Agenda item

The board considered a report of West Midlands Development Capital (WMDC) that sought approval for loan funding for the sum stated in the report from the Revolving Investment Fund (RIF) to the ‘Company,’ to fund the refurbishment of 32 existing flats and create an additional 13 flats, whilst improving the overall green credentials of the building.

It was noted that the property, a former office building located in Harborne West, was constructed in early 1970s was converted to a mix of residential and commercial accommodation around 2000-2003 that is now in need of refurbishment. The proposed development would create new residential accommodation on the first and second floors, leaving one floor of accommodation at street level for commercial space. The development would provide a total of 45 apartments including 13 new. The apartments are currently let to a range of tenants which include paramedics, ambulance workers and NHS key workers who currently pay a discount on market rent.

In relation to an enquiry from the Chair as to whether the discounted market rent would be retained for key NHS workers, Ed Bradburn (WMDC) reported that this could not be enforced. However, the developer has indicated the refurbishments apartments would continue to be let at a discounted rent for NHS workers and these apartments would be retained as commercial investment. He advised that the developer would be breach of the loan funding, if this condition was not met.

The Chair noted the reputational risk to the organisation if the accommodation for key NHS workers was not retained on the same basis on which it is currently offered and reported of the need for continued dialogue to ensure this happens.

In relation to the loan, Ed Bradburn reported that the loan to value ratio on completion was 66% and a loan to cost covenant has been agreed at 80% of the loan. He also advised that the developer has applied for a grant to remove  cladding from the building and if the grant application was successful, the loan would reduce accordingly.

Gary Taylor expressed concern regarding the values for the property which he felt were low, with little margin for the developer and enquired as to whether there were any comparable for review.

Ed Bradburn advised that the figures for some existing schemes and schemes from agents have been provided but the range was quite broad and there were not many comparable properties in Harborne. He added that 100% of net sales   proceeds could be absorbed from the first unit and the loan could reduce.

The Director of Commercial and Investment, Ian Martin, concurred with Ed Bradburn regarding the lack of comparable development properties in Harborne  and reported that the WMCA/ WMDC would be reliant on a good ‘Red Book’ valuation for the development.

Resolved:

That a RIF loan for the sum specified in the report be approved to the ‘Company’ to refurbish 32 existing flats and create an additional 13 new apartments, whilst improving the overall green credentials of the building at the ‘Development’.