EXECUTIVE BOARD

4TH FEBRUARY 2019

 

CARTREFI CROESO CYFYNGEDIG.

FINANCING REQUIREMENT

The purpose of this report is to secure an appropriate consolidated finance facility to allow Cartrefi Croeso Cyfyngedig to commence the development of two schemes and meet the on-going funding of operating costs and future scheme development costs, as well as the provision of headroom to commence future schemes that are identified as being viable.

Recommendations / key decisions required:

To agree to a funding facility as follows:

1.    Maximum funding facility of £6m

2.    Duration of arrangement – 5 years. This is based on the loan being for the scheme developments and repaid within the business plan timescales.

3.    Interest at 1.6% above the rate set by the PWLB reflecting the part security that will be available to the Council from the land/works prior to sale

4.    Funding facility to be operated as an overdraft arrangement – funds only drawn when required and balance reduced as receipts received.

5.    Approval of the release of funding (up to the limit) is to be delegated to The Chief Executive and Director of Corporate Services, in consultation with the Executive Board member for Resources, with the facility to be administered as follows:

a)    Release of the construction funding only when the tenders have been returned, the scheme is confirmed and assessed as still being viable, and the contractual arrangements are in place.

b)    Development Agreement to be in place for the sale of the social housing to the Authority

c)    Operating Costs: loan arrangements for circa £280k per annum until the company is viable without that element of support

d)    Project Development costs. The original allocated ceiling of £750k will suffice, and for monitoring and control of project development costs, itemised quarterly reports to be presented to the Chief Executive and Director of Corporate Services.

e)    Future scheme construction.  Approval of funding in principle (not exceeding facility ceiling in total) upon completion of site specific development appraisals and the release of construction funding only when the tenders have been returned and the scheme is confirmed and assessed as still being viable and the contractual arrangements are in place.

f)     The conclusion of the detailed loan agreement to be delegated to the Chief Executive and Director of Corporate Services

  6. Company to submit its 3 year business plan to the shareholder by 31st March annually so that the progress and viability of the funding arrangements can be monitored.

Reasons

To agree the funding facility to enable the company to proceed with the development proposals as outlined in the report.

Relevant scrutiny committee to be consulted   No

Exec Board Decision Required                    YES

Council Decision Required                           YES

 

EXECUTIVE BOARD MEMBER PORTFOLIO HOLDER:-  Cllr David Jenkins, Executive Board Member for Resources

Directorate: Corporate Services

 

Name of Director:

Chris Moore

 

 

Designations:

 

 

Director of Corporate Services

 

 

 

Tel No. 01267 224886

E Mail Addresses:

 

CMoore@carmarthenshire.

gov.uk

 

 

 


 

EXECUTIVE SUMMARY

 

 

CARTREFI CROESO CYFYNGEDIG – FINANCING REQUIREMENT

 

Background

The Executive Board agreed on the 4th June 2018 to the financing arrangements for Cartrefi Croeso Cyfengedig to sustain its operating and scheme development costs on the following basis:

 

Financing Requirements

·          To note the Company’s high level 2018-2023 Business Plan as developed by the Council’s Housing Department/Communities Directorate, which will be refined following the detailed project feasibility studies and site investigations;

·         To agree to meet the Company’s 2017/18 establishment costs from existing revenue budgets to a maximum of £100,000;

·         To agree an Operating Cost Loan to the Company in respect of its 2018/19 operating costs to a maximum of £280,000. This to be transferred in 25% tranches, quarterly, in advance;

·         To agree a further Project Development Loan of a maximum of £750k, to be released in agreed tranches, to develop the detailed business of the company for further Council consideration, This loan will be utilised to progress:

o   Further development appraisal of eight sites, including 2 rural projects. This is to include detailed valuation, state aid , legal and taxation advice;

o   Detailed and comprehensive scheme development proposals/site investigations for three sites, including one rural, including:

o   Completing detailed financial modelling and securing associated legal and taxation advice.

o   Developing an effective procurement strategy.

o   Commissioning detailed technical appraisals and associated surveys such as site, soil, transport and ecological.

