Aelodau’r pwyllgor yn bresennol
Committee members
in attendance
|
Andrew R.T. Davies
|
Ceidwadwyr Cymreig (yn dirprwyo ar ran Mohammad Asghar)
Welsh Conservatives (substitute for Mohammad Asghar)
|
Mike Hedges
|
Llafur
Labour
|
Alun Ffred Jones
|
Plaid Cymru (yn dirprwyo ar ran Jocelyn Davies)
The Party of Wales (substitute for Jocelyn Davies)
|
Sandy Mewies
|
Llafur
Labour
|
Darren Millar
|
Ceidwadwyr Cymreig (Cadeirydd y Pwyllgor)
Welsh
Conservatives (Committee Chair)
|
Julie Morgan
|
Llafur Labour
|
Jenny Rathbone
|
Llafur Labour
|
Aled Roberts
|
Democratiaid Rhyddfrydol Cymru
Welsh Liberal
Democrats
|
Eraill yn bresennol Others in
attendance
|
Jeremy Green
|
Lambert Smith
Hampton Ltd
|
Alistair
McQuaid
|
Swyddfa Archwilio
Cymru
Wales Audit Office
|
Lee
Mogridge
|
Lambert Smith
Hampton Ltd
|
Huw Vaughan Thomas
|
Archwilydd
Cyffredinol Cymru
Auditor General for Wales
|
Mike Usher
|
Swyddfa Archwilio
Cymru
Wales Audit Office
|
Swyddogion Cynulliad Cenedlaethol Cymru yn
bresennol National Assembly
for Wales officials in attendance
|
Claire Griffiths
|
Dirprwy Glerc
Deputy Clerk
|
Fay Buckle
|
Clerc
Clerk
|
Joanest Varney-Jackson
|
Uwch-gynghorydd Cyfreithiol
Senior Legal Adviser
|
Dechreuodd
rhan gyhoeddus y cyfarfod am 09:19.
The public part of the meeting began at 09:19.
|
Cyflwyniadau, Ymddiheuriadau a
Dirprwyon
Introductions, Apologies and Substitutions
|
[1]
Darren
Millar: Good morning,
everybody. Welcome to today’s meeting of the Public Accounts
Committee. I will just make a few housekeeping notices. I remind
everybody that the National Assembly for Wales is a bilingual
institution and that Members and witnesses should feel free to
contribute to today’s proceedings in either English or Welsh
as they see fit and, of course, there are headsets available for
translation. These can also be used for sound amplification. If I
could, I encourage everybody to switch off their mobile phones
because these can interfere with the broadcasting equipment. In the
event of a fire alarm, we should all follow the directions from the
ushers.
|
[2]
Members have
already received guidance on changes to the rules for making oral
declarations of interest, and a number of declarations were made at
the start of this inquiry that I would refer everybody to. In
addition to that, we have two substitutes for today’s
meeting. We have Andrew R.T. Davies here in place of Mohammad
Asghar—Andrew’s with us for the duration of this
inquiry—and we have Alun Ffred Jones in place of Jocelyn
Davies, who excluded herself from this inquiry under Standing Order
18.8.
|
09:20
|
Papurau
i’w Nodi Papers to Note
|
[3]
Darren
Millar: Item 3:
we’ve got a paper to note—minutes of the meetings held
on 12 and 13 October. I’ll take it that those are noted.
We’ve also had a letter from James Price, which was
distributed to members of the committee last week, on the
management arrangements for the regeneration investment fund for
Wales within Welsh Government. I will take it also that that is
formally noted.
|
Cronfa Buddsoddi Cymru mewn Adfywio: Sesiwn
Dystiolaeth 5
Regeneration Investment Fund for Wales: Evidence Session 5
|
[4]
Darren
Millar: Item 4, then,
continuing with our inquiry into the regeneration investment fund
for Wales—this is our fifth evidence session and I’m
very pleased to be able to welcome to the table this morning Jeremy
Green and Lee Mogridge, both of Lambert Smith Hampton. We’re
very grateful for you taking the time to be with us today, and
we’re also grateful for the written submissions that
you’ve made to the committee. You’ll appreciate that
there’s been quite a bit of public interest in this
particular matter, and we’re keen to get to the bottom of
precisely what happened in respect of RIFW and its establishment,
and of course the disposal of those public assets that are referred
to in the auditor general’s report.
|
[5]
Perhaps just to
open the questioning, can you tell us: what did you think of the
arrangements in terms of the way that RIFW was established by the
Welsh Government? Did you think that it was a good vehicle? Did you
think that it had been established properly? What did you think
about the composition of the board et cetera? I don’t know
who wants to lead on this. Lee.
|
[6]
Mr
Mogridge: On the set-up of
RIFW, it was a very innovative concept, I thought, for the
regeneration opportunity and the way markets were going. I think it
was a very, very sound vehicle. The set-up itself, with the
board—I think they had a decent level of expertise on the
board. The concept was an investment vehicle, effectively a
secondary bank, to lend into the marketplace. I think there was a
distraction in terms of the ability to actually resource the
funding in terms of having a land asset base that needed to be
realised. But generally, I think the whole concept was a good
one.
|
[7]
Darren
Millar: But you think that
the introduction of an asset base rather than a cash investment
upfront made the situation more complicated.
|
[8]
Mr
Mogridge: Well, it would
have been a lot easier with cash.
|
[9]
Darren
Millar: Do you think that
it was a mistake for them to transfer assets rather than cash into
the fund?
|
[10]
Mr
Mogridge: I suppose really
it was dependent on whether they had the cash, because these were
large amounts of money.
|
[11]
Mr
Green: I don’t
think it’s our position to say whether it was a mistake or
not, but certainly the intention of the fund was to invest, or lend
money, to support regeneration projects in Wales, so cash was
required for that investment.
|
[12]
Darren
Millar: You’ve
mentioned also that you felt that the board, in terms of the way it
was composed, was the right board—it had the right expertise
around the table. What was your understanding of the role of Chris
Munday?
|
[13]
Mr
Mogridge: As far as I was
concerned, and I think I speak for Jeremy as well, Chris was a
Welsh Government representative. He was involved, obviously, in the
original set-up of RIFW, and also, for the first nine months of its
existence, he was involved in all of the board meetings, and as far
as we were concerned, he was Welsh Government.
|
[14]
Darren
Millar: So, when you say
he was the Welsh Government’s representative: he spoke for
the Welsh Government, he was the person who you went to for
permission to do things and for feedback from the Welsh
Government.
|
[15]
Mr
Green: No. Chris Munday
was the one who set up the fund, who created the vehicle, and he
led the procurement exercise, where we were appointed alongside
Amber. But remember that our role here was to report to Amber. It
was Amber’s role to report to the board. So, we were not, in
effect, in direct contact and liaison with Chris Munday. All of our
communication was via Amber.
|
[16]
Darren
Millar: So, you had no
direct communication with Chris Munday at all. You were present in
the same meetings as him. I’ve seen e-mail chains from you,
backwards and forwards.
|
[17]
Mr
Green: Yes. We were
present in the same meeting, so, yes, of course we would have
discussed matters with him in those meetings, but outside of those
meetings, we won’t have had any additional communication with
him.
|
[18]
Darren
Millar: But in those
meetings, you saw him very much as the Welsh Government’s
representative—yes?
|
[19]
Mr
Green: He was the—.
Yes. Alongside the other board members who were Welsh Government
representatives.
|
[20]
Darren
Millar: We took evidence
from the board members themselves and they suggested that Chris
Munday was akin to a non-executive director in terms of his
relationship with the board. Would you agree with that sort of
definition of his role?
|
[21]
Mr
Green: Yes. We’ve
seen that he was referred to as a shadow director, and, yes, the
board were the five members who have been referred to. Chris Munday
certainly we saw as a slightly separate adviser to the board,
representing Welsh Government.
|
[22]
Darren
Millar: And you saw the
other two members of the board, you said, also as Welsh Government
representatives.
|
[23]
Mr
Green: Yes.
|
[24]
Darren
Millar: Yes, so, the chair
and the alternative member. Jenny, you wanted to come in on this,
and you, Aled.
|
[25]
Jenny
Rathbone: Just to come in on
the amount of money you thought was needing to be realised.
