Lampton 360

Overview and Scrutiny Presentation

21 March 2018

Purpose of this presentationThe purpose of this presentation is to update the Overview and Scrutiny Committee with

A quick overview of Lampton 360 group and its financial aims

Details of the progress made by Development 360 and Investment 360 to date.

A brief update on Recycle 360 Ltd.

What is Lampton 360?

• Lampton 360 Ltd was established by the London Borough of Hounslow (LBH) in 2012 with the objective of trading local authority functions to make financial surpluses and return them to the council.

• It is a company wholly owned by the council, with an aim of returning value to the council.

• Current strategy is based on the governance and business plans approved in Spring/Summer 2016 updated in autumn 2017 for housing/property

Lampton 360 group structure

London Borough of Hounslow

Lampton 360 Ltd

Lampton Development

360 LLP

Lampton Investment 360

Ltd

Lampton Recycle 360 Ltd

Lampton GreenSpace 360

Ltd

Lampton 360 Ltd - financing

• MTFS Approach• Surpluses will come from the provision of services to external

organisations or individuals• supported by a loan from London Borough of Hounslow• group business plan will need to determine a strategy for repayment of

the loan

• What was £1.25m loan used for?• £250k utilised to pursue initial objective of trading existing services• £1m used to establish businesses which are currently operating

• Lampton 360 group currently recovers all operating costs from the Council through charges for the services it provides to the Council

• With the exception of Lampton Investment 360 which generates rent from tenants

Lampton 360’s core housing objectives

• Increase the supply of housing in the borough by:

• Developing Council-owned sites for housing and achieving the following mix:

• 40% homes for private sale; 40% affordable homes (24% social rent; 16% intermediate); 20% private rent

• Private rent to be subsidised to 90% of market rents or lower where possible

• Buying homes in these developments and elsewhere for use by the Council as temporary accommodation and as affordable lets

Lampton Investment 360

• New acquisition of existing flats and houses,

• Original Target 175 Units to be purchased off street by 2020,

• Currently own 7

• Why so few?

Investment 360 – Acquisition to date

• Property particulars considered: 113

• Property Inspections: 36

• Initial DD/ Assessments: 27

• Offers made: 19

• Purchases: 7

Lampton Investment 360

• The Residential Portfolios,

• Existing Street Properties,

• Other Block sales in future,

• All subject to due process and Shareholder approval.

FinancesLampton Investment 360 Ltd -AcquisitionInitial loan facility of £54m for purchasing 175 units from the market

Purchases restricted by a requirement to cover

Gross Yields of 4%

Full repayment in 45 years

Relies on rent inflation to enable capital repayment

in future years

Annual rental income £102k

Debt £'000

11 Montague Road 576

115 Hatchett Road, Feltham 272

15 Blackburn Way 281

15 McCarthy Road 299

162 Cotman House 302

68 Edgar Road 297

75 Wincanton Crescent 298

Abortive costs 26

Total 2,352

LBH TA budget pressure

Unit type Annual subsidy per unit £ Currently in use

Private lease agreements 1,380 63

Private Sector Lease * 2,080 225

*Pressure funded until April 2019

Current Temporary Accommodation options

Lampton 360’s core housing objectives

• Increase the supply of housing in the borough by:

• Developing Council-owned sites for housing and achieving the following mix:

• 40% homes for private sale; 40% affordable homes (24% social rent; 16% intermediate); 20% private rent

• Private rent to be subsidised to 90% of market rents or lower where possible

• Buying homes in these developments and elsewhere for use by the Council as temporary accommodation and as affordable lets

Lampton 360 Development

• JVA with Be Living

• 15 sites identified within Borough

• Target to build 844 new homes

• Management of affordable accommodation via Registered Providers

JV agreement – headlines

• Allows for sites to be taken out of the Agreement, or added to it

• All costs and income shared 50/50

• No transfer of land to the JV – only to Lampton 360

• Council has first rights to purchase either homes for private sale and/or affordable homes

• Options for Nantly House and Acton Lodge are being exercised

Lampton 360 Development Nantly House (75 Units)

Tenure Owner Units

Social rent Octavia 19

Shared ownership Shared 12

PRS Lampton 360 15

LBH 29

Lampton 360 Development

• Initial financial Appraisal, (Apr 2017)

• Option Agreement, (2nd Aug 2017)

• Planning Application, (Nov 2016)

• Planning Permission, (21st July 2017 & revision 15th Jan 2018)

• Revision to financial appraisal, (Jan 2018)

• Site price fixed, (Jan 2018)

• Transfer of land into L360, (Feb 2018)

• Start on site, (Feb 2018)

FinancesLampton Development 360 LLP

• Initial loan facility of £52m for developing units on LBH sites over 6 years

• Development sites required to achieve

• Gross margin of 20% (average across tenure types)

• Capital repayment of debt upon sales completing

• To date no borrowing undertaken but with Nantly onsite requiring the loan to be utilised imminently.

Expected cashflows on a typical development

Year1 Year2 Total

£'000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Income - 1,096 976 4,280 1,419 2,215 1,419 12,308 23,713

Expenditure 288 2,526 2,158 2,482 3,449 3,636 3,521 870 18,930

Financing cost 1 10 34 26 29 51 83 94 328

Gross Development Return 4,455

Lampton 360 Property

• Optimising use of Council land.

• Constructing homes for Council nominees and the open market.

• Regenerating & investing in communities.

• Generating financial surpluses through construction & development.

• Providing income stream for Council through PRS rentals.

Recycle 360 Road Map

1: 31 October 2016 – LBH service starts

2: June 2017 – Phased introduction of new recycling service

3: July 2017 – Fortnightly collection of residual waste

4: Nov 2017 – Move into Southall Lane

5: Feb 2018 – Submission to pilot a food waste service in LB Hammersmith and Fulham

6: May 2018 – Business case to enter commercial waste market

developed

Recycle 360 Recycling Performance

• Q1 2017 = 26.5% recycled from kerbside collections

• Q2 2017 = 33.2% recycled from kerbside collections

• Q3 data currently being compiled by LBH

N.B. The above figures do not include other materials recycled via Space Waye which would normally be added to provide an overall recycling rate to be reported via WasteDataFlow to government

Business Development Opportunities

LB Hammersmith and Fulham – application submitted for the provision of a food waste trial for c2000 homes each week

Business case to enter the commercial waste market

Benefits – minimal start up costs/existing customer base/ability to offer single stream recycling collections eg glass, cardboard, food/run recyclables through MHF and revenues go back into LBH for material sales