Optimistic pledge by new boss as £150,000 a year chief executive leaves housing company owned by Cambridgeshire County Council
- Credit: This Land
Two years after his £150,000 a year boss at This Land Ltd described his appointment as a “real coup”, David Lewis has replaced him.
Mr Lewis becomes – temporarily – chief executive of the Cambridgeshire County Council owned housing company.
Neither have been slow in revealing their changed status on the networking site LinkedIn, David Gelling introducing himself with a self-effacing ‘Ex-CEO’ on his profile.
Mr Gelling offers an insight into his achievements, noting that in the case of This Land he “formed the company in April 2017.
“Sourced land and funding for three large master development sites, seven development sites, fifteen land trades and three strategic land promotion deals throughout Cambridgeshire and Essex”.
And as a further reminder of what This Land has lost, he recalls that “I devised and oversaw the creation of every aspect of the business from a blank sheet”.
Mr Lewis, meanwhile, strategic land director, steps up to the challenge of turning the tide at This Land Ltd, whose accounts show accumulating losses including £11.8m for the year end to December 2019, and £3.9m for the previous year.
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This Land Ltd – previously known as the Cambridgeshire Housing and Investment Company Ltd – was set up to provide an additional income stream for the council.
In essence the plan was simple and that was for This Land Ltd to acquire council owned sites, develop them, and then to reap the financial benefit.
But the methodology of how those sites would be transferred, the capitalisation of This Land Ltd and the changing nature of housing has meant not everything has been plain sailing.
Mr Lewis offered county councillors an optimistic ‘sound bite’ briefing in his February report.
“Dave Gelling recently left the business, and I would like to pay tribute,” wrote Mr Lewis. “Over a three-year period, he took the company from nothing to where it is today.
“Start-ups, by their very nature, are notoriously difficult and DG demonstrated his acumen and skill to the best of his ability. The company is in a very strong position to take forward the next phase of growth.”
With clouds darkening on the construction environment and question marks over delays to some of their key projects – the Soham Gateway among them – it will be for the class of 2021/2022 to assess if this is so. The council has elections in May and any presumptions or inferences about continued support for This Land will be in the inbox of the new intake at Shire Hall.
Mr Lewis believes that This Land enters 2021 “in a strong position. Our ten-year cash flow, which was approved in April of 2020, demonstrates we will pay off the shareholder loans by the end of 2028.
“The model's assumptions, particularly related to land disposals, are conservative and we expect to exceed our estimates. Despite the very challenging macro-economic environment, the house building industry as a whole has done relatively well – as has This Land™.”
As CEO he offered three “top priorities” for 2021 which includes a “change to our internal process to improve performance”. His other two involve development sites, of which we will come to shortly.
There are some, however, wondering if Cambridgeshire County Council might have bitten off more than it can chew with the sums involved.
Mr Gelling, in his statement in last year’s accounts, describes the formation of a 2020 business plan as “a substantial financial planning exercise to place the company on firm commercial footing”.
His plan, approved by the council, commits “our shareholder” (the council is the sole shareholder) to “providing up to £85 million in additional loan funding, of which £17.1 million has been drawn down to date during 2020”.
The optimism is shared with the executive chairman of This Land, Steve Norris, property entrepreneur, former Government minister and one-time Tory candidate for Mayor of London. He joined in October 2018 and in his most recent report re-iterates the company offers an “ambitious project planned over a minimum of a decade”.
Re stating the objectives of This Land as providing “decent housing for local people that is affordable in every sense” he says that the twin ambition must be to pay interest on the capital loaned to it by the council.
Mr Norris is also realistic about the pandemic which he believes may have “far reaching consequences for the housing market in Cambridgeshire”.
Signalling a change of emphasis if not direction for This Land he says the company recognises that early cash receipts are vital to its success.
“As a consequence, the board has determined that in some cases sites will be sold with the benefit of planning consent. In other cases, while This Land will develop part of the planned housing, it will forward sell parcels of sites to third party developers.”
This, he believes, will “produce earlier cash than would otherwise be the case”.
