Decision details

The Cabinet will be asked to approve proposals to borrow from the European Investment Bank fixed rate finance to fund an urban regeneration programme.

(Prior to consideration of the matter, Councillor Worby left the meeting in view of her pecuniary interest as an employee of East Thames Group and took no part on the discussions.)

Further to Minutes 123 (viii) and 128 (30 June 2014), the Cabinet Member for Regeneration presented a report on proposals for the financing of the Gascoigne Estate (East) Phase 1 and Abbey Road Phase 2 projects via a Special Purpose Vehicle(s) which would develop, own and be responsible for procuring the management of the new units.

The Cabinet Member referred to the delivery and funding options and the financial modelling which supported those options and advised that the European Investment Bank (EIB) option offered the most economically advantageous solution, acknowledging that alternative funding via the Public Works Loan Board (PWLB) was necessary for the development of private sale properties.  In response to a question regarding the financial modelling, the Chief Finance Officer clarified issues relating to the net present value calculations and confirmed that a range of prudent assumptions had been made which underpinned the detailed modelling.  To that end, the preferred model would realise long-term benefits for the General Fund.

The Cabinet Member for Regeneration commented that one of the other key advantages of funding the projects via the General Fund, rather than the Housing Revenue Account (HRA), was that it would free up funding for Decent Homes and other projects to be funded via the HRA to maintain the current Council housing stock.  A further point clarified during the discussions related to the Council’s current powers to restrict on-letting at a rental profit by Buy-to-Let investors and the Cabinet Member confirmed that appropriate notice would need to be given to prospective purchasers to make them aware of the fact.

Cabinet resolved:

(i)  To agree to borrow £66m from the European Investment Bank within the General Fund to finance the development and ownership of the Shared Ownership and Affordable Rent tenures in the Gascoigne Estate (East) Phase 1 re-development project;

(ii)  To agree to borrow £4.5m from the PWLB to fund 50% of 51 private for sale units to be developed and sold jointly by the Council and East Thames Group via a limited company;

(iii)  To agree that £23m be borrowed from the EIB within the General Fund to finance the development and ownership of the Affordable Rent tenures in the Abbey Road Phase 2 development project;

(iv)  To agree the reallocation of £2m from the Budget Support Reserve to create an EIB Development Period Reserve to meet the costs of interest payment during the development period to enable taking the borrowing at the earliest opportunity and at the lowest rate;

(v)  To agree to develop and own Abbey Road Phase 2 within the Special Purpose Vehicle to be established for the redevelopment of Gascoigne Phase 1, pursuant to Minute 123 (viii) of the Cabinet on 30 June 2014;

(vi)  To delegate authority to the Chief Executive, in consultation with the Head of Legal and Democratic Services, the Chief Financial Officer and the Cabinet Members for Finance and Regeneration, to negotiate terms and agree the contract documents to fully implement and effect the projects; and

(vii)  To authorise the Head of Legal and Democratic Services, or an authorised delegate on her behalf, to execute all of the legal agreements, contracts and other documents on behalf of the Council.