Transcription

RBWM PROPERTY COMPANY LIMITEDINITIAL BUSINESS PLANNOVEMBER 2016

Contents1.EXECUTIVE SUMMARY TIVES AND TARGETS .36.COMPANY STRUCTURE AND GOVERNANCE ARRANGEMENTS .37.OPERATIONS .58.DEVELOPMENT STRATEGY.69.FINANCING THE PROPERTY COMPANY .810. FINANCIAL MODEL .811. DEVELOPMENT / REFURBISHMENT COSTS.1012. TAX AND FINANCIAL SUPPORT .1013. DIVIDENDS.1114. CASH RETENTION .1115. ASSET VALUATIONS .1116. FUNDING .1217. DEVELOPERS .1218. PROFIT AND LOSS, BALANCE SHEET AND CASHFLOW PROJECTION .1219. KEY FINANCIAL PERFORMANCE MEASURES .1320. SWOT ANALYSIS.1321. CONCLUSION.14Annex A .16Annex B .17Annex C .35Annex D .36Annex E .37Annex F.42Annex G .43Annex H .44Annex I .45

1.EXECUTIVE SUMMARY1.1This document sets out the Business Plan for RBWM Property Company Ltdfor the immediate foreseeable future with an emphasis on the next fiveyears. It provides the company’s vision and broad strategic objectives, aswell as the financial forecasts that sit behind the Business Plan.1.2Broadly, the Business Plan sets out: The context and background to the Company.The longer term growth strategy of the business.The plan for pipeline schemes and scaling of the Company.The profit and loss, balance sheet and cashflow of the Company for thenext five years.1.3The Company has identified opportunities to develop existing Council ownedassets with the potential to create up to 138 properties for use as affordableaccommodation primarily for ‘key workers’ which has formed the basis of thisinitial Business Plan.1.4The Business Plan demonstrates that through its current projected pipelineRBWM Property Co Ltd will become profitable by year 2 (2017/18),generating a turnover of 230,000 and profit before tax of 113,000, buildingto a turnover and profit before tax respectively of c 1,500,000and 674,000per annum by year 5. In addition this will create an asset base of c 46,640,000.1.5The future of the business beyond the fifth year is truly exciting with thepotential of adding in excess of 850 homes to the Company’s propertyportfolio as a result of the Council’s regeneration projects which could boostturnover by 8-10,000,000 per annum, the Company’s asset base by afurther 250,000,000 and its profit before tax to c 5,000,000 per annum.1.6Key to the Business Plan in its early stages is the transfer of assets from theCouncil for development and the provision of funding from the Councilthrough S106 monies provided from developers’ contributions to fund theearly build and refurbishment programmes.2.INTRODUCTION2.1RBWM Property Company Limited has been created as a dedicated andwholly owned property management and development trading company withthe aim of developing a property portfolio that is available primarily to rentwithin both the affordable and private rental markets, initially within thegeographic boundary of the Royal Borough of Windsor and Maidenhead.2.2Provision of properties at affordable rents for ‘key workers’ is a prioritymarket. This will provide sustainable long term income and a solid assetP age 1

base alongside private rented sector (PRS) units. Consideration will begiven to the provision of other types of accommodation as the Companydevelops e.g. shared ownership.3.BACKGROUND3.1In 2013 the Royal Borough of Windsor and Maidenhead decided to refurbishtwo Victorian four storey semi-detached houses in Maidenhead Town Centre(15 – 17 York Road) into flats and to offer them as private lettings though itstrading company Two5Nine Ltd. The properties had previously been usedas accommodation for homeless single parents, (prior to transferring theservice to another location).3.2With the increasing attractiveness of the Borough as a result of new railconnections to London, the major regeneration of sites within and aroundMaidenhead, coupled with a general shortage of housing, opportunities existto develop the company further. As part of its long term strategic vision, theCouncil recognised that in order to build and sustain a vibrant local economyand ensure it is a town for everyone, it needed to ensure that the supportingsocial infrastructure in terms of education, health and housing was in placeto support it. Increasing property values have made it more difficult to attractand retain those ‘key workers’ such as teachers and social workers that arenecessary to support the community.3.3The Royal Borough of Windsor and Maidenhead own a number of buildingsand parcels of land that, due to changes of use or as a result of moreefficient ways of working, have been identified as available forredevelopment.3.4In parallel, the Council is progressing a number of significant regenerationprojects which are being managed and developed in conjunction withselected partners. Each major regeneration project will potentially provide anumber of properties for the company to manage in the future. This is likelyto include affordable and PRS units.3.5As a result of a number of new developments that have taken place withinthe Borough over the last few years, the Council has received funds fromdevelopers (s106) to be used for affordable housing, which currentlyamounts to 2,600,000 which has remained unspent. It is believed that afurther 300,000 of additional funding may well be received during theremainder of 2016/17. Legal advice has been provided that suggests thatthese funds can be utilised for the refurbishment / development of affordablehousing without breaching state aid provisions.3.6In order to reflect its primary focus and aid transparency ‘Two5Nine’changed its name earlier this year to RBWM Property Company Ltd.P age 2

4.MISSION4.1To support, through development, the Members ambitions to create aBorough for everyone by providing affordable and private rentedaccommodation for key workers and others requiring housing in the Boroughwhilst providing an income stream back to the Council that can be reinvested in other services for residents.5.OBJECTIVES AND TARGETS5.1The objectives of RBWM Property Company Ltd are: To provide good quality affordable and private rented housingthroughout the Borough for rental purposes for the use of key workersand others requiring housing. To contribute to the general fund through surpluses generated fromhousing developed and rents received that can be re-invested inservices to residents. To contribute towards existing and forecast demand for housing boththrough the development of existing Council owned sites alreadyidentified and through development of new Council owned facilities asyet unidentified. To remain financially viable and operate efficiently to ensure it receivessufficient rental income to meet all of its costs including financing,housing management, property maintenance and administration.5.2The Company has an aspiration to develop 138 properties within five yearsand thereafter for its portfolio to increase to 1,000 within 10 years fromproperties being created as a result of the Council’s regeneration activities.5.3The Business Plan demonstrates that through its current forecast pipeline,the business will generate profits before tax of c 318,000 by year 3(2018/19), building to 674,000 by year 5 (2020/21).6.COMPANY STRUCTURE AND GOVERNANCE ARRANGEMENTS6.1The development of an arm’s length wholly owned property developmentand management company allows for a more flexible and commercialresponse in order to increase or accelerate the delivery of housing supply.The Localism Act introduced a new ‘power of competence’ which hasincreased the Council’s ability to act innovatively including creatinghousing/development companies.P age 3

6.2As a company it can determine tenures and rents, build homes and borrowmoney if required to finance schemes either via the Council or could, ifnecessary, borrow directly from banks and institutional investors.6.3The company is one limited by shares (CLS) which is considered the mostappropriate form of vehicle for a number of reasons:6.4The Council is the sole shareholder of RBWM Property Company Ltd andhas ultimate control of its business activities.6.5The Company has been established in accordance with the Companies Act2006 including the appointment of a Board for the Company. TheMemorandum and Articles of Association is in a standard form.6.6A sound and robust governance structure of the company is being put inplace to protect the Council’s financial and reputational investment in thecompany. As sole shareholder the Council will appoint the directors, approvethe business plan and other key decisions such as additional borrowingbeyond those agreed in the Business Plan. These decisions will be taken byCabinet in line with a formal shareholders agreement with the PropertyCompany. Regular reviews with the shareholders will be undertaken.6.7Through the appointment of non-executive directors with appropriate skillsand a Chief Executive, the Council is delegating the day to day commercialoperation of the business and the delivery of the Business Plan to thoseindividuals within a framework agreed by the Council. This will include: Entering into contracts for the refurbishment of existing properties anddevelopment of new properties.Agreeing the terms of funding.Marketing strategy and property lets.Management and maintenance arrangements in relation to theproperties.Rent setting.Letting policy.Rent arrears and debt recovery.6.8The flowchart at Annex A gives an overview of the governancearrangements for RBWM Property Company Ltd. Annex B is a copy of theCompany’s Memorandum and Articles of Association and Annex C is theShareholders’ Protocol Agreement.6.9Any loans entered into will be documented within a loan agreement whichsets out the deals and the terms of any funding arrangements between theCouncil and the property company.6.10The Council will control the company at a strategic level with Directorstasked with managing the property company within a framework and throughdelegated authority as set out in the shareholder’s agreement.P age 4

6.11In addition, the Property Company will be governed via a series ofoperational documents that will be approved by the Council, namely: A Business Plan that will cover a rolling 5-year period of investment andactivity and outlining the Company’s planned operations. The BusinessPlan will be reviewed regularly (at least annually) and cover thefollowing:a)b)c)d)e)f)g)h)Company objectivesGovernance arrangementsOperational plansFinancial models and assumptionsRents, sales and development assumptionsOperational expensesFunding profileProfit and loss, balance sheet and cash f