There’s also quite a considerable cash transfer, so why
was—?
|
[26]
Mr
Green: Well, the fund
itself was a £55 million fund and the imperative, or the
intention was that that money was committed, invested, in
regeneration projects in Wales. The intention, actually, was to do
that in a timely manner and on the assumption that that was a
successful exercise. The secondary intention, actually, was to then
show that we had created a fund, a vehicle that worked, and we were
then expecting to take this to the market to raise additional funds
to turn it into a larger vehicle and to invest more money in
Wales.
|
[27]
Jenny
Rathbone: Why were you in
such a rush to dispose of these assets at the bottom of the
market?
|
[28]
Mr
Green: We weren’t
necessarily in a rush. I think the point is that the fund was there
to invest money; the fund was not there to sit on land
assets.
|
[29]
Jenny
Rathbone: Well, it was
invest money or invest or regenerate.
|
[30]
Mr
Green: Yes.
|
[31]
Jenny
Rathbone: You could’ve
used the land to regenerate.
|
[32]
Mr
Green: No. We were
clearly guided that the land was there to release cash. The land
was not there for us to use for projects to regenerate.
|
[33]
Mr
Mogridge: If you actually
went down that route, you know taking the fund as a development
vehicle that was sitting on a load of land assets and cash, would
it not have been just as opportune to actually develop out the land
as a developer using the cash assets?
|
[34]
Jenny
Rathbone: It’s
perfectly possible. I’m asking you whether or not you
considered that.
|
[35]
Mr
Mogridge: No. We were
precluded from doing that. The investment management agreement,
basically, as far as the land assets were concerned, allowed us to
maximise the value, or requested we provided asset-specific
business plans to maximise the value of the assets through active
management and not through a property development
process.
|
[36]
Jenny
Rathbone: But if it was your
job to maximise the value, why did you sell these assets when the
market was really low.
|
[37]
Mr
Mogridge: That’s what
we were asked to do.
|
[38]
Jenny
Rathbone: Sorry?
|
[39]
Mr
Mogridge: That’s what
we were asked to do.
|
[40]
Jenny
Rathbone: You were asked to
sell the assets—
|
[41]
Mr
Mogridge: Yes.
|
[42]
Jenny
Rathbone: —at the
lowest possible price.
|
[43]
Mr
Mogridge: It wasn’t
the lowest possible price. The price achieved was actually a very,
very good price.
|
[44]
Jenny
Rathbone: Right, but at the
time you were marketing these, the property market was obviously in
a very depressed state, because of what had happened with the
bankers.
|
[45]
Mr
Green: Yes. But that was
the point of the fund—that the banking sector, at the time,
was not in a position to lend money on projects that needed to be
developed within Wales. So, the intention of the RIFW fund was to
plug that gap and to lend money for development projects in a poor
market. So, the fact that we were in a poor market—there was
nothing that we could do about that, but the fund had been created
to plug that hole and to encourage development.
|
09:30
|
[46]
Jenny
Rathbone: So, you never
thought it was necessary to give advice on the inadvisability of
disposing of land at rock-bottom prices?
|
[47]
Mr
Green: The land was
transferred into the fund, in effect as cash. There was £20
million-worth of land. We would have been equally criticised if we
had sat on that and not invested that money in regeneration
projects, because that was the primary purpose.
|
[48]
Jenny
Rathbone: With hindsight,
though, the land was worth a hell of a lot more than what you got
for it.
|
[49]
Mr
Green: It wasn’t,
though, that’s—
|
[50]
Mr
Mogridge: Working with
hindsight is a fantastic thing. I think what people are tending to
forget in this instance is that, in 2008, there was a banking crash
and the markets fell apart. There was no commercial funding
available, because the banks shut up shop. If you actually look at
share prices of house builders, between 60 per cent and 95 per cent
of their share values fell away in 2008. The only real statistics
for residential property development in Wales are the National
House Building Council statistics on new house registrations. In
2007, there were something like 8,700 new houses being built in
Wales, or registered to be built in Wales. In 2008, that dropped to
3,640. This trend continued in 2009 down to 2,800. Then, there was
a little bit of recovery in 2010-11, when it got up to 3,500 or
4,000 new buildings—
|
[51]
Darren
Millar: We’re well
aware of the economic situation, Mr Mogridge.
|
[52]
Mr
Mogridge: But I’m just
trying to set a context for—
|
[53]
Darren
Millar: We understand the
context and the arguments that you’ve made in written
submissions that you’ve given to us. I think the point
is—. You’ve made reference to the investment management
agreement. One part of that says that you should be identifying
value-enhancement potential at a portfolio level, and through
planning consents, seeking services, utilities, improvements,
upgrades and highway improvements, liaising with local authority
planning departments, and the submission of planning applications,
the negotiation of section 106 agreements, and preparation of site
information packs for marketing, and marketing and sale of the
assets. Did you do any of this?
|
[54]
Mr
Mogridge: Yes, we
did.
|
[55]
Darren
Millar: Did you? So, what
discussions did you have about planning consents and getting
services into these sites? I haven’t seen any evidence of
that.
|
[56]
Mr
Mogridge: We had a chartered
town planner. The timescales of the transfer into the fund—.
We were appointed on 14 December 2010—
|
[57]
Darren
Millar: It’s just
that in your summary—the reason I ask this is that, in your
summary of the duties that you were charged to deliver on behalf of
the fund, you don’t refer at all to the fact that you were
charged to identify value-enhancement potential. Why don’t
you? Is that something that was not emphasised as part of the
agreement by the Welsh Government?
|
[58]
Mr
Green: The asset
realisation plan and the asset-specific business plans that we
prepared did identify opportunities within each asset. So, that
exercise was undertaken. And alongside those plans, those written
submissions to the board, we provided our own opinion as to the
likely sale prices in the marketplace for those assets.
|
[59]
Darren
Millar: We know you gave a
likely sale price; I’m asking what work you did to enhance
the potential value of both the portfolio and individual sites, in
accordance with the investment management agreement.
|
[60]
Mr
Mogridge: The first thing we
did was—. We were presented with very scant information on
each and every one of the sites, by the way of a single sheet of A4
paper with a photograph and a brief description of it. We
hadn’t received the title documentation. We were looking at
all of the sites individually for any planning context through our
planner, who undertook quite a lot of work on that. And we made a
recommendation to the RIFW board that they needed to get further
insight into the actual legal titles so we could actually work with
a bunch of assets that were workable, because, when we first
inherited them, they were not. So, the background information we
did was planning and legal, in conjunction with Morgan Cole
solicitors, to understand exactly what was being sold. Planning
development work is a long-term process. You know, it is a
long-term process.
|
[61]
Darren
Millar: So, did the Welsh
Government transfer the wrong assets to you?
|
[62]
Mr
Mogridge: It’s not up
to—. The assets were transferred—
|
[63]
Darren
Millar: You just said they
were not workable assets. So, did they give you the wrong assets?
These were supposed to be assets, we were told last week by Mr
Munday, which had been shortlisted on the basis of their ability to
realise cash very quickly.
|
[64]
Mr
Green: In our opinion,
they were tradeable at the transfer values, so we were happy that
we were able to realise the money that was required to then
reinvest in regeneration projects. Remember that the transfer value
for these assets was £20.65 million.
|
[65]
Darren
Millar: Yes, I’m
aware of that. Aled, you wanted to come in.
|
[66]
Aled
Roberts: Rwyf
eisiau gofyn y cwestiwn yn Gymraeg.
|
Aled
Roberts: I’m going to
be asking my questions in Welsh.
|
[67]
A
gaf i ofyn, felly, a gawsoch chi unrhyw gyfarfodydd efo adrannau
cynllunio cyngor sir Caerdydd neu gyngor sir Fynwy ynglŷn
â safleoedd Llysfaen a Threfynwy?
|
Can I ask you,
therefore, did you have any meetings with planning departments in
Cardiff county council or Monmouthshire County Council in terms of
the sites in Lisvane and Monmouth?
|
[68]
Mr
Mogridge: I’m sorry,
could you repeat the question?
|
[69]
Aled
Roberts: Ie.
A gawsoch chi unrhyw gyfarfodydd efo un ai cyngor dinas a sir
Caerdydd neu gyngor sir Fynwy ynghylch safleoedd Trefynwy neu
Lysfaen?
|
Aled
Roberts: Yes. Did you have
any meetings with either Cardiff council or Monmouthshire County
Council about the sites in Monmouth or Lisvane?
|
[70]
Mr
Mogridge: Yes, we did. Our
planner—
|
[71]
Aled
Roberts: Faint? Faint o gyfarfodydd?
|
Aled
Roberts: How many? How many
meetings did you have?
|
[72]
Mr
Mogridge: I’m not sure
how many meetings we had, but it was, I would say, a fair
number.
|
[73]
Aled
Roberts: A
ydy’n bosibl i ni gael nodyn o faint, a phryd gynhaliwyd y
cyfarfodydd yna?
|
Aled
Roberts: Would it be
possible for us to have a note of how many meetings you had, and
when you had them?
|
[74]
Mr
Mogridge: I think I can come
back to you on that, yes.
|
[75]
Aled
Roberts: Diolch.
|
Aled
Roberts: Thank
you.
|
[76]
Darren
Millar: It would also be
useful to receive a copy of any correspondence that you had with
the local authorities as well, promoting the sites.
|
[77]
Aled
Roberts: A
gaf i droi nôl at y berthynas rhyngoch chi a Llywodraeth
Cymru? Rwy’n deall eich bod chi wedi dweud mai eich
dyletswydd chi oedd adrodd nôl at Amber
Infrastructure—rwy’n deall hynny. Ond, yn ystod eu
tystiolaeth wythnos diwethaf, fe ddywedodd Amber Infrastructure eu
bod nhw wedi cynnal cyfarfodydd efo Gweinidog ac efo gweision
sifil y tu allan i gyfarfodydd bwrdd RIFW. A oeddech
chi’n bresennol yn unrhyw un o’r cyfarfodydd
yna?
|
Aled
Roberts: Could I go back to
the relationship between you and the Welsh Government? I understand
that you said that your duty was to report back to Amber
Infrastructure—I understand that. But, during their evidence
last week, Amber Infrastructure said that they’d had meetings
with a Minister and with civil servants outwith the meetings of the
RIFW board. Were you present in any of those meetings?
|
[78]
Mr
Green: No, we were not
involved in any of those meetings.
|
[79]
Darren
Millar: Okay, Aled? Mike
Hedges.
|
[80]
Mike
Hedges: Can I go back to
two points? One is the Mr Munday point. You said that Mr Munday
attended like a non-executive director. He’s down as being an
observer. My understanding is that the difference between an
observer and a non-executive director is that a non-executive
director would express views, have opinions, take part in the
discussion, whereas an observer, by definition, would just observe.
