Havering Council want to lend a property developer £8m. Last night, we managed to get this agreement put on pause.
Mercury Land Holdings (MLH) is a property developer which is owned entirely by Havering Council. It is, however, a legally separate company. What this means is that you, as the taxpayer, don't have access to the full workings of the company, for reasons of 'commercial sensitivity'.
MLH isn't new, it was set up under a Conservatives administration and a lot of other councils have done the same. Labour councils do this to. It is legal for councils to operate this way.
The purpose of the company is to develop homes for Havering, however it is the company setup that worries me.
MLH is funded by taking out large loans from the council, which it repays with interest. As cabinet recently, HRA and Labour councillors backed a plan to lend MLH a further £8m. This money was so that it can purchase a number of car-parks from the council.
So Havering lends MLH £8m. MLH pays Havering £8m, + interest, to buy the car parks.
I called this decision in, backed by a number of other councillors, so that we could give the decision more scrutiny. We succeeded in putting the Cabinet's plans on pause and we now wait to see if we will be overruled.
The Loan Proposal.
Havering Council has identified that it needs to bring in cash, fast. It has to do so because we have a deficit. Before the election, the HRA leafleted Havering revealing that they had found a "Conservatives plan to sell assets to fund election promises". Now they are in power, they have realised that the plan was to raise money to plug a financial gap. The more we sell, the smaller the loan from Government.
The HRA want to sell 6 sites, including the Como St and Angel Way car parks, to raise around £8m.
It's worth noting at this point that I, as a Councillor, can see the council's valuation for the car parks. You, as a the taxpayer funding all of this, cannot. "Commercial sensitivity", you see the problem?
MLH was going to borrow £8m from Havering, buy the car parks, rent the car parks back to Havering for £1 a year, and let Havering keep all the revenue from the car-parks. Let's be honest, that's a bad deal for MLH.
MLH will then seek planning permission for the sites. We've already seen that they want to put a 12 storey tower-block on Como St. Once they get planning permission, the site value goes up and MLH will pay the council some money back. Once the flats are complete, and being sold, Havering will get a cut.
At last night's committee, the Chair described the situation as looking more like "An accounting exercise".
The Problem
This type of deal isn't new for MLH and Havering. In fact, just a few months ago, I called in another decision to lend MLH money. This was a decision to lend them money so that they can buy a dilapidated site on Harold Hill and turn it into 9 homes.
We approved that decision. Why? We were given pages and pages of details. There were architects drawings of homes, financial predictions, and a clear outline of the amount of profit the council would make on it's lending. We could see that, by lending MLH this money, we'd be better off at the end of things. We'd have 9 homes to help tackle the housing crisis, and profit.
What did we get for this £8 loan, and the sale of 6 car parks? About a page and a half of text telling us very little.
The document, approved by the HRA/Labour Cabinet, didn't tell us what the interest rate would be on the loan. It didn't tell us how many homes would be built. It didn't tell us what the profit, if any, would be. It so so scant on details that I was borderline offended someone thought it was enough to justify being lent £8m of taxpayer's (yours) cash.
So, I called the decision in.
What is a 'call in' and what happened?
The Chair of a committee can request to view a decision before it is agreed, or to review it after it has been agreed by Cabinet. If looking at it before being agreed, the Chairman can call it in themselves. The committee will discuss the document and then make a recommendation to the Cabinet.
If the decision was already agreed, as this £8m loan was, then a group of 6 councillors, from at last 2 political groups, can call it in. I found support for the call-in from a number of Labour Councillors, who shared my concerns, as well as fellow Conservatives.
The meeting decided to "uphold" the call-in. This means that the Cabinet must now vote on the decision again. However, this time, they will have the benefit of the committee's scrutiny and a number of suggestions from us.
Cabinet can, if they really want to, ignore the recommendations and just approve the decision again. If they do so, then it goes ahead. Or, as I think would be wise, they can hit pause on things and follow our recommendations.
Among last night recommendations where;
That MLH come back to us with a detailed business plan for each site, giving an outline on what they plan to build and how much profit will be made on the loan.
That the council explore developing the sites themselves, as opposed to lending to MLH to do it.
Depending on how quickly things move, Cabinet could make their decision on May 15th.
MLH was set up by a Conservatives administration. However, the decision to sell it the car-parks with a loan of £8m was made by this HRA/Labour administration in 2023.
I believe that, as this is your money, you deserve more transparency around MLH and their operations. I will be pushing for the company to voluntarily open it's books to all residents.
Further information on Mercury Land Holdings
According to the accounts filed with Companies House (the government body for oversight of business), MLH has a valuation (Net book value) of £54.5m.
The company made a loss of £692,000 for the year ending March 2023, we've not yet seen the accounts for the year ending March 2024. Mercury Land Holdings has just £590,000 cash in the bank.
MLH gets rental income, from it's properties, which is uses to service its running costs and to repay its debts to Havering Council. It estimates that around £4m of debt is "due within one year" (as of March 2023) and a total of £30m is due after more than one year.
Last year MLH reported that cash generated from it's operations was £754,000. This is £1m less than the year before.
Get Regular Updates
I send regular email updates, on my work and on key developments in Havering. If you'd like to get these, please sign-up to get my emails.
Your information isn't shared with anyone else, including any political party, and I do not send election campaign material.
Comments