The London Borough of Barking and Dagenham (LBBD) has reported “significant underperformance” in its residential investment and acquisition strategy (IAS) for the last financial year.
A report, which is to be presented to the council’s cabinet on 18 June, stated that in 2023/24 the combined Treasury and IAS return was a surplus of £2.3m.
This is “significantly below” the £7m surplus returned in 2021/22 and the £29m returned in 2022/23, which included a £22m dividend from the sale of the former Muller factory site, the report explained.
The report said that the “underperformance” of the strategy is mainly due to residential investments, with this part of the IAS Scheme experiencing delays and increased costs during the last financial year.
According to the document, “significant delays” between the private rental and shared ownership schemes being completed and leased incurred large interest, security and heating costs whilst empty.
Overall, this negatively impacted the return of these schemes by £2.5m in 2023/24, the report said.
Another “key reason for the significant losses”, the report explained, is the amount of borrowing against the private rental and shared ownership schemes of £174.6m.
“2023/24 saw pressures on the IAS from delays in letting private rental schemes and the sale of shared ownership schemes.
“As each scheme has a significant amount of borrowing, the delays have had a significant impact as there is insufficient rent to cover the borrowing costs. In addition, security and energy costs need to be funded by the IAS when schemes are void,” the report said.
During the previous financial year, the council’s borrowing increased by £130.5m to £1.3bn, which was mainly driven by a £343.9m increase in short-term borrowing, the report added.
Despite losses from the residential schemes, Barking and Dagenham was able to provide a surplus on the Treasury and IAS return due to the final distribution sale of the former Muller factory site of £4.8m.
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