What did Mr Munday do at those meetings?
|
[81]
Mr
Green: He participated in
the meetings, but I don’t recall exactly what he did. We were
there, in effect, as observers and advisers. When we attended the
meetings, we were not there to make decisions. We were there to
provide advice to the board and to respond to questions that we
were asked. In many ways, Chris Munday was there in a similar
manner.
|
[82]
Mike
Hedges: No. You were there
appointed as advisers on land values. The board were there
appointed to make decisions. Mr Munday was there as an observer. My
understanding of observers, by the definition of the word
‘observe’, is that they do not take part. You’re
saying he actually took part in those discussions, so he went
beyond being an observer.
|
[83]
Mr
Green: No.
Well—
|
[84]
Mr
Mogridge: He did speak at
the meetings.
|
[85]
Mr
Green: Yes, he spoke at
the meetings, for sure. He provided input when input was
required.
|
[86]
Darren
Millar: You say
‘provided input’. Did he provide opinion in terms of
supporting or not supporting things that were put to the
board?
|
[87]
Mr
Green: It was quite some
time ago, so I’m just trying to think back
to—
|
[88]
Darren
Millar: For example, did
he support the portfolio sale as it was proposed? Did he give an
opinion on that, or did he merely observe what was going on and
inform?
|
[89]
Mr
Green: He certainly
raised no objections to it, so—
|
[90]
Darren
Millar: ‘Did he give
his support?’ I’m asking you, not whether he raised any
objections. Did he give his support?
|
[91]
Mr
Mogridge: I honestly
can’t recall.
|
[92]
Mr
Green: Yes, I honestly
can’t recall. I’m tempted to say ‘yes’
because, as I say, I don’t recall any objections either. But
I think that’s a question for him, not for us.
|
[93]
Darren
Millar: But you very much
looked to him as the face of Welsh Government and for Welsh
Government’s opinion on different matters.
|
[94]
Mr
Green: We looked to him
as the person that had created the vehicle and therefore was best
placed to understand the structure within which the vehicle was
operating.
|
[95]
Mike
Hedges: Can I just go on
to the land, which we are going on to now?
|
[96]
Darren
Millar: Yes. Go
on.
|
[97]
Mike
Hedges: We talked about
the land. When you had the valuation and that was passed over to
you, do you think that it was just a book value, or do you think it
was a commercial value?
|
[98]
Mr
Mogridge: The King Sturge
valuation.
|
[99]
Mike
Hedges: No. You had the
land, but when it was transferred over on a Welsh Government
valuation, do you think it was a book valuation or a real
valuation?
|
[100]
Mr
Mogridge: Well, the land was
transferred into the RIFW before we were appointed. It was actually
transferred at a market value, which was in line with the King
Sturge valuation. It was a registered land transfer. So, as far as
we were concerned, that was the market value and the book
value.
|
[101]
Mike
Hedges: You were talking
about the collapse in market prices of land. Now, correct me if
I’m wrong, but we actually have a number of different land
markets in Wales and, at the top end of the market, Lisvane would
count as being towards the top end of the market, as would
Cowbridge, and as would Reynoldston in Swansea. These are areas
where houses are very expensive and land is rarely made available.
Wouldn’t that be differently affected than the ordinary, dare
I say it, Wimpey or Persimmon-type of development land?
|
[102]
Mr
Mogridge: It absolutely
would, yes. You’ll always get small pockets in prime areas
that will retain value because there will always be a demand for
that sort of land, but you’d be talking about serviced
smaller sites. You wouldn’t be talking about wholesale land.
It’s basic economics—supply and demand. You know, if
somebody’s bringing on a site of 568 acres into a
marketplace, which would effectively facilitate one and a half
year’s countrywide supply, it’s going to have a
detrimental effect on the land value. So, you can’t be
specific in terms of what you’re looking at with that.
You’ve got to look at the individual site and you’ve
got to look at the individual characteristics, and it is a very,
very difficult thing to determine.
|
[103]
Mike
Hedges: But what would you
estimate the land value per acre of land made available in Lisvane
for building to be?
|
[104]
Mr
Mogridge: In 2011, we
provided a report to the RIFW board. At that time, taking into
account the market forces, circumstances and a number of variable
factors—you know, you are crystal-ball gazing—we put on
a site value of about £600,000 an acre net, which was after
infrastructure. So, that would actually be money received by the
landowner. That was in 2011. It probably hasn’t varied
greatly from that figure today.
|
[105]
Mike
Hedges: How would you
compare that land value then against, say, Cowbridge or areas
around Usk?
|
[106]
Mr
Mogridge: Cowbridge is
probably on parity. Some of the better areas of Swansea will be on
parity. Again, it comes down to individual land sites and how big
they are. You can get a massive variation in land value.
|
[107]
Mike
Hedges: Yes,
but—sorry to push this point—one is, I think, that a
lot of people would like to know whether you’d be able to get
land for £600,000 an acre on the Gower peninsula. The second
point is that you talk about this valuation of £600,000. Do
you know what land sold in that area for at any time between 2000
and 2015?
|
[108]
Mr
Mogridge: In
Lisvane?
|
[109]
Mike
Hedges: In
Lisvane.
|
[110]
Mr
Mogridge: Yes, we are aware
of the land sales.
|
[111]
Mike
Hedges: Would you like to
share it?
|
[112]
Mr
Mogridge: I’ve got one
site, which is actually, at the moment, client privilege, so I
can’t say anything about it, but there are other
sites—smaller sites—that have been reported at £1
million an acre. But, they are smaller sites and they are fully
serviced, and it’s not comparing apples with
apples.
|
[113]
Mike
Hedges: This is my last
point: if smaller sites sell better, wouldn’t it have been
better to parcel it up into smaller sites and sell over a period of
time?
|
[114]
Mr
Mogridge: And who provides
the infrastructure?
|
[115]
Mike
Hedges: Well, I would have
thought that—. I’m not sure about this part of Lisvane,
but Lisvane is part of an urban area. So, it won’t be very
short of infrastructure. It will have water, gas and electric
fairly close to it, won’t it?
|
09:45
|
[116]
Mr
Mogridge: There’s
‘fairly close’ and there’s actually the
connectivity. There’s also: do they have the capacity?
What’s the drainage capacity of Lisvane? Does anybody know,
or has anybody looked at it, for 6,000 new dwellings?
|
[117]
Mike
Hedges: No, but I
don’t think—. It’s not one of those areas, well,
it is one of those areas—we have areas on the Gower peninsula
where Welsh Water has said, until more work is done, further
development will not be possible. I don’t believe
that’s happened in Lisvane, has it?
|
[118]
Mr
Mogridge: Lisvane’s
been a candidate site for development since 2000-01. We’re 15
years on and nothing’s happened with it. You know, it
hasn’t even got an allocation in the local development plan
at the moment. So, you know, the actual provision—. Trying to
value that as an overall site, whether it’s a single lot, and
with a prudent lotting exercise, at the moment, is almost
impossible.
|
[119]
Mr
Green: One of the best
examples that I can think of is one that we actually mention in our
response, which is a site at Filton Airfield, just outside Bristol,
which British Aerospace sold recently, having achieved planning
permission. A site approaching 300 acres was sold at £300,000
per acre, and that was because there continued to be significant
expenditure required on infrastructure and the development was
going to be phased over a long period of time. Now, individual
sites would have been worth £1 million at Filton, and yet that
was sold—
|
[120]
Darren
Millar: You’re
making arguments about the market at that time. The only actual
piece of evidence that we’ve got in terms of valuation at or
around the time of disposal was, of course, from Savills in their
valuation report, which said, and I quote:
|
[121]
‘Cardiff
residential land values, particularly in the suburbs have recovered
almost to pre crash levels in early 2007’.
|
[122]
This
was at the time of disposal:
|
[123]
‘and in most
cases were sold by tender with competitive
bidding’,
|
[124]
which,
of course, this particular site wasn’t, was it?
|
[125]
Mr
Mogridge: Is there any
further context around that?
