Lenton flats | Councillors to approve £6.2m loan

The Executive Board meets on 17th September when councillors are being asked to approve a 50 year loan to Nottingham City Homes to allow them to build new houses in Lenton. The preferred developer is Keepmoat Homes Ltd, and the completion date for the entire project is set as autumn 2017.

The five high rise flat blocks that currently occupy the Lenton site are in the process of decommissioning and demolition. This will create a cleared site extending to 2.95 hectares (7.296 acres) or thereabouts available for redevelopment. It is proposed that Nottingham City Homes (NCH) acquire 1.09 hectares (2.71acres) or thereabouts of the cleared site for the construction of 62, 2 and 3 bedroom family houses. The remainder of the site is to stay in the ownership of Nottingham City Council (NCC) for the development of a further 80 homes. Roads and infrastructure will be shared across the development. On this basis the market value of the land to be acquired by Nottingham City Homes is £2.1 million.

The report proposes the sale of the land to NCH to enable the company to build 62 houses and own and rent the houses in their own right. The land has been valued at £2.1 million and it is proposed that NCC give a grant to NCH to enable the company to finance the purchase.

This means that none of the newly built houses will be eligible to be included in the Right to Buy scheme.

NCC will receive a capital receipt of £2.1 million from the sale of the land, and this can be used to finance the grant to NCH. In addition Stamp Duty Land Tax (SDLT) will be payable by NCH as purchaser of the land at 4% of the purchase price, which equates to £84,000.

The cost of the 62 family homes to be built on this site is estimated to be £6.82 million as reported to Executive Board in February 2013. It is proposed that a loan of £6.82 million be made by NCC to NCH over a 50 year term at an interest rate equivalent to Public Works Loan Board (PWLB) annuity rate for borrowing over 50 years plus 0.5% for the inherent credit risk taken by NCC (equivalent to £17,000 per annum). Based on current rates this would be 5.1% per annum; the actual rate will be fixed by the Director of Strategic Finance on the date the transaction occurs. A loan agreement will need to be drawn up between NCC and NCH to formalise repayment terms.