There were no apologies for absence.

There were no declarations of interest.

RESOLVED:

That the minutes of the meeting held on 12 October 2020 were agreed as a correct record.

RESOLVED:

A.        That the decision of the Merantun Development Ltd (MDL) Board that the business case is no longer viable and not to proceed with the development of sites be noted.

B.        That it be noted that LBM owned land will not be transferred to MDL.

C.        That it be noted that the business case for the development of Private Rented Sector housing at the scale set out in MDL’s business plan is no longer viable and to commence the process for closing down the company.

D.        That the Sub-Committee agrees in principle to wind up the company and to authorise the Shareholder Representative (Chris Lee, Director of Environment and Regeneration), in consultation with the Chair of the MDL Sub-Committee, the s151 officer and Monitoring officer, to agree the process to be followed with regards winding up the company and act on behalf of the Shareholder with regards any resolutions that may be required.

The Chair referred to the minutes of the previous meeting, which stated that this was the point at which the Merantun Development Ltd (MDL) business plan would be reviewed and invited officers to present the report.

The Director of Environment and Regeneration, in presenting the report, advised that it had been anticipated in the original business plan that this would be the point at which the proposals set out in the report would be brought before Members.  The report followed on from a review of the business plan and a recommendation, which he had received in his capacity as Shareholder Representative.  Whilst the housing company could still make a profit for the Council, it was not expected that this would happen for some time.  The risks had grown at a time when the Council’s financial challenges had grown, particularly related to Covid.  Therefore it was proposed to wind the company down and that the land remain in the possession of the Council for redevelopment.  It was felt that value had been added to the sites through the granting of planning permission and would potentially be attractive to a private developer, who would not be affected by some of the challenges faced by the Council.  The business plan had deteriorated through increased costs beyond what was originally anticipated and predicted income was also now less than had originally been anticipated.  The Government’s recent change in the interest rate for the Public Works Loan Board had increased the cost of borrowing to the Council, and that cost would be passed on to the company.  Legal advice had been sought on the process for winding down the company, which was straightforward and could be concluded within three months which would enable the business to be concluded in this financial year if the decision was taken in a timely manner.

Roger Kershaw, Director of MDL, summarised the financial position which had led to the recommendation to wind down the company, reiterating the points made by the Director of Environment and Regeneration.  The combination of the increased costs and the decrease in anticipated return would affect the company’s ability to repay the loan to the Council, and would not be able to fully meet its interest payments to the Council until 2049/50 and therefore it was felt that the company was no longer financially viable.

The Chair referred to the minutes of the last meeting and highlighted that the company had gone further by looking at a number of factors including the impact of the public works loan board rates on the financial position.

In response to a Member question, the Director of Environment and Regeneration advised that it was difficult to determine exactly what had caused the predicted increase in costs for materials and construction; but it could be due to a number of factors including Brexit, inflation rates, affordable housing provision costs impacting on viability and the tightening of the Government guidance on investments.  It was noted that a commercial developer would not  ...  view the full minutes text for item 4.