This Land's Business Plan - Thoughts & Questions

Initial thoughts on This Land’s latest business plan, referred to in Agenda Item 10 of CCC’s Strategy & Resources Committee meeting of 11^th July 2023.

This Land’s last “business plan” was presented to the Strategy and Resources Committee in September 2022 in its entirety. Why is it confidential this year? Does it in fact exist?

Paragraph 2.1 of Agenda Item 10 states that approximately 863 new homes will be delivered in total.  The timescale is not disclosed.  The following simple observations are derived from the bare figures provided in CCC’s report on This Land’s business plan.  Apart from the stated loan interest figure, the following points do not consider the time value of money.  General inflation is currently running at over 10%.

a. Para 2.2: all loan principal and interest to be paid back by February 2029.  £113.8m principle plus £41m remaining interest from 2023 onwards = £154.8m

b. Repayments have to come from profits generated from commercial activity.  Even if all 863 houses could be built and sold by Feb/March 2029 – (over the next six years), that would require a comprehensive profit of £179,000 per home, compared with the £339,000 comprehensive loss on each of the 18 homes sold in 2021/22.

c.  If one deducts the homes already built and sold since incorporation (20 at a comprehensive loss of £27m – i.e., £1.35m loss per unit sold), then the calculation becomes £154.8m/843 - £184k clear profit on each future unit built and sold.

d. Given that 387 (45%) of the 863 units are to be affordable, i.e. sold at cost or near cost, that raises the profit needed to be generated on the remaining 456 units (476-20) – i.e. £339k profit per commercial unit?

e. Given that 373 units are to be delivered via a “master-developer” arrangement, it is reasonable to assume that those commercial partners will take a healthy proportion of any profits, thus diluting any profits accruing to This Land Ltd on those units.  That will require This Land to factor in a higher profit margin still on the units it delivers directly. 

f.  Even considering the above, the profit per unit sold This Land will have to achieve to meet its repayment target by Feb/March 2029 looks to be considerably higher than the average sale price of each unit sold during 2021/22 (£5,925,620/18 = £329k per unit).   Who will buy these homes which will have to be priced at a considerable premium over their historical commercial value if This Land’s debt repayment target is to be met – and in an increasingly difficult housing market?

g. In addition, if one takes the 863 headline figure and subtracts the 20 sold between 2016 and 2022, and the 78 completed to date (para 2.1), that leaves 765 to be built and sold in the next six years, at an average rate of 128 units per year – a seven-fold increase on the units sold in 2021/22 after six years of commercial activity.

h. If the 863 figure relates to a longer period than the Feb 2029 target for paying back the loan principal and interest, then the profit-generating burden on each unit sold by Feb 2029 will need to be proportionately higher still.

Similar questions have been put to This Land before, but they were never answered.

Q1 – How is any of the above even arithmetically possible?

Q2 – If the above questions are based on false assumptions (partly because the actual 2023 business plan is a confidential document), will This Land engage and replace those false assumptions with correct ones and explain in simple unambiguous terms and in detailed cash flows, how the targets are to be met?    

Q3 – Does the promised repayment in full of the £113m + interest by Feb 2029 mean that none of it is to be written off as a bad debt in CCC’s 2021/22 financial statements?

Q4 – Does This Land have an additional secret, cunning plan to generate the necessary profits to pay off its debts – thus making the above questions redundant?  If so, where is it?