Mr Lewis no doubt had that business plan to hand when he revealed his priorities for 2021 that include the need to
1: Accelerate land receipts at Burwell and Worts Causeway
·2: Accelerate delivery at This Land’s house building sites (“we will break ground on seven sites in 2021”)
He also believes This Land can get through the year comfortably as “we have a strong cash position with approximately eight months of cash in our account”.
He says his firm will also be starting work soon on sites at Over, Ditton Walk phase 2, Brampton, Worts Causeway, Malta Road and Burwell.
He told councillors: “In accordance with our business plan, we have a busy schedule of disposals to third parties.
“These sites were selected as they do not make a sufficient return, but also the revenue generated allows us to acquire more profitable opportunities.
“Our priority will be on land owned by the shareholder.”
The disposal sites are Shepreth, Cottenham, Trap Road, Wicken, Hartford, Horningsea, Hereward Hall, Norwood Road, Queen Street, Landbeach and Milton Road.
Additionally, Mr Lewis said the business's strategic land side continues to do well, and terms have been agreed on five sites.
“The financial returns are in excess of the original business plan,” he said.
He reminded councillors, too, that This Land had recently secured planning consents at Hereward Hall, March; Landbeach and Hertford.
Arm's length oversight of This Land Ltd – its sole shareholder and financial beneficiary – is the commercial and investment committee of Cambridgeshire County Council.
The chairman is Cllr Goldsack who authorised the release of This Land’s February statement.
Cllr Goldsack also replied in December to Andrew Rowson, a long-time scrutineer of the county council and who regularly drills into its financial affairs. He is, it is fair to say, well known within Shire Hall, particularly as objections from both him and former independent councillor Mike Mason, have delayed authorisation of the council’s annual accounts.
In his letter to Mr Rowson, Cllr Goldsack offers a reminder that This Land “is a commercial venture that does indeed expose the council to commercial risks.
“Repeating a second point from my October letter, the committee continues to have in place a number of mechanisms for monitoring, validating and challenging the assumptions and deliverables within the business plan that was endorsed in 2020 in order to have assurance that This Land is currently delivering to that plan.
“Taking these first points in combination, I am anxious that This Land’s risk exposure is not increased through misinformation and that we afford the highly experienced directors at the company the opportunity to continue delivering against the plan and the commercial returns it brings”.
It is probable his response was influenced and shaped by Chris Malyon, the council’s deputy chief executive and chief financial officer of the county council.
Mr Malyon, who retires in April after a 40-year local government career, was one of the architects of This Land Ltd and who ever replaces him will need a speedy briefing on its history and the implications for council finances.
Last summer Mr Malyon was obliged to step down from the role of non-executive director of This Land Ltd after “candid” legal advice about “the potential conflicts that arise as a result” of his holding those positions simultaneously.
Whoever takes the helm – at This Land Ltd or at Shire Hall – Mr Rowson is likely to remain snapping away at their heels.
“The original long-term business plan of This Land Ltd has demonstrably failed,” he says.
“Judging by the chairman’s words, the company does seem to have overlooked its requirement to pay the loan interest to the council.
“It is also clear that the proposed solution (selling some of the company’s land to developers to generate essential cash revenue) defeats the council’s stated purpose of setting up its own property development company”.
Mr Rowson is referring to the original business plan put to councillors in May 2016 that set out an opinion from Mr Malyon that the council had an “an opportunity to develop its own land rather than sell it.
“Simply selling sites for others to develop, and profit from, is no longer an option for Cambridgeshire County Council,” said Mr Malyon.
Which is exactly where This Land finds itself, a moment in time not unnoticed by Mr Rowson.
“The poor planning and/or other miscalculations that led to This Land selling some of its sites to developers in what looks like a fire sale will rob the council of the potential profits it planned to make by commercialising its own property resources,” he says.
“The current economic conditions are considerably less buoyant than in 2016 and look set to stay that way for the foreseeable future.
“It is now a buyer’s market for developers who will be able to exploit the council’s straightened circumstances to force prices down.”
Transparency and confidence in this Land Ltd.'s management decisions and the same transparency and confidence in those from the council that oversee it, will feature prominently no doubt in the corridors of powers in months to come.
But probably not until after the May elections.