o   Undertaking liaison with utilities and statutory bodies.

o   Commissioning of detailed design brief and specification statement (which will also be utilised for following projects).

o   Receiving pre planning advice and completing pre planning consultation;

·         An initial £250,000 of the detailed Project Development Loan will be made available to the Company to progress the proof of concept. Approval of the release of further tranches of funding (up to the loan limit) is delegated to The Chief Executive and Director of Corporate Services which will be released upon satisfactory commercial appraisal of the initial three proof of concept sites;

·         It is noted that requests for further loans for major development expenditure (for example, land transfer, professional fees, construction costs) will come forward as and when necessary and will form part of the detailed business plan to be completed once the individual site appraisals have been finalised;

·         Loan finance will be available at 3.5% above the rate set by the Public Works Loan Board (PWLB) for the Operating Cost Loan and 2.2% above the PWLB rate for the Project Development Loan. The conclusion of the detailed loan agreement to be delegated to the Chief Executive and Director of Corporate Services.

 

Current position.

  • Operating costs.

Since the company commenced trading on the 3rd July 2018, it has operated within the operating loan facility of £280k (for a 12 month period), and is currently forecasting an under-spend of £13k in the nine month period to 31st March 2019.

  • Project development costs.

To date, the company has committed £150.3k on scheme development works, the majority of which relate to development consultancy, engineering assessments and planning advice relating to the two sites - land to the rear of Maesgriffith, High Street Llansteffan and land at Glanmor Terrace, Burry Port.

  • Major Development funding

Having undertaken the development appraisals, the company is now at the position that it requesting a funding arrangement to enable the major development expenditure (for example, land transfer, professional fees, construction costs) to proceed with and deliver the following two sites:

  • land to the rear of Maesgriffith, High Street Llansteffan
  • land at Glanmor Terrace, Burry Port.

 

Scheme overview:

Maesgriffith, High Street Llansteffan

  • 6 two bedroom semi-detached houses  (4 social)
  • 6 three bedroom semi-detached houses  (3 social)
  • 4 four bedroom detached houses
  • Traditional construction
  • Estimated site completion – September 2020
  • Planning amendments being negotiated on sale units
  • Quantity Surveyor/Employers Agent appointed
  • Tender documents being drawn up
  • Social Housing increased from 5 homes to 7.  (2 additional homes to purchased at MV)
  • Establishing land transfer process with Carmarthenshire County Council
  • Development appraisal demonstrates a viable scheme based upon estimates provided by consultants which take account of the land being acquired at market value which is being negotiated between the company’s agent and the Authority’s property valuers.

 

 

Glanmor, Burry Port

  • 20 two bedroom houses arranged in pairs
  • 10 one bedroom apartments over two floors in pairs
  • Ty Solar product, timber frame and clad.
  • Estimated site completion – April 2021
  • Complete site to be sold to the HRA
  • Development appraisal demonstrates a viable scheme based upon estimates provided by consultants which take account of the land being acquired at market value which is being negotiated between the company’s agent and the Authority’s property valuers.
  • £4m Innovative Housing Grant awarded to the Company
  • Finalised scheme design
  • Pre planning consultations commenced
  • Planning application to be submitted pre-Christmas
  • Legal advice received regarding contractual relationships with contractors and a development agreement with Carmarthenshire County Council

 

  • Cash-flow requirement

The cash-flow requirement for the company to develop the above schemes peaks at £3m prior to scheme completion. This sum is specific to the development of the two schemes so is in addition to the on-going funding of operating costs and future scheme development costs, as well as the need to provide headroom to commence future schemes that are identified as being viable. It is considered sensible therefore to have the one future funding arrangement with the Cartrefi Croeso Cyfyngedig as follows:

  • Maximum funding facility of £6m
  • Duration of arrangement – 5 years
  • Interest at 1.6x% above the rate set by the PWLB reflecting the part security that will be available to the Council from the land/works prior to sale
  • Funding facility will be operated as an overdraft arrangement – funds only drawn when required and balance reduced as receipts received.
  • 3 year business plan for the company to be submitted to the shareholder by 31st March annually so that the progress and viability of the funding arrangements can be monitored.

