People’s Audit 11 – COUNCIL ASSETS “SOLD OFF WELL BELOW MARKET RATE”
We found a number of examples where Lambeth’s assets were sold off below market rate to a private property developer. In one case the asset is then registered with an off-shore company.
We first became interested in this when we discovered that as part of the Your New Town Hall project the council sold its empty offices at Wynne Road, Brixton SW9 to a developer, Pocket Living, for £1.33M.
This piqued our interest, as a rudimentary calculation showed this to be below what we considered to be the market value.
Pocket Living receives a substantial amount of public subsidy. Pocket’s website states “The GLA awarded Pocket a £21.7m loan in 2013, which we have agreed to recycle over a period of ten years, delivering 4,000 new homes across London.”
In October 2015 the GLA awarded Pocket Living a further £4.7M.30 The initial loan (which is interest free) equates to over £56,000 per property. Lambeth state that the Wynne Road site is “redeveloped as 100% affordable housing”. The term affordable must be one of the most abused words in recent years with regard to housing. Pocket state “You could be a Pocket home owner if you earn less than £90K”. A single person earning £90k a year is in the top 1% of income earners in the country.
In 2015/2016 Lambeth sold off three pieces of land on council estates to Pocket Living at a significant discount and without any competitive tender. The cabinet papers approving this sale merely state “The site will be purchased by Pocket Living LLP at values which the Council has considered with advice provided by the council’s external valuers.”
As a rough rule of thumb property developers usually work on the basis that the cost of the land is in the order of one third of the total sale price.
On that basis the land price paid to Lambeth should have been several million more and the real sales prices represent a huge subsidy for Pocket Living.
During our research we also discovered that in September 2016 one of the sites in Mountearl Gardens was the subject of a “Unilateral notice” in respect of an agreement for sale dated 26 August 2016 made between Pocket Living (2013) LLP and Adriatic Land 5 Limited.”
There is limited information available on Adriatic Land 5 Limited other than to say that its address is given as an office in Guernsey, which it shares with at least twenty other companies, including PWC and Capita.
We also discovered that Pocket Living is 50 per cent owned by an American company called Related, whose chairman and founder is Stephen Ross. His personal wealth is stated by Forbes as being an astounding $7.4Bn.
It is beyond the scope of this report to investigate the byzantine financial structures of Pocket Living, other than to say that the latest accounts for Pocket Living (2013) LLP (who bought the Mountearl Gardens land from Lambeth and who have received GLA grant funding since 2013) showed a loss of £1.4M.The previous year’s accounts showed a loss of £1.75M.
It is striking that a company engaged in such a profitable business, and that has received substantial subsidy, can be recording a loss. (Source: Lambeth Peoples’ Audit report).