Cash flow from £24.4m loan to refurbish 92 ex MOD homes ‘behind forecast’
- Credit: Richard Fraser Photography
A £24.4m loan it agreed to a council’s trading arm was described as “one of the bigger risks currently” to the Cambridgeshire and Peterborough Combined Authority (CAPCA).
CAPCA’S housing and communities committee chair Cllr Lewis Herbert expressed his concern after a report from Roger Thompson, CAPCA’s director of housing and development
Mr Thompson told the committee that repayment of the loan by March 2023 “is at risk”.
He said the loan was made to the trading company of East Cambridgeshire District Council to refurbish 92 former MOD homes in Ely.
Of these 15 would be affordable and made available to local people through a community land trust.
As of February 28, the balance of the loan to East Cambs Trading Company (ECTC) was £21,522,510.
In August 2020, CAPCA agreed an extension to this loan and at that time the forecast balance for February 2022 was £12,141,813.
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“It should be noted that approximately £5.78m is due from units that are under offer, and £2.5m is expected in May 2022 from the transfer of 15 affordable units to a community land trust,” he said.
But he said the most recent monitoring report “advises that the cash flow is £2m behind forecast, there is a high probability that the cash flow will not be achieved, and that the loan repayment by March 2023 is at risk”.
Mr Thompson said CAPCA had been told that £410,000 had been removed from the construction project to reflect homes that are “now to be ‘sold as seen’ to accelerate cashflow”.
He said additional options available to ECTC to avoid default include re-financing, portfolio transfer, accelerating the volume of sale with a block investment sale or utilising company reserves to clear the balance of the loan when it determines.
Mr Thompson said that ECTC had until March 31, 2023 to repay to repay the loan and no direct intervention can be taken by the Combined Authority unless default occurs on that date.
Cllr Lucy Nethsingha said there “lots of elements of concerns over these loans and have been for some time”.
Mr Thompson said cash flow was being followed closely and in recent weeks sales were picking up of the former MoD homes and CAPCA was seeing “steady progress”.
“They do have significant number of sales under offer and are trying to push remaining market units not under offer,” he said.
Cllr David Ambrose-Smith said 55 of the homes had been sold and it was just legal conveyancing issues taking time.
“At the moment I don’t see a problem meeting the March, 2023 deadline,” he said.
But Cllr Herbert said the scheme was not on track and he would not be happy if other monies had to be found from CAPCA to meet other affordable housing commitments.
The committee heard that £14m loaned to Laragh Homes for three schemes was broadly on target for the cash to be repaid.
Laragh has secured a three-month extension on its Alexander House, Ely, scheme but another, at Linton Road, Great Abington was repaid in January.
And another at Histon Mews, Cambridge, is on target to be repaid on time in May.
Paul Remington, chair of East Cambs Trading Company Ltd, said Palace Green Homes, its housebuilding operation, was responsible for the refurbishment of the 92 homes at the former RAF estate at Kilkenny Avenue, Ely.
He said: “Sixty nine of the homes have now been refurbished “and families are once again living on the estate.
“The company is on track to complete the refurbishment project during 2022.”
He said that 55 houses have already been sold, or are under offer including 15 homes that have been sold to East Cambs Community Land Trust.
He added: “Like the rest of the country, it is taking much longer to complete the normal processes of house conveyancing in East Cambridgeshire than it did prior to the pandemic.
“However, the company remains confident that the remaining properties at Ely will be completed and the loans repaid in full before the final loan repayment date of March 31, 2023.”