Approval of the release of funding (up to the limit) is to be delegated to The Chief Executive and Director of Corporate Services, in consultation with the Executive Board Member for Resources, with the facility to be administered as follows:

  • Maesgriffith, Llansteffan and Glanmor Burry Port scheme construction: release of construction funding once the tenders have been returned, the scheme is confirmed and assessed as still being viable, and the contractual arrangements are in place.
  • Development Agreement to be in place for the sale of the social housing to the Authority
  • Operating Costs: loan arrangements for circa £280k per annum until the company is viable without that element of support
  • Project Development costs. The original allocated ceiling of £750k will suffice, and for monitoring and control of project development costs, itemised quarterly reports will be presented to the Chief Executive and Director of Corporate Services.
  • Future scheme construction.  Approval of funding in principle (not exceeding facility ceiling in total) upon completion of site specific development appraisals and release of construction funding once the tenders have been returned and the scheme is confirmed and assessed as still being viable and the contractual arrangements are in place.
  • The conclusion of the detailed loan agreement to be delegated to the Chief Executive and Director of Corporate Services

 

Cartrefi Croeso Cyfyngedig Income and Expenditure forecast

 

2018-2019

£’0000

2019-2020

£’000

2020-2021

£’000

2021-2022

£’000

Profit/(Loss) before Tax

(200)

28

478

(294)

 

Note – the forecasts above only reflect the administration costs and the activity on the two schemes listed within the report being developed.  To maintain the momentum and financial viability of the company further scheme appraisals will be developed over coming months.

 

 

DETAILED REPORT ATTACHED ?

 

NO

 

 

 

 


 

 

 

 

 

 

IMPLICATIONS

 

I confirm that other than those implications which have been agreed with the appropriate Directors / Heads of Service and are referred to in detail below, there are no other implications associated with this report :

 

Signed:  Chris Moore  Director of Corporate Services                           

 

Policy, Crime & Disorder and Equalities

Legal

Finance

ICT

Risk Management Issues

Staffing Implications

Physical Assets 

YES

YES

YES

YES

YES

YES

YES

1.Policy, Crime & Disorder and Equalities

The housing company assists in deliver the Council’s strategic objectives regarding economic growth and delivering additional affordable housing. It also contributes to ensuring the Council’s commitment to enabling sustainable communities and prosperous & healthy future generations are met.

2. Legal 

 

The legal background to establishing the Company and the Council’s powers to do so are set out in the report to the Executive Board of the 27th November 2017.

3.Finance 

Loan facility to be provided once agreement has been completed. Maxiumum facility is £6m and interest will be charged at 1.60% above PWLB rate. Period of loan 5 years.

 

 

4. ICT

The Company utilises the Council’s IT section, with a charge being made to the Company for the supply of these services.

 

 

5. Risk Management Issues

 

The Council manages the risks faced by the Company through the appointment of suitably qualified and experienced directors. The Company manages its own risk register and is explicit in terms of how these risks are managed and mitigated.

 

 

6. Physical Assets 

The company will be in a position to purchase assets from the Council (subject to the loan funding being agreed by the Council). The process for this will follow general disposal procedures and guidance.

 

 

7. Staffing Implications

The Company utilises council staff with a charge being made to the Company for the supply of these services.

 

 

 


 

 

 

CONSULTATIONS

 

I confirm that the appropriate consultations have taken in place and the outcomes are as detailed below

Signed:      Chris Moore                                                           Director of Corporate Services                                               

 

 

1. Scrutiny Committee

N/A

2.Local Member(s) 

N/A

3.Community / Town Council

None

4.Relevant Partners 

None

 

5.Staff Side Representatives and other Organisations 

None

 

Section 100D Local Government Act, 1972 – Access to Information

List of Background Papers used in the preparation of this report:

THESE ARE DETAILED BELOW    

Title of Document

File Ref No.

Locations that the papers are available for public inspection

Reports to the Executive Board

 

27th November 2017

4th June 2018

www.carmarthensire.gov.uk