as a consequence (including (i) to confirm the appointment of consultants to provide the necessary additional management and technical support, and (ii) in respect of the sale of the 6 sites, as are referred to in recommendation 2).


6.           Delegate authority to the Section 151 Officer, in consultation with the Chief Executive and Monitoring Officer, to vary the loan agreement in respect of the sites returned to the Council sites (subject to SDLT and various other tax advice) and with any such modifications being reported in the quarterly  ...  view the full decision text for item 99


The Leader of the Council (Councillor Hamida Ali) reflected that Cabinet had considered and deliberated the future of Brick by Brick at previous meetings in November 2020 and February 2021. It was stated that the meeting would determine the way forward for the company with the recommendation being that the council should reject the offer which had been received and should proceed with the build out of 23 sites and sell six sites.


It was noted by the Leader that the build out of the sites should complete that financial year with only two going beyond that date and one completing in February 2023.


The Leader felt that the decision before Cabinet was one of a balance between risk and return. It was noted that the analysis contained within the report argued that higher levels of risks could be mitigated and that the council should pursue the higher levels of return which were available. The fact that there was no risk free option was highlighted.


It was reflected that the guiding principles that have underpinned the council’s response to addressing its financial resilience had been to reduce the risk appetite and to maximise the return on the public’s investment, however with the decision in terms of the future of Brick by Brick the Leader felt that those two principles came into conflict and it was important that Cabinet came to a decision as to the best option of the two.


The Leader noted that there was greater risks pursuing the build out option, but that the greater certainty and lower risks of agreeing the bid came at a price and would potentially secure less of the money invested by the council. External analysis by PwC and Savilles had been undertaken which had evaluated what the price difference would be.


Members were informed that the recommendation contained within the report sought to secure the best return for the council’s investment and noted that almost 800 new homes will have been delivered, with over 50% of the homes being affordable. Whilst it was recognised that the recommendation involved greater risk, that risk would be offset by introducing additional support which had been budgeted for within the analysis. The Leader stressed that the council had striven to establish the best value from the investment in Brick by Brick for residents.


The Leader thanked all those involved in the work; including the Interim Director of Finance, Investment & Risk (Chris Buss), the Chief Executive (Katherine Kerswell), external consultants and the Improvement & Assurance Panel.


The Chair of Scrutiny & Overview Committee (SOC) (Councillor Sean Fitzsimons) informed Members that a meeting of Scrutiny had taken place on 6 July 2021 to review the Cabinet report and to receive a briefing from the Interim Director of Finance, Investment & Risk. Cabinet were informed that when Scrutiny review the report, the Committee had focussed on three key areas; officer confidence in the valuations provided, the evaluation of the risks to the council presented by the two options, and whether there were  ...  view the full minutes text for item 99