|
[126]
Darren
Millar: Well, do you
disagree—
|
[127]
Mr
Mogridge: What’s the
paragraph—
|
[128]
Darren
Millar: —with
Savills’ assertion that:
|
[129]
Cardiff
residential land values, particularly in the suburbs, had recovered
to pre-crash levels?
|
[130]
Mr
Mogridge: I do disagree,
actually, because Savills themselves actually—if I can find
it and quote you the report—
|
[131]
Darren
Millar: I mean, the only
way to have actually tested the value would've been to market the
site, wouldn’t it, which you didn’t do?
|
[132]
Mr
Green: We had many
discussions with developers in the market.
|
[133]
Darren
Millar: Can I just ask two
questions, before I bring some of the Members in, because I think
these are particularly interesting ones? In terms of the King
Sturge valuation, you suggested that the King Sturge valuation was
the market value of those sites and, of course, there were two
elements of the valuation; there was a ‘with hope’
valuation also, wasn’t there, that King Sturge attached to a
number of the sites, which was quite different to the transfer
value? Why did you emphasise to the board only the transfer value
and give the impression, even though you knew that there was a hope
value valuation given to a number of sites—? Why did you
emphasise only the transfer value to the board in your
discussions—
|
[134]
Mr
Green: The transfer value
was the base value. That was the figure that was used to create the
£55 million fund value. But, the hope value is not necessarily
achievable in the market and, particularly—
|
[135]
Darren
Millar: You wouldn’t
have known, because you didn’t market, did you? You
didn’t put it to the market. Mike.
|
[136]
Mike
Hedges: Could I come back
to the questions that I raised earlier? You compared Filton with
Lisvane. I’ve just done a quick check now on houses for sale:
a four-bedroomed house in Filton—£375,000 to
£445,000; a four-bedroomed house in
Lisvane—£945,000 to £1.75 million. Do you recognise
those sorts of numbers?
|
[137]
Mr
Mogridge: No.
|
[138]
Mike
Hedges: You
don’t.
|
[139]
Mr
Mogridge: No. We don’t
sell houses.
|
[140]
Mike
Hedges: Pardon?
|
[141]
Mr
Mogridge: We don’t
sell houses.
|
[142]
Mike
Hedges: No, but house
prices are directly proportional to land value.
|
[143]
Mr
Mogridge: House prices will
have a direct proportion to land value—the end-value price,
if you’re looking at residual valuation. I haven’t seen
the two houses you’re comparing. There could be a vast
difference in the types of four bedroomed detached house. If
they’re both Persimmon standard boxes, would there be that
much variation? I don’t think there probably
would.
|
[144]
Mike
Hedges: Okay. I will do
further investigations.
|
[145]
Mr
Mogridge: Can I just come
back to you—
|
[146]
Darren
Millar: Of
course.
|
[147]
Mr
Mogridge: —about your
point on the Savills report? This is Savills ‘UK Residential
Development Land’, January 2012. I’ll quote:
|
[148]
‘Nationally,
the rate of land value growth in 2011 was broadly flat, dipping
into negative territory in the final quarter of 2011. Greenfield
land values fell by -0.7% in Q4 2011, bringing annual growth to
2.5%. Urban land values saw comparable quarterly
falls’—
|
[149]
Darren
Millar: That’s the
national picture, isn’t it? I’m talking about the
localised picture, in Cardiff, per the valuation report that they
prepared for South Wales Land Developments immediately before the
sale, okay, which you cannot dispute. You made mention also of the
fact that flooding the market with lots of land would force a
downward pressure on sites, and yet you recommended flooding the
market, effectively, didn’t you, by selling a portfolio of
sites, rather than individual sites, as per the asset management
realisation plan?
|
[150]
Mr
Mogridge: The asset
management realisation plan—
|
[151]
Darren
Millar: Given what
you’ve just said about flooding the market having a downward
pressure on price, why did you pursue recommending this to the
board?
|
[152]
Mr
Mogridge: There’s a
bit of a misremember about this asset management realisation plan,
because, if you look at the individual asset-specific business
plans, each and every one of them, with the exception of the site
at Brackla, which was largely industrial, and Imperial House, which
was a building, which actually was a negative income producing
building, every single asset on that schedule we recommended was
sold before the end of 2012, and that was approved by the RIFW
board, on an individual basis. Now, is selling them on a
site-by-site basis or as a portfolio a better option for the board?
Because, if it’s sold on a site-by-site basis, there’s
quite a high risk that a number of those sites will fail, and,
bearing in mind our knowledge of the legal issues relating to each
and every one of those sites, our recommendation to sell a
warts-and-all portfolio was, in my opinion, a good one, and it
would remain a good one today.
|
[153]
Darren
Millar: So, have you
recommended the same to South Wales Land Developments, then, that
they sell as a portfolio? Of course you haven’t. You’ve
suggested carving the portfolio up into
individual—
|
[154]
Mr
Mogridge: We haven’t
suggested anything to South Wales Land Developments. They’re
a property development company who will row their own boat.
We’re not instructed on all the sites, and we’re
providing advice on a number of the sites in south Wales where we
have good knowledge.
|
[155]
Darren
Millar: You’re
giving completely different advice, aren’t you? It’s
very different advice that you’re giving to them. I’m
going to bring Andrew R.T. Davies in and then Julie Morgan.
Andrew.
|
[156]
Andrew R.T.
Davies: If I could just,
before I go into my main question, seek clarification, or your
opinion, on the Savills report; I do think that’s really
important. From a lay person’s perspective, there’s a
clear quotation there for the report that was developed for the
South Wales Land Developments company, which I’m sure they
would have flagged up to their backers, their lenders as such,
which clearly paints a very, very different picture from the
Cardiff market to what the advice you were giving to RIFW to sell
that property was. It’s a very robust line that they use, and
a very bright picture that they use. So, I’d be grateful for
a further explanation of how your advice was so
contrary—bearing in mind this report was produced in January
2012, so it’s looking back at 2011. This isn’t with
hindsight, as you’re saying the committee is doing at the
moment; this is actually in real time that this report was put
together.
|
[157]
Mr
Mogridge: Firstly, I
haven’t had the benefit of seeing the valuation report from
Savills, produced by Savills, nor have I seen the Colliers report,
and until recently—well, I haven’t even seen the full
district valuer’s report, because all we’ve had is a
redacted copy. Could I have a look at the complete context of the
Savills report that you’ve got there, because it’s
quite—
|
[158]
Darren
Millar: Can’t you
ask your client?
|
[159]
Mr
Mogridge: Pardon?
|
[160]
Darren
Millar: Has your client
not shared this with you?
|
[161]
Mr
Mogridge: We have not, no; I
have not seen a copy of that report.
|
[162]
Darren
Millar: So, South Wales
Land Developments, your client, which purchased this land, have not
shared a copy of this.
|
[163]
Mr
Mogridge: No. They
haven’t.
|
[164]
Darren
Millar: You haven’t
asked for a copy of this from them to support you in your work in
helping them market these sites and get better value for South
Wales Land Developments?
|
[165]
Mr
Mogridge: No.
|
[166]
Darren
Millar: I find that very
extraordinary.
|
[167]
Andrew R.T.
Davies: It’s not my
report to release, but, if it’s releasable, I think that
would be helpful to get further comment, as such, then.
|
[168]
The
other points I wanted a cover off: last week, in the evidence that
the Government officials gave us, James Price in particular said
that, from a policy perspective, it would be completely acceptable
to lose value on some of these properties. In fact, they talked of
a figure of about 50 per cent loss of value. And then Mr Munday
goes on to say that, as the window was closing, we were losing it
by every day—the opportunity to link the European money and
the sale proceeds of these properties. Did you get a feeling that,
as you were putting this deal together, there was a time imperative
that was bearing down on you, rather than a realisation of the
complete value of the properties you were dealing with, and that
there was agreement that, if some value was lost, that was
acceptable?
|
[169]
Mr
Green: ‘No’
is the answer. We weren’t—. There was an imperative to
sell the assets in a timely manner; we were not under any
impression that this was a fire sale—that we had to sell at
any cost. Our duty was to obtain value, and we believe we did
that.
|
[170]
Andrew R.T.
Davies: But there’s
obtaining value in the circumstances that your clients are
expecting you to obtain that value, and there’s obtaining the
maximum value via looking at all avenues, exhausting those avenues
and, ultimately, taking your time to deal with it. And the point
I’m getting at is that some of the evidence we’ve
received clearly shows that there was a mindset that was saying,
‘Just get these deals done—get the deals done, get the
assets out the door’.
|
[171]
Mr
Green: There was a
mindset to sell the assets, as I say, in a timely manner, and our
asset realisation plan, our budget, was to sell the majority of the
sites in 2011, the remainder of the sites in 2012, and then the
last two sites, which actually would have been Imperial and part of
Brackla, in 2013 and 2014.
|
[172]
Andrew R.T.
