Completion of three steel framed £600,000 homes - part of the flagship This Land Ltd Cityglades development in Cambridge – has stalled.
Fourteen luxury homes are being built at Ditton Walk by the Cambridgeshire County Council 100 per cent owned housing arm.
However, a dispute over health and safety has escalated and Hadham Construction, who were awarded the contract for the steel framed homes, has been ordered off the site.
This Land Ltd issued a ‘notice of termination’ but Hadham says it will be rigorously defending accusations of health and safety breaches and alleged defects in “design, manufacture and installation”.
David Lewis, acting chief executive of This Land Ltd, said: “Despite numerous warnings about unsafe practices Hadham Construction failed to meet the standards This Land expects.
“Further, issues around the design and construction of the steel frame erected by Hadham Construction were identified by engineers working for This Land.
“Despite numerous requests to Hadham Construction about how this would be rectified, no solution was provided.”
Mr Lewis admitted that “completion of Cityglades has been delayed” but insisted this was for other reasons.
He said the timescales had slipped “largely due to the Covid pandemic and a nationwide shortage of materials.
“These are issues that have effected every housebuilder in the UK.
“The termination of Hadham Construction is not associated with program delays but is primarily down to the unsafe actions of their operatives on site and their failure to provide any resolution around defects.”
David Collins, managing director of Hertfordshire based Hadham, emphatically rejects the claims by This Land.
He told This Land Ltd: “It is apparent that you do not like what we build, you do not like the way they are built, and have no intention of paying for them once they are built.”
Mr Collins said the “alleged deficiencies” had been inspected by structural engineers and quality assessors who had confirmed their homes “once complete will meet the required standards”.
In a robust response to detailed allegations, he accused This Land of having sold and exchanged on homes at Ditton Walk for dates “that there is no possibility of being able to meet”.
He said This Land has clearly decided to blame this mistake on his company.
“The alleged health and safety breaches do not constitute grounds for individual suspension, and certainly not that of a company,” he said.
“Health and safety are extremely important and taken so by Hadham which has a very good health and safety record on every site the company has worked on, including high rise in central London.”
Hadham’s track record showed “not one accident of any sort, or near miss – a record of which we are proud”.
He told This Land: “Despite that the allegation has been made that we have not taken any steps to improve our health and safety advice and knowledge, which is untrue”
Mr Lewis believes This Land was within its rights to suspend Hadham Construction.
He said: “The health and safety of all operatives working on our sites is essential and we follow industry best practice and expect those working on our sites to abide by this.
“We employ a highly professional team who have decades of experience in managing and delivering construction projects and they understand how to operate a safe site and deliver homes of a high quality.
Mr Collins said his company would “defend rigorously” the actions taken by This Land.
Holding out an olive branch, he said his door remained opened to meet This Land directors to “discuss, resolve and establish a process for completion”.
The revelations at Cityglades come in the wake of escalating borrowing by This Land Ltd from the county council, its only shareholder.
Just two months ago, Cllr Mark Goldsack, the then Tory chairman of the commercial and investment committee, was quizzed by a councillor on This Land.
Cllr Goldsack said he had been told by This Land they intend to build 413 homes in Cambridgeshire over the next five years.
He said £112.177m was on loan to This Land and his committee had set an “operational boundary for lending” at £150m.
"Projections from This Land currently suggest that lending will peak at £122.2m over the next five years, subject to economic conditions,” he said.
“The most up-to-date forecast from This Land is that they will repay all borrowings as well as interest amounts exceeding £55m to 2029.”
He said that This Land’s assets, principally land and properties acquired from the county council, “are not reflective of the underlying asset value of the business.
“Where positive planning permissions are achieved, the enhanced value is not currently being recognised”.
Since May political control at Shire Hall has changed and the ‘rainbow alliance’ in control are looking at options for This Land.
Council leader Lucy Nethsingha declined to comment on specifics, but said she had recently attended an officers briefing to bring her up to speed.
As political leader she was required to be ‘arm's length’ from the directors of This Land and not get involved in management issues.
Cllr Nethsingha, however, told the Local Government Chronicle this week, that her predecessors has been over reliant on ‘shaky investments’ that had not met their income targets.
She said a key concern was indeed This Land Ltd which she acknowledged had “very high levels of debt”.
With her Lib Dem, Labour and independent colleagues, she will shortly be replacing the current Tory non-executive This Land board member Josh Schumann,
There is also expected to be calls by councillors for an independent review of This Land's business plan and, crucially, the risks posed for the council by such large amounts of borrowing.
If the company is to approach anything like a break-even point, it has to produce some spectacular trading results.
The latest available audited financial statements put the company’s interest rate on its borrowings at between 5.79% - 8.81%.
Experts say that even if one assumes a conservative average interest rate of 6.5%, that would require at least £18 million each year for the next eight years to December 2028.
In addition, This Land incurred administrative expenses of £4.2m in 2019, more than double the year before.
One analyst believes that once all factors are taken into account one can appreciate the scale of delivery needed by This Land.
Simply dividing the debt repayment and overheads over the next eight years plus the accumulated losses suggests that This Land will need to build and sell every home with an average clear profit margin of over £300,000.
Despite its ownership by the council, This Land is entitled to normal commercial rules when it comes to revealing its day-to-day trading activities.
But the level of debt is troubling for some councillors.
The delays and dispute now evidenced at Ditton Walk will add to those concerns.
Mr Lewis, when he took over as acting chief executive earlier this year, replaced David Gellings who had been in that post from day one.
Mr Gelling’s explanation for leaving so suddenly has never been revealed although, ironically, he’s reported to have told associates one reason was political interference in decision making.
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