Issue - meetings

Councillor I.T.E. Harvey

To consider a report on a review of Knowle Green Estates Ltd.

Reason for exemption - Confidential Appendix, Business Plan

It may be necessary to exclude the press and public during consideration of this item due to the fact that the Appendix to the reportcontains exempt information within the meaning of Part 1 of Schedule 12A to the Local Government Act 1972, as amended by the Local Government (Access to Information) Act 1985 and by the Local Government (Access to information) (Variation) Order 2006:

Paragraph 3 – Information relating to the financial or business affairs of any particular person (including the authority holding that information) and in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information on the basis that the confidential business case contains commercially sensitive information which the Company requires to be protected in order to procure development schemes and rent properties in a competitive commercial environment.

Cabinet considered a report and an exempt Business Plan reviewing the structure of Knowle Green Estates Ltd following a 3 year operational period.  The report proposed a new corporate structure for the business in keeping with the Council’s ambitious development plan. 

Alternative options considered and rejected by Cabinet

None

The Cabinet considered the recommendations from the Overview and Scrutiny Committee following its consideration of the Business Plan at its meeting held on 21 January 2020.

The Chairman, Councillor V.J. Leighton spoke to the recommendations which were:

1.    That the Business Plan for the Knowle Green Estates Group is presented alongside a mission statement or that a mission statement is subsequently developed identifying the purpose and aims of the Group.

2.    That the process of asset valuation and transfer detailed in the Business Plan for the Knowle Green Estates Group be subject to further clarification.

The Leader responded to the recommendations, on behalf of the Cabinet, as follows:

“Mission Statement

As regards a mission statement for Knowle Green Estates Group Ltd – I can see how this will provide some assurances for members.  I think the business plan makes it clear the direction of travel for the business, but I have no reservations to ask the Directors to consider their proposal for a mission statement and submit it to the Council.  I think this will complement the Business Plan. 

Asset valuation and transfers

I know that this is a live issue for the Directors because it fundamentally affects the financial appraisals for all the development sites. 

I am also aware that the Council has taken some initial advice in this area.  This has clarified that we do not need to transfer at full value where there is affordable housing and the Council is the sole proprietor of the Company.  It is worth the Council and the Company developing a protocol on this for the future schemes and taking further advice on a revised protocol.  As Shareholder Representative, I will discuss this with the Directors to see how such a protocol could be developed and how the approach can be clarified in the business plan. 

Thank you for your recommendations which I propose to accept.” 

Resolved that the Directors of Knowle Green Estates Ltd be requested to furnish further information to Cabinet along the lines outlined by the Leader in his response to the Overview and Scrutiny Committee recommendations.

The Cabinet then considered the recommendations in the report, and exempt appendix, before them and

Resolved to:

1.            Authorise the Head of Corporate Governance to establish a group holding company – Knowle Green Estates Group Ltd;

2.            Authorise the Head of Corporate Governance to establish a Lettings Agency and to subscribe to one share in this company in the name of the Council and thereafter to transfer the share to Knowle Green Estates Group Ltd;

3.            Authorise the Head of Corporate Governance, subject to their confirmation of willingness to be so appointed, to appoint the Directors of Knowle Green Estates Ltd as the  ...  view the full minutes text for item 2681

To consider the Governance arrangements for Knowle Green Estates Ltd.

Resolved to move the exclusion of the Press and Public for the following item in view of the likely disclosure of exempt information within the meaning of Part 1 of Schedule 12A to the Local Government Act 1972, as amended by the Local Government (Access to Information) Act 1985 and by the Local Government (Access to information)

(Variation) Order 2006.

Terry Collier, Deputy Chief Executive, conveyed the apologies of Councillor A.J. Harman, as Chairman of the Board of Knowle Green Estates, who was unable to attend the meeting.  

Howard Williams, Non-Executive Director of Knowle Green Estates Ltd (KGE), outlined the history of the company and why it was first established in 2016.  Since the company’s formation the Council’s direction in relation to provision of housing had substantially changed and it was now envisaged that the role of KGE would be to manage most of the Council’s residential assets, managing within the next few years tenancies of 500-600 properties.

The residential portfolio would include a range of types of rental properties.  It was proposed that the Council would acquire and develop suitable sites before handing these over to KGE for management.  The financial arrangements for the transfer of properties were broadly outlined.

The Committee were advised that the report to be presented to Cabinet also requested that a new company, Knowle Green Estates Group, is set up with facilities for limited liability partnerships (LLP) for risk and tax management purposes.

Members were also informed that the accounts had been independently audited and were now being reviewed by the Council’s external auditors as part of the Council’s consolidated accounts.

The Committee scrutinised the report in detail and raised a number of questions.  In response to these they were advised:

• The structure of the group was still under consideration by Cabinet in the role of shareholder representative.  No Special Purpose Vehicles (SPV) or LLPs have been set up. 
• The board structure had been broadened to include two non-executive directors which would bring a wider range of experience to the company and provide safeguards for continuity purposes. It had recently been decided that the company secretary need not be an individual but appropriate members of the legal department.
• The company would take its direction from the Council as the sole shareholder.  
• The company will not be able to purchase or dispose of assets without the permission of the Council. Furthermore they cannot source third party funding without the permission of the Council. There had been clear instructions from the shareholder that the intention was to retain the properties for ever and not sell them.  If at any stage sales were considered necessary, the company would need Cabinet’s (as the shareholder representative) agreement to do so.  It was also confirmed that the company was not authorised to raise mortgages on the properties.
• The Council will complete the residential developments and incur costs from the PWLB or equivalent funding source.  At the point of completion the property will be transferred to KGE; they will buy assets  ...  view the full minutes text for item 15