Purpose

Report setting out refinancing
of Populo working capital in response
to detail set out in February 2024 cabinet report.
 

Decision

 
Decision
 
For the reasons set out in the report and its
appendices Cabinet RESOLVED to Agree:
 
i) 
To approve the conversion of £30m working capital loan
provided to Populo Living Limited into ordinary shares as
investment into the Council Company.
ii) 
To enter into a Deed of Variation to reduce the working capital
loan facility to £10m on the terms set out in paragraph 5.10
of the report.
iii) 
To delegate authority to the Corporate Director of Resources in
consultation with the Cabinet Member Finance and Corporate
Resources to take all steps necessary to finalise and approve all
documentation required to implement the decisions contained in this
report.
 
Alternatives
Considered
 
a) 
Do Nothing – the Council is the sole shareholder and funder
of Populo. Without addressing the working capital position, the
strain on Populo’s finances will continue and will impact on
Populo’s development capacity. For this reason, officers do
not consider ‘do nothing’ to be a viable option.
 
b) 
Increase the £40m working capital limit – the Council
could increase the existing working capital limit beyond
£40m. Officers consider this to be a short term fix rather
than a long term solution. The cumulative impact of operational
scale and rolled up interest would continue to grow and even a
£10m increase would only buy 12-18 months of scope before
this issue returned. For this reason, officers consider it
preferable to seek a longer term funding strategy.
 
c) 
Accelerate Populo getting to scale – Populo is a key part of
the Council’s housing delivery strategy. Recent Cabinet
decisions in relation to the Carpenters, Pier Road and Cyprus sites
have demonstrated the Council’s commitment to growth in the
company. However, new housing development is complex and lead in
times for delivery run to many years. The Council could seek to
accelerate Populo’s growth via acquisition of existing
assets. This has been considered however due to prevailing interest
rates bringing forward viable investment acquisitions has not been
possible.
 
d) 
Management changes – the Council could seek to bring
management of finance, legal and governance activities of Populo
back within the Council under a Service Legal Agreement or similar.
This approach may offer some small efficiencies in operational
overheads but it would complicate the relationship between the
Council and company without offering any substantial benefits.