City leaders prepare £70m bailout for property firms

Published on Saturday 23 May 2009 11:18

THE council-owned companies behind regeneration efforts in Craigmillar and the Waterfront are on the verge of going bust – with city leaders forced to draw up a drastic rescue plan.

The council is lining up a 70 million bailout of its struggling arms-length companies which will see them buy up the property assets of Waterfront Edinburgh Limited (WEL) and Parc Craigmillar, along with development firm EDI.

All of the flagship companies have struggled to cover their debts with commercial banks in the face of falling land values and it is hoped millions can be saved by the council taking out the 70m loan at the cheaper interest rates available to local authorities.

Repayments on the loan will be met from the rents on the properties the council is buying.

It is understood that WEL and EDI will effectively disappear, as all of the council's arms-length companies are to be brought under one group, CEC Holdings.

Meanwhile, it has also emerged that city taxpayers are to be hit with a 1.6m bill to repay loans to Miller Developments after the property giant recently pulled out of a joint venture with the council to build a new town at Shawfair, the site of the former Monktonhall Colliery.

Opposition politicians today accused council chiefs of carrying out a "smash and grab" on some of the city's best arms-length firms.

But the city's finance leader, Councillor Gordon Mackenzie, said the restructuring would save taxpayers money in the long run.

Cllr Mackenzie said: "It is important to make clear that the council is not taking a hit here, the loan is to buy properties which have tenants who are paying rent and this will cover the loan repayments.

"I would confidently say that in three to five years this will prove to be a very good deal for the city with the companies back on track and land values rising."

The city's Labour finance spokesman Ian Murray said: "There are questions to be asked of this move. The council seems to be doing a smash and grab on EDI's assets.

"Greg Ward (the council's head of economic development] said himself that EDI was suffering short-term problems, which is tied up with the money it is owed by PARC, but I don't think these were insurmountable."

Uncertain future facing council's cash cows

AT THE height of the property boom they were the darlings – and often cash cows – of the city council's regeneration efforts. So what has gone wrong with EDI, Waterfront Edinburgh Ltd and Parc Craigmillar?

&#149 EDI: The slashing of land values has hit the council's main development firm hard. In recent months, EDI broke its banking covenants with a loan-to-value ratio on its 48 million borrowings of 94 per cent. Penalty charges have EDI facing interest and banking costs of 4.1m per annum.

&#149 WEL: With its land values cut by 50 per cent over the last year, WEL has been left with a net asset value of less than 900,000. The sale of its remaining property portfolio to the council for 7.5m will mean the firm's bank, the taxpayer-owned Bank of Scotland, will only get around two-thirds of the 11.7m it is owed by WEL.

&#149 PARC: Falling land values and dozens of unsold houses have left Parc fighting for its future. Parc owes EDI 3.45m in 'soft' loans but must start shifting some of its new homes in Craigmillar. Council chiefs are set to give Parc a 600,000 loan just to help it through the year. Delays to a deal to bring a major supermarket to Craigmillar have severely hampered Parc's cash flow.