A report from the Director of Health, Housing and Adult Social Care and the Director of Finance, Resource and Customer Services is attached. This proposes the setting up of a limited liability company for the purposes of developing, owning and managing property. (Key decision – reference number 3890)
(8.50 – 8.55 pm)
Councillor Ahmet Oykener (Cabinet Member for Housing and Estate Regeneration) introduced the report of the Director of Health, Housing and Adult Social Care and Director of Finance, Resources and Customer Services (No.21) proposing that the Council establishes a local authority company to develop, own and manage a portfolio of properties to be made available for rent.
1. That the new build company would afford the Council the opportunity to intervene in the market and increase the supply of new housing in the Borough. The company would need to be established at this stage to allow the Small Housing Sites project to proceed to a start on site. A further report would be presented to a future meeting of the Cabinet explaining how the Council proposed to structure the company and how the new homes could be managed.
2. That this was an innovative project. The detailed proposal was set out in section 4 of the report.
3. The project was on track, on course and on budget with construction works anticipated to start in the autumn 2014.
Alternative Options Considered: The Council could decide not to set up a special purpose vehicle (SPV) and hold the 57 units for private market rent in the General Fund. This was not considered a viable option as it would see the Council fall foul of legislation, Counsel’s advice against holding housing directly in the General Fund and open the possibility of private tenants acquiring a secure tenancy including any associated rights such as Right to Buy.
DECISION: The Cabinet agreed to
1. Use its powers to set up a limited liability company (SPV) for the purposes of developing, owning and managing property.
2. Delegate to the Company Management Board approval via a portfolio decision to finalise the Terms of Reference and Company Memorandum and Articles of Association of the local authority company proposed and other such matters necessary to (i) incorporate and register the company and (ii) facilitate the objectives identified in the report.
3. Note that the investment model proposed had been approved by Cabinet and Council in March/April 2014 respectively and that there were no additional costs to the Council from the approval to reallocate money from the Investment in Private Rented Sector Homes to the Small Housing Sites project. This borrowing had already been factored into the Council borrowing requirement.
4. Note that the Council had sought independent expert legal advice/support on forming a wholly owned SPV subsidiary and on drafting an arms-length development finance facility agreement. To include memorandum and articles of association, shareholder issues and overview tax advice, and due diligence on development and construction arrangements, full suite of development covenants and formation and administration of conditions precedent respectively.
5. Note that the Council was proposing to add the redevelopment of the Ordnance Road site to the Small Housing Sites (Phase 1) project and to bring forward a Small Housing Sites Phase 2 (project), along the same principals as Small Sites (Phase 1). Both proposals ... view the full minutes text for item 11