COUNCIL REPORT REVEALS DOUBTS OVER VIABILITY OF LANDMARK DEVELOPMENT
A report commissioned by Lewisham Council reveals doubts over the viability of the Lewisham Gateway development as the long-planned regeneration project makes grindingly slow progress.
A heavily redacted version of the report was released to alternativeSE4 following a Freedom of Information (FOI) request for information on a £2m loan made to the developers of the scheme.
Produced and presented to the Council leadership in May 2012, the report was originally withheld from public scrutiny on the grounds of commercial confidentiality and only released following a protracted 7-month FOI process and the intervention of the Information Commissioners Office.
The loan made to Lewisham Gateway Developments Limited (LGDL) followed a request by the developer for funding assistance.
The following extract from the report set out the case for making the loan:
In other words, the developer would not, or could not, come up with £1.5m (with Lewisham Council already prepared to advance £500,000 to make up the £2m). Without the £2m the £8m in HCA funding (Housing and Communities Agency – the national housing and regeneration delivery agency for England) would be lost.
Lewisham Council was asked for the £2m by the developer once funding from the GLA was confirmed as a loan instead of a grant of £1.5m. The report stating that the Council is “now in the best position to provide this funding”. The loan to LGDL being financed through borrowing (despite increasing pressure on its balance sheet). We can only assume the loan terms negotiated with the Council being more to the developers liking than those of the GLA.
The reason for the loan soon becomes clear further into the report:
GBB refers to Get Britain Building (administered by the HCA), a government funded initiative with over £500m up for grabs.
Of specific note is the reference that the Lewisham Gateway development would not “proceed” without the GBB funding.
If the Council already didn’t feel between a rock and a hard place the whole question of the development’s viability would have concentrated minds:
In other words, LGDL would not take any more money from their own pockets to progress a scheme it viewed as “marginally viable”.
LGDL thus put the Council in the uncomfortable position of seeing the developer walk away, allowing the scheme to languish until judged to be more than only “marginally viable” or fronting £2m to the developers of the borough’s landmark development in Lewisham town centre.
LGDL was originally selected as preferred developer back in 2004.
The Lewisham Gateway development was originally granted planning permission in October 2007 on the basis it would provide the following:
- up to 57,000 square metres of space for housing
- up to 12,000 square metres of space for shops and professional services
- up to 10,000 square metres of space for education / health
- up to 8,000 square metres of space for offices
- up to 5,000 square metres of space for leisure-oriented businesses
- up to 4,000 square metres of space for restaurants, cafes and licensed premises
- up to 3,000 square metres of space for a hotel
- up to 1,000 square metres of space for hot food takeaways
- parking space for up to 500 vehicles
Phase 1a is planned to deliver 232 homes between July and October 2014
LGDL is a joint venture between Muse Developments and Taylor Wimpey.
Taylor Wimpey plc is one of the UK’s largest house building companies. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index. Its current market capitalisation is £3.7bn and made pre-tax profits of £207m in 2012. (source: Digital Look)
Muse Developments is the Urban Regeneration Division of the Morgan Sindall Group, a business with a market capitalisation of £337m and pre-tax profits of £34m in 2012. (source: Digital Look)
At the time the report was being debated by senior officers and councillors the two companies behind LGDL were on their way to making a combined pre-tax profit in excess of £240m that year.
Lewisham Council could not afford for the development to be shelved or face interminable delays for a number of reasons not least the New Homes Bonus. Under the New Homes Bonus, the government matches, for six years, the council tax raised from new homes built. The policy is intended to increase support from communities for new housing.
The more homes built in Lewisham, the more income will flow into Council coffers. In the era of austerity and budget cuts this is a powerful motivation for Councils to green light and push through developments even to the extent of loaning money to developers and the commercial results becoming less favourable to the local authority.
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