Davies: So, you did have
definitive timelines to get these properties—
|
[173]
Mr
Green: Yes, we did. We
provided budgeting advice to the board, all of which the Wales
Audit Office have seen, that identified a sales timeline, and the
sale of the portfolio actually achieved that. It achieved it with
much less risk and with a lot of the impairments, because
don’t forget that, as part of the exercise, once we actually
started receiving detailed information on these assets, it was
realised that a lot of them had defects in their title. So, one of
the advantages of the portfolio sale was this infamous
warts-and-all statement, where the purchaser was prepared to take
on board the assets in their then current condition.
|
[174]
Andrew R.T.
Davies: So, it’s
fair to say you had been handed distressed assets, then, that
needed quite a bit of tidying up, from what you’re
implying.
|
[175]
Mr
Green: Yes, it turns out
that we had been handed assets that needed additional work to sort
out the titles.
|
[176]
Andrew R.T.
Davies: And, from your
point of view, it was the timeline that was more
important—because you outlined 2011, 2012, 2013—the
timeline was the important deliverable factor on your part, rather
than the maximum realisation, albeit, within that timeline, you
wanted to achieve the maximum value, but you had to get the assets
away by the timeline that you were given.
|
[177]
Mr
Green: Yes, I believe
that we would have been fairly criticised if we were still owning
the majority of those assets in 2014, and, as a consequence, had
not been able to invest in regeneration projects in Wales, which
was the principal purpose of the fund.
|
[178]
Andrew R.T.
Davies: Do you believe
that the information that you were giving Amber was being
transferred to the board in its entirety? We heard last week from
Amber, for example, that some of the information they would put
together, and there’s some evidence in the paperwork that
indicates that some of the information never reached the board in
its entirety. Do you feel confident that you had that communication
with the board, and that all the information and evidence that you
were providing to them to make decisions was reaching the
board?
|
[179]
Mr
Green: Yes, we were
working alongside Amber, or Amber were working alongside us,
whichever way you want to—
|
[180]
Andrew R.T.
Davies: Well, I appreciate
that, but there’s two things—working alongside, and
your information going through.
|
[181]
Mr
Green: Yes.
|
10:00
|
[182]
Mr
Mogridge: Can I answer that
question? The answer to the question is that the information that
we provided to Amber was always discussed. Amber, once the initial
business plan had been approved in the March 2014 meeting,
weren’t actually under any obligation to pass every facet of
information through to the board. They were the fund manager; they
were running the project. So, the information we provided to
them—I believe everything that was of material consequence to
the asset sales was passed on. If it wasn’t, in their
opinion, of material consequence, they were completely within their
rights not to pass it on, but the extent of that I don’t
know. There’s a lot of information passing hands here;
it’s not just the land sales, which this is all about;
it’s the fact that, at the time, there were 62 investment
projects trying to be run on top of everything else. It would be
impossible to actually relay everything that was going
on.
|
[183]
Andrew R.T.
Davies: Yes, but, from the
evidence we’ve seen, there’s some important
deficiencies in some of the information that was presented to the
board and the final agreements that were finally put in place.
Frankly, I’m a farmer, I’ve done land deals over my
time; I don’t think any of it’s rocket science and I
don’t take the point that it’s able to provide this
information. It’s a critical part of the relationship that
you, as the contracted experts in the field, and then the client,
feel confident that the flow of information is giving them the true
picture.
|
[184]
Mr
Green: We were happy that
Amber—. We were happy in our own minds. It wasn’t up to
us to determine, but we were happy that Amber were reporting
appropriately to the board. During the sale process, it was Amber
that were negotiating the contract. It was Amber’s job to
negotiate the contract, and then to report. My understanding is
that they then provided a final report to the board, which included
a legal report from Morgan Cole, which identified to the board
exactly what the terms of the sale were, and that was provided to
enable the board to sign or authorise signature into
contract.
|
[185]
Andrew R.T.
Davies: And one final
point, if I may. I know Aled Roberts asked you this question about
meetings that Amber identified last week with Ministers and civil
servants, and I know you came back and said that you weren’t
participating in any of those meetings. But were you engaged in any
other meetings with civil servants or Ministers outside of the RIFW
chain of communication?
|
[186]
Mr
Green: No.
|
[187]
Mr
Mogridge: Well, that’s
not quite true. The only time we did have communication with civil
servants is when we were trying to sort out the land assets, and we
did have a number of—I think two—meetings, at the legal
department of Welsh Government, just trying to understand what was
being sold and what was being placed into the fund.
|
[188]
Andrew R.T.
Davies: That was to do
with the title deeds specifically, and the queries that you’d
identified in the portfolio.
|
[189]
Mr
Mogridge: Yes, it was all to
do with the title deeds and the queries.
|
[190]
Andrew R.T.
Davies: And that was with
officials, that was, then, within the legal department.
|
[191]
Mr
Mogridge: Yes, that was just
with officials of Welsh Government.
|
[192]
Darren
Millar: Okay, thank you.
Julie Morgan.
|
[193]
Julie
Morgan: Thank you. Before
I go on to ask you about conflicts of interest, I just wanted to
return to the Lisvane land. We were told last week that, in
hindsight, the officials considered that Lisvane should not have
been included in the portfolio. What is your view on that? And can
I declare an interest as it is in my constituency of Cardiff
North?
|
[194]
Mr
Mogridge: As said
previously, what was placed into the fund wasn’t our call. We
basically dealt with what we were provided with, which is what
happens a lot in our business. We were presented with a number of
assets and our job was to maximise value and sell them.
|
[195]
Julie
Morgan: So, you
don’t have any views on that.
|
[196]
Mr
Green: I think
what’s important about Lisvane is that it has been in Welsh
Government ownership for a large number of years—I think
I’ve heard 20 years—with very little activity. It is
now in the hands of a private sector developer, who is promoting it
for development, and it’s been sold under a profit share
arrangement, such that, when the Lisvane land is allocated within
the local development plan for residential use and is sold, then
the Welsh Government will participate in the uplift in
value.
|
[197]
Julie
Morgan: And what
percentage would the Welsh Government gain from that?
|
[198]
Mr
Mogridge: Thirty per
cent.
|
[199]
Julie
Morgan: Thirty per
cent?
|
[200]
Mr
Mogridge: Yes.
|
[201]
Julie
Morgan: Right. And would
you agree that you did underestimate the actual developable area in
Lisvane?
|
[202]
Mr
Mogridge: No, the valuation
appraisal that was put forward in our board report—.
Basically, at the time we were looking, there was actually never a
consortium in place, but there was a loosely held together bunch of
individuals who were negotiating a 568 acre site in Lisvane. The
Welsh Government were a party to that. When this was placed into
RIFW, RIFW did not have to adhere to any of that procedure. The
site itself was being promoted as a stand-alone site. The—.
Sorry, I’ve lost my train of thought on that.
|
[203]
Julie
Morgan: It’s just
that I thought you reported to the RIFW board that it was only 30
per cent or 25 per cent—
|
[204]
Mr
Mogridge: No, sorry, it was
25 per cent. We were looking at it as an overall. When you get a
site of that magnitude, you’ll get a land equalisation. You
get land equalisation because the development density will be split
over the entire site. We weren’t sure what it was, so instead
of actually saying, ‘It’s 25 per cent, 30 per cent or
50 per cent’—whatever that number may be—we
suggested that they would receive a net figure per acre on
development land and that the net figure per acre would be
multiplied by the number of acres you actually get consent for. So,
in terms of that document, it doesn’t make any difference if
it was 1 acre or 121 acres because you’ll still get the
£600,000 an acre on whatever the ultimate result was. So, we
weren’t trying to be clever in formulating a process and
looking at a planning consent 10 years hence, because we
don’t know what that’s going to be. So, we’ve
looked at protecting Welsh Government—sorry, RIFW’s
value by an overage provision, which is standard
practice.
|
[205]
Darren
Millar: That’s not
quite the question though, is it? The question is: why have your
assumptions changed? So, in your most recent communication with the
committee, you seem to be suggesting that around 50 per cent of
that site is developable, in effect, versus your advice to the RIFW
board in June 2011 that only 25 per cent of the
site—
|
[206]
Mr
Mogridge: No, I just made
that point: that is not right. The fact that we actually now have
knowledge of what the planning applications are being submitted
for, are now—. Back in 2011, we were making assumptions on
the value and the assumptions on the land take, we could not
accurately assess the land take, so, we put an overage provision
into the calculation. We gave a land figure—
|
[207]
Darren
Millar: I understand that,
but I think the point that’s being made is that because of
that much lower assumption back in June 2011, that could have had a
significant impact had you used the 50 per cent figure at that
time, particularly in view of the Rightacres proposal that was on
the table, which was giving some overage on that site.
|
[208]
Julie
Morgan: Yes. It certainly
could have influenced the board.
|
[209]
Mr
Green: The point here,
also, is that the residential value, which is what we’re all
aiming for, and what we’re talking about, is not actually
achievable until the site has an allocation for residential use,
and even today—three and a half years after the sale—it
does not have residential use. Therefore, it does not have the
value that we’re all talking about and that we’re all,
frankly, hoping for because the Welsh Government will participate
in the additional value that is generated.
|
[210]
Julie
Morgan: Thirty per
cent.
|
[211]
Mr
Mogridge: I think, from a
planning context as well, if this doesn’t get an allocation
in the local development plan and if there’s a change of
Government in May, and this hasn’t been allocated and it
hasn’t had a planning consent granted on it—it might
well do—you’re stuck with a farm for 15
years.
|
[212]
Julie
Morgan: This land’s
been talked about for many years as being developable land, so I do
think that the information you’ve given has led to
assumptions that are not correct.
|
[213]
Mr
Mogridge: We tried to be
realistic in our assumptions—there'd be no reason why we
would be anything other than realistic. We've tried to protect the
best interests and value for the RIFW, and I think we've actually
done that. You know, from a development perspective, if you're
looking at high percentage overage as you're getting into
joint-venture territory, where you’re then meeting a cost for
actually promoting the land, I know that this site in particular,
to date, being run through the planning process, has ramped up
nearly £1 million-worth of fees—planning fees and
professional fees—to get it into a state of marketability,
and that’s without even starting on the infrastructure. So,
there's a lot of cost implication in this that hasn't been
realised. Was RIFW in a position to actually run that itself? It
probably wasn't, but that wasn't our decision. Our
decision—well, we didn't make it; we just gave advice. We
don't make the decisions.
|
[214]
Julie
Morgan: Well, it just
seems to me that you did give this report—you know, 30 acres,
25% of total ownership, £750,000 per acre gross
value—and that is what the RIFW board received,
and—.
|
[215]
Mr
Mogridge: The number is the
important bit, which was pointed out to them. They are all
professional people; they did understand that. The number is the
important bit, per acre.
|
[216]
Julie
Morgan: Right.
|
[217]
Darren
Millar: But, obviously,
your view may have influenced why they proceeded with the
GST—you know, the South Wales Land Development
proposal—as opposed to others that were being discussed at
the time.
|
[218]
Mr
Mogridge: Our view
was—. Quite honestly, at the time, that was our understanding
and that was a bone fide assumption that we made.
|
[219]
Darren
Millar: Okay. Aled
Roberts.
|
[220]
Aled
Roberts: A
gaf i jest ofyn i chi pam nad aethoch chi ati’n weithredol i
farchnata’r safleoedd yma felly? Rydych chi wedi dweud bod y
datblygwr, erbyn hyn, yn marchnata’r safle yng Nghaerdydd,
ond pam nad aethoch chi ati i farchnata?
|
Aled
Roberts: May I just ask you
why you didn't set out to actively market these sites, therefore?
You have said that the developer, by now, is marketing the site in
Cardiff, but why didn’t you set out to actively market
them?
|
[221]
Mr
Mogridge: The context of the
timescale on this has got to be understood. We were instructed on
14 September 2010 to be the investment managers for RIFW. The first
board meeting was on 28 January, and the second board meeting was
on 28 March. That's quite a short time frame. Within that period,
we were carrying out due diligence in terms of planning and legal
on all of the sites, and at the point in time of the March board
meeting, those assets were not ready for market, because of the
impairments. One of the sites, we discovered, we didn't even own,
and that's the extreme, but there were a number of title issues, a
number of access issues, and we needed to put that into a state of
marketability, and the timescale for that was
undetermined.
|
[222]
Aled
Roberts: Os
oedd yna resymau felly nad oeddech chi’n marchnata ar y
farchnad agored—rwy’n meddwl bod Mr Green, yn ei
dystiolaeth yn gynharach, wedi dweud eich bod chi wedi cyfathrebu
efo datblygwyr—beth a wnaethoch chi yn union i gysylltu yn
uniongyrchol efo datblygwyr?
|
Aled
Roberts: If there were
reasons, therefore, as to why you didn't market on the open
market—I think that Mr Green, in his evidence earlier, stated
that you had been in communication with developers—what did
you do precisely to directly contact developers?
|
[223]
Mr
Mogridge: We actually had
quite a bit of direct development interest. When the RIFW contracts
were tendered, quite a number of high-profile agents acting in the
Cardiff marketplace and the south Wales marketplace were aware of
the assets. There were agents from north Wales looking after the
management on behalf of Welsh Government, which was transferred
into the RIFW. You had Savills, who were undertaking the original
valuations prior to transferring to RIFW, King Sturge, who provided
all the valuation reports on the sites, and GVA and Knight Frank,
who were also tendering for the contract work. So, the information
was quite widely available in the marketplace. The transfers were
all well documented, and Welsh Government had actually announced on
a number of occasions. We were undertaking roadshows for the
promotion of the investment side of the business, which is our
primary function. During the roadshows—and we did one in
north Wales, one in Swansea, and one in Cardiff—those were
attended quite well by developers, investors and land promoters
plus agents.
|
10:15
|
[224]
So,
the market exposure—for want of a better word—was
actually quite good. We then had quite a few unsolicited approaches
to see whether we would sell the land—I think that all of the
national house builders spoke to us on one basis or another. We had
quite a few land promotion companies looking at it. We had
indicative proposals from both Rightacres and from South Wales Land
Developments and we were actively involved in a number of
conversations with quite a few parties.
|
[225]
Aled
Roberts: Sut
y cafodd Mr Langley Davies, felly, o South Wales Land Developments
wybod am y portffolio asedau yma, wrth gofio, wrth gwrs, nad
oeddech chi wedi’i farchnata? Hefyd, nid wyf yn credu bod y
cwmni arbennig yna wedi’i restru fel cyswllt marchnata ymlaen
llaw mewn unrhyw bapurau.
|
Aled
Roberts: How did Mr Langley
Davies, therefore, from South Wales Land Developments become aware
of this asset portfolio, bearing in mind, of course, that you
hadn’t marketed it? I also don’t believe that that
specific company had been listed as a marketing contact beforehand
in any papers.
|
[226]
Mr
Mogridge: No, you’re
absolutely right. South Wales Land Developments wasn’t a
listed company; it didn’t exist. Langley Davies actually
approached us originally because he owns the buildings next door to
Imperial Park, Imperial Courtyard, and it was my understanding from
him that he originally tried to buy the Imperial House and Imperial
Courtyard buildings from King Sturge, who were Welsh
Government’s appointed disposal agents, and had failed a year
or so previously. He approached us on the basis of that and during
the course of the conversations that we had with him, he was made
aware of the portfolio.
|
[227]
Aled
Roberts: Gennych
chi?
|
Aled
Roberts: Was that by
you?
|
[228]
Mr
Mogridge: Sorry?
|
[229]
Aled
Roberts: Gennych
chi?
|
Aled
Roberts: Was that by
you?
|
[230]
Mr
Mogridge: Yes, it was.
Yes.
|
[231]
Darren
Millar: So, you made him
aware of the portfolio.
|
[232]
Mr
Mogridge: Yes.
|
[233]
Darren
Millar: Okay. But you
didn’t make other people aware of the portfolio in quite the
same way.
|
[234]
Mr
Mogridge: Yes, I
did.
|
[235]
Darren
Millar: Can I just ask as
a point of information? One of the things that is very clear in the
auditor general’s report is that not all of these other
expressions of interest were communicated to the RIFW board. In
fact, as a company, you were turning some people away,
weren’t you? I mean, there’s a reference in the auditor
general’s report, paragraph 3.83, regarding an enquiry from
Legat Owen in respect of the north Wales sites. The response from
your company at that time, when you were already progressing in
terms of the discussions with GST, or South Wales Land Developments
as it’s now known, was,
|
[236]
‘it is a
little premature at this stage as we still have to collate
significant amounts of information’.
|
[237]
So,
you didn’t even explore it with them, and, nor was it
communicated to the board. Why not?
|
[238]
Mr
Mogridge: Legat Owen. At the
time, I think that was a response from our Manchester office that
was dealing with the north Wales assets. I’m unaware that
that wasn’t communicated to the board, because the—.
Well, Legat Owen were actually the managing agents for the north
Wales assets for Welsh Government prior to their inclusion in the
fund. The level of their interest—. I know they expressed
interest in one of the sites or part of one of the sites for a
nursing home for a client and they also had—. I’ve got
the information here somewhere—
|
[239]
Darren
Millar: I’ve seen
the list of organisations that you had discussions with. The
question I’m asking is: why weren’t these discussions
always followed up? So, this Legat Owen enquiry; why wasn’t
that sufficiently followed up and why were these things not always
and consistently communicated to the board? Why did you communicate
some offers and not others, and some expressions of interest and
not others?
|
[240]
Mr
Mogridge: I’d have to
look at the timescales.
|
[241]
Darren
Millar: Was that because
you had certain friends that you preferred to engage
with?
|
[242]
Mr
Green: That was actually
not the case. All—
|
[243]
Darren
Millar: But we just heard
from Mr Mogridge—
|
[244]
Mr
Green: All interest
was communicated to Amber.
|
[245]
Darren
Millar: Okay, but
we’ve just heard from Mr Mogridge that Mr Langley Davies was,
effectively, tapped on the shoulder and pointed in the direction of
the portfolio, haven’t we?
|
[246]
Mr
Green: A large number of
meetings were taking place with potential interested
parties.
|
[247]
Darren
Millar: But not all
potential interested parties were tapped on the shoulder to express
an interest, were they?
|
[248]
Mr
Green: All those
interested parties were advised—
|
[249]
Darren
Millar: No, no.
We’ve been—
|
[250]
Mr
Green: —of the
availability of the—
|
[251]
Darren
Millar: No, wait a second.
We were told that there were unsolicited
enquiries—okay—by other interested parties. This one
from Mr Langley Davies was not unsolicited, was it, Mr Mogridge,
because you—?
|
[252]
Mr
Mogridge: It
was—
|
[253]
Darren
Millar: Well, you’ve
just confirmed to Aled Roberts that—
|
[254]
Mr
Mogridge: It was completely
unsolicited. He approached us on the back of information he’d
received on the asset that he’d been trying to buy
previously, and he came in to see us about the asset he’d
tried to buy previously. As a property entrepreneur, which he is,
he enquired as to what else was being sold.
|
[255]
Darren
Millar: So, you
didn’t make him, therefore, aware—. I mean, in direct
response to Aled Roberts’s question, you said that you made
him aware of all of the assets—
|
[256]
Mr
Mogridge: I just said that.
I just said that he came in specifically about the Imperial
House/Imperial Courtyard asset. He requested information on the
balance of assets being sold by RIFW, and he was provided with
exactly the same information as anybody else who
enquired—
|
[257]
Darren
Millar: Apart from Legat
Owen, of course, who you didn’t provide any information
to.
|
[258]
Mr
Mogridge: I never had any
communication with Legat Owen.
|
[259]
Darren
Millar: Well, your
organisation did, didn’t it?
|
[260]
Mr
Mogridge: It
did—
|
[261]
Darren
Millar: These are
taxpayers’ assets worth millions of pounds, and yet an
enquiry from Legat Owen was not followed up.
|
[262]
Mr
Mogridge: Legat Owen offered
£450,000 on part of the site for a nursing home, without
planning and without access—
|
[263]
Darren
Millar: Fairways Care, as
I understand it, offered that.
|
[264]
Mr
Mogridge: Yes.
|
[265]
Darren
Millar: But you
didn’t pursue this suggestion from Legat Owen that one of
their clients was interested in the north Wales site. In fact, you
dampened down the interest by saying ‘It’s premature at
this stage’. Why—?
|
[266]
Mr
Mogridge: I
will—
|
[267]
Darren
Millar: Why was that not
communicated to the board?
|
[268]
Mr
Mogridge: I will check the
dates on that.
|
[269]
Darren
Millar: Why were these
things not being communicated consistently to the board? What was
the process for communicating offers and interest to the
board?
|
[270]
Mr
Mogridge: The process was a
monthly report, which was passed on to Amber, listing all of the
interest that we had received.
|
[271]
Darren
Millar: Well, we’ve
got copies of those monthly reports, of course, and so did the
Wales Audit Office have copies, and it’s quite clear that
they say in their report:
|
[272]
‘We have not
found any record of the interest being reported to the RIFW
Board’.
|
[273]
Was it
a mistake?
|
[274]
Mr
Mogridge: I’m not
sure. I will check.
|
[275]
Darren
Millar: Sandy
Mewies.
|
[276]
Sandy
Mewies: Thank you, Chair.
You yourself have covered many of the areas I wanted to ask about,
but I wanted to move on, really, to the Monmouth site. You will be
aware that South Wales Land Developments have sold part of that
site already for £12 million, following an open market and
competitive process with offers, seemingly, from five national
house builders. Do you think that, perhaps, it could have been
something that RIFW could have done for themselves with a similar
result or do you think there’s been a right time for each
part of the process?
|
[277]
Mr
Mogridge: The Monmouth asset
was certainly—. Of all the assets placed into the portfolio,
it was probably the most likely to get a planning consent. There
was a risk running the planning process with Monmouth because there
was quite a lot of objection on the site and there was quite a high
cost of actually promoting the site through the planning process.
Could RIFW have done it? It possibly could have done. I think, in
the ‘warts and all’ portfolio sale, Monmouth was
probably the jewel in the crown of the assets that would assist in
the sweetening of the disposal of the remainder of the assets, and,
being covered with a 50 per cent overage on the development value,
it wasn’t a bad deal for RIFW. You’re coming into
joint-venture territory then, so the actual risk-to-reward ratio is
actually quite high.
|
[278]
Mr
Green: I think also the
main point for me is that, although Monmouth, as Lee has said, was
actually one of the more certain assets in terms of achieving a
planning allocation, it’s actually taken this long to achieve
it; it’s taken
this long to achieve the sale. Although contracts have been
exchanged at £12 million, no money has yet been received and
there is a phased payment schedule that’s been agreed, such
that, if we were RIFW waiting for money to come in to invest in
regeneration projects, we’d be short by quite a significant
amount of money, because we’d still be waiting for those
receipts to come in.
|
[279]
Sandy
Mewies: Thank
you.
|
[280]
Darren
Millar: Okay. Alun
Ffred.
|
[281]
Alun
Ffred Jones: Byddaf yn gofyn yn Gymraeg. Fe gawsoch chi gynllun gwireddu
asedau a oedd wedi cael ei roi gerbron y bwrdd, ac wedyn a gafodd
ei gytuno ar ddechrau 2012, a oedd yn dweud y dylid gwaredu’r
safleoedd yma yn unigol neu fesul lotiau. Pam felly ichi awgrymu i
RIFW beidio â bwrw ymlaen â’r cynllun
hwnnw?
|
Alun Ffred
Jones: I will be asking
my questions in Welsh. You had an asset realisation plan that was
put before the board, and was then agreed at the start of 2012, and
that plan said that these sites should be disposed of individually
or in lots. Why, therefore, did you suggest to RIFW that it should
not proceed with that plan?
|
[282]
Mr
Mogridge: We didn’t.
The asset realisation plan was drafted and it was accepted in the
March board meeting. The board papers that were submitted to the
board, you’re absolutely right, made reference to individual
asset sales. Those individual asset sales—the majority of
them, with the exception of two of the assets—were to be sold
by the end of 2012. On 4 March, prior to the board meeting, we had
an indicative proposal from South Wales Land Developments,
or Barclays Wealth, as it was at the time, which we are duty-bound
to report to the board, because we’d received it in writing.
We pushed it on to Amber, and it was reported to the board at the
same board meeting. The proposal looked relatively attractive in
terms of values—the values being in line with the market and
the book values that we had. The proposal at the time didn’t
have overage on anything other than the Monmouth site, and there
were a couple of other anomalies, which we were basically requested
by the board to investigate. So, there was no decision made in
March to accept that offer. We were sent away to do some more work
on it, to actually analyse it and to make some recommendations,
which is exactly what we did.
|
[283]
Alun
Ffred Jones: Ond
roedd y cynnig am y portffolio yn wahanol, felly, i’r cynllun
roeddech chi eich hunain wedi cynnig i’r bwrdd.
|
Alun Ffred
Jones: But the bid for
the portfolio was different, therefore, to the plan that you
yourself had proposed to the board.
|
[284]
Mr
Mogridge: Yes, the actual
bid that was received, the offer that was received, was slightly
different. In value terms, it was actually slightly
enhanced—I think it was running at about 10 per cent more
than the actual book values that we had in place—and we had a
significant opportunity to benefit from overage from the sale. It
also de-risked the portfolio. You’ve got to bear in mind that
these assets were impaired—and a number of them quite
significantly impaired—and the audit office themselves
acknowledged and Welsh Government acknowledged that there was the
possibility that they wouldn’t actually achieve the values
they were transferred in at, which would actually then leave RIFW
and the match-funding issue short. So, we were looking at an
opportunistic proposal in the depths of a very, very, very poor
marketplace.
|
[285]
Alun
Ffred Jones: Rydych yn sôn tipyn am y book value, a bod y
cynnig yma, mwy neu lai, yn debyg i’r book value, ac
eto rydych chi’n dweud, pan dderbyniwyd y tir yma gan y
Llywodraeth, a chithau’n dechrau edrych arno fo, nid oedd yna
ddim gwybodaeth. Rydych chi’n feirniadol iawn am y wybodaeth
oedd ar gael ynglŷn â’r tiroedd yma, ond eto rydych
chi fel petaech chi’n derbyn y prisiad ar y tir yn
ddi-gwestiwn.
|
Alun Ffred
Jones: You’ve
talked a lot about the ‘book value’, and that this bid
was, more or less, the same as the book value, but you say that,
when this land was accepted by the Government, and you started to
look at it, there was no information at all. You’ve been very
critical of the information that was available about this land, but
you seem to accept the valuation of the land without
question.
|
[286]
Mr
Green: No. The asset
realisation plan provided an opinion of the achievable prices for
the land, which adds up, actually, to £24.935 million. So, in
the report that we submitted to the board in April 2011, we
provided a schedule that identified the transfer value as
£20.65 million, an ARP value, shall we call it, of
£24.935 million, with a downside price also identified at
£18.15 million. That is the price that reflected the potential
issues and problems that were being identified, particularly with
regard to Imperial House/Courtyard, where it was being discovered
that there was significant capital expenditure required in order
to—
|
10:30
|
[287]
Alun Ffred
Jones: Dof
yn ôl at brisiau’r tir. Pam na roddodd Lambert Smith
Hampton gopi o adroddiad prisio King Sturge i aelodau bwrdd y
gronfa? Roedd yr adroddiad hwnnw yn cynnwys manylion gwerth
gobeithiol pump o’r safleoedd yn y portffolio.
|
Alun Ffred
Jones: I’ll come
back to the land prices. Why didn’t LSH give a copy of the
King Sturge valuation report to the RIFW board? That report
included hope-value estimates for five of the sites in the
portfolio.
|
[288]
Mr
Green: It was not, in my
opinion, relevant for the board to see that; that was a transaction
that had occurred before we were appointed. It supported the
transfer of the assets into the RIFW board, and we were instructed
to provide an ARP, which is what we were doing, and it was the ARP
figures that were being discussed with the board at the time. The
King Sturge valuation at that time did not have relevance to those
discussions.
|
[289]
Alun
Ffred Jones: Pam
na sicrhawyd prisiad annibynnol ar gyfer bwrdd y gronfa cyn gofyn
iddyn nhw gytuno i werthu’r asedau yn breifat, heb
brofi’r farchnad?
|
Alun Ffred
Jones: Why wasn’t
there an independent valuation given to the RIFW board before the
independent sale was agreed?
|
[290]
Mr
Mogridge: I don’t
know. We did obtain a quotation for an independent valuation to be
undertaken, which was passed on to Amber.
|
[291]
Mr
Green: Yes, it was
discussed that that would be obtained, but it wasn’t our
decision to do that.
|
[292]
Alun
Ffred Jones: Rydych wedi sôn cryn dipyn am yr asedau yma; rwy’n
credu bod rhyw gyfeiriad at ‘distressed assets’
a bod yna broblemau di-rif. A gaf i jest gyfeirio at un ohonyn nhw,
sydd yn digwydd bod yn fy etholaeth i—fferm Goetra Uchaf,
Bangor? Ac mae’r prisiadau sydd yn y gwahanol adroddiadau yma
yn prisio Goetra Uchaf yn £1.5 miliwn, ond, wrth gwrs, mae
rhai yn ei osod mor uchel â £3 miliwn. Felly, mi werthwyd
o am tua £1.5 miliwn fel rhan o’r portffolio. Roedd o
eisoes yn rhan o gynllun unedol Gwynedd, ac felly roedd o’n
dir ar gyfer datblygu tai. Yn fuan iawn ar ôl i South Wales
Land Developments gael y tir yna, fe werthwyd o am £2.5
miliwn, sy’n awgrymu i mi nad oeddech chi wedi prisio’r
tir yna yn gywir o gwbl. Ond ar dir fel yna, a oedd eisoes o fewn
cynllun unedol, pam nad oedd yna ddim overage arno
fo?
|
Alun Ffred
Jones: You’ve
mentioned quite a lot about these assets; I think there is a
reference to ‘distressed assets’ and that there are
great problems. Could I just refer to one of them, which happens to
be in my constituency—Goetra Uchaf farm, Bangor? And the
valuations that are in the different reports here value Goetra
Uchaf at £1.5 million, but, of course, some place it as high
as £3 million. So, it was sold for about £1.5 million as
part of the portfolio. It was already part of the unitary plan for
Gwynedd, so it was development land for housing. Very soon after
SWLD had that land, it was sold for £2.5 million, which
suggests to me that you hadn’t valued the land accurately at
all. But on that kind of land, which was already within a unitary
plan, why wasn’t there any overage on
that?
|
[293]
Mr
Green: The Bangor
land—. The transfer value, as you say, was £1.5 million.
The figure that we actually put on it as part of our ARP was
£3 million. So, we had identified the potential for greater
value, but it was sold as part of the portfolio. We did receive an
offer of £2 million in July after we agreed terms for the
portfolio sale. And you’re right that the site was sold for
£2.5 million. But in terms of whether or not that should
include overage, I think we need to just consider—and we did
consider at the time—that whether or not you include overage
on land, there’s a balance between the initial price
that’s achieved, which is a certain price, and the future
price that might be achieved on overage. And we maximised, in our
opinion, the initial price that was achieved for this portfolio by
agreeing overage on two assets, which were Lisvane and Monmouth. We
also received, as you know, an indicative proposal from Rightacres,
which did include overage on more assets, but was at a much reduced
initial price.
|
[294]
Alun
Ffred Jones: Os
caf i jest orffen, un feirniadaeth ar y cytundeb wnaethpwyd oedd
nad oes overage ar ragor o safleoedd a phetaech chi wedi eu
gwerthu nhw’n unigol, neu mewn lotiau, yna mi fyddech chi
wedi gallu gwireddu gwell deal i’r cyhoedd. Ers y
gwerthiant i South Wales Land, mae tri a hanner o’r safleoedd
yma wedi’u gwerthu, ac maen nhw’n werth, mae’n
debyg, tua £17 miliwn fel cyfanswm. Mae hynny’n awgrymu
i mi bod y tir yma wedi’u werthu yn rhatach na’i werth.
A fyddech yn cytuno neu’n anghytuno?
|
Alun Ffred
Jones: If I can just
finish, one criticism of the agreement that was made was that there
is no overage on more sites, and that if you had sold them
individually, or by lot, then you would have been able to realise a
better deal for the public. Since the sale to South Wales Land,
three and half of these sites have been sold, and they are worth,
apparently, about £17 million in total. That suggests to me
that this land has been sold more cheaply than its value. Would you
agree or disagree?
|
[295]
Mr
Mogridge: I disagree with
it. On the three and a half assets that have been sold, firstly,
£17 million hasn’t been received because the Monmouth
site hasn’t yet completed. So, there’s £12 million
pounds of moneys yet to come in to that calculation. And, in any
event, half of that money from the Monmouth sale will go back to
RIFW, not South Wales Land. On the balance of sites, they
have made profit on them, but, in all reality, a property
speculator wouldn’t expect to buy a portfolio of sites that
he had to still work on if he wasn’t going to make a
profit.
|
[296]
Alun
Ffred Jones: Diolch yn fawr.
|
Alun Ffred
Jones: Thank you very
much.
|
[297]
Darren
Millar: Can I just ask, in
terms of the South Wales Land Development sale at the agreed price
of £12 million, does that include any overage
terms?
|
[298]
Mr
Mogridge: Sorry,
the—
|
[299]
Darren
Millar: Is there any
overage in addition to the £12 million?
|
[300]
Mr
Mogridge: No.
|
[301]
Darren
Millar: There’s no
overage, so that’s a straight sale. Thank you. Julie, you
wanted to come in on conflicts of interest.
|
[302]
Julie
Morgan: Conflict of
interests, yes. Would you agree that you broke your own
company’s procedures, and the advice of other professional
bodies, in having your same employee trying to deal with both the
interests of RIFW and SWLD?
|
[303]
Mr
Green: We have quite
clear conflict of interest procedures, yes, and those conflict of
interest procedures were agreed with Amber at the outset of the
creation of the fund.
|
[304]
Julie
Morgan: I thought that
your procedures said that it couldn’t be the same person
dealing with both bodies.
|
[305]
Mr
Green: The procedures are
that if there is a conflict of interest, or a potential for
conflict of interest, then we create an information barrier by
storing different information in different offices. So, in this
particular case, you’re talking about the South Wales Land
instruction, and that was being handled out of the Cardiff office.
I was identified as the person based in the London office who would
be the conduit for information where it needed to be transferred or
discussed between us and Amber.
|
[306]
Julie
Morgan: So, you’re
saying that it’s not correct that the same person was dealing
with RIFW and South Wales Land Development.
|
[307]
Mr
Green: The same
person—. There was one particular issue, which was in
connection with the Brackla land, where the contract on Brackla was
a conditional contract. It was subject to the Linc Cymru planning
application, under which they would have taken on the affordable
housing commitment for the wider land. Therefore, it was of benefit
to RIFW that (a) that the land sold, and (b) that it sold at the
full value. The instruction that Amber gave to the planning
consultant within LSH was to oversee that process and to report
back progress on the Linc Cymru application.
|
[308]
Julie
Morgan: It does seem
rather—how can I say—confusing. Really, to go back to
the point, I understand you signed an agreement with SWLD on the
day after the sale of 14 of the 15 sites in the portfolio. So, from
that point, you were acting on both sides.
|
[309]
Mr
Mogridge: No. The deal was
crystallised on contract exchange and completion. We signed a
management agreement, so we continued to manage the land, in the
same way as Legat Owen continued to manage the land