Council set to purchase residential block to house staff and raise income
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A London council is set to approve a loan of £110.5m to one of its wholly-owned companies to help purchase a residential block to provide investment income and house its staff at below-market rents.
London Borough of Brent’s cabinet will next week consider a proposal to borrow money from the Public Works Loan Board and lend it to either its investment company i4B or its housing company First Wave Housing.
The money could be used to buy a block of 153 homes being built by developer Quintain in a new development in Wembley Park, as well as buying a number of existing street properties.
A report by Minesh Patel, the authority’s director of finance, which is set to go before councillors, says: “Officers are exploring whether this could support the council to recruit and retain officers in specific roles, for example children’s social workers.
“This would contribute to a long-term strategy to attracting and retaining key workers in Brent.
“In addition, purchasing the block is a potential investment opportunity for i4B/ First Wave Housing, since the block would be acquired at a discount from the open market value.”
Under a section 106 planning agreement between the council and Quintain, Brent has the option to buy the block for between 70% and 75% of the market rate, to let at intermediate rents.
If the council decides not exercise its option to purchase the block, it will still acquire, for free a 25% to 30% share in the block.
However, Patel said that the council could not realise this asset until individual owners of the flats chose to purchase the remaining equity.
He said: “The asset is therefore very illiquid.
“After a few years this would provide a stream of capital receipts to the council, the value and timing of which would depend on the assumptions made about how quickly owners would choose to staircase out and the change in property values.”
The cabinet will also consider a proposal for an investment in 300 existing homes purchased by i4B.
The deal would see the council purchase shares in the company up to a maximum of £21.8m.
London Borough of Brent’s cabinet will next week consider a proposal to borrow money from the Public Works Loan Board and lend it to either its investment company i4B or its housing company First Wave Housing.
The money could be used to buy a block of 153 homes being built by developer Quintain in a new development in Wembley Park.
A report by Minesh Patel, the authority’s director of finance, which is set to go before councillors, says: “Officers are exploring whether this could support the council to recruit and retain officers in specific roles, for example children’s social workers.
“This would contribute to a long term strategy to attracting and retaining key workers in Brent.
“In addition, purchasing the block is a potential investment opportunity for i4B/ First Wave Housing, since the block would be acquired at a discount from the open market value.”
Under a section 106 planning agreement between the council and Quintain, Brent has the option to buy the block for between 70% and 75% of the market rate, to let at intermediate rents.
If the council decides not exercise its option to purchase the block, it will still acquire, for free a 25% to 30% share in the block.
However, Patel said that the council could not realise this asset until individual owners of the flats chose to purchase the remaining equity.
He said: “The asset is therefore very illiquid.
“After a few years this would provide a stream of capital receipts to the council, the value and timing of which would depend on the assumptions made about how quickly owners would choose to staircase out and the change in property values.”
The cabinet will also consider a proposal to approve an investment in 300 existing homes purchased by i4B.
The deal would see the council purchase shares in the company up to a maximum of £21.8m.
CORRECTION: This article was amended on 14 October to make it clear that not all of the £110.5m will be spent on the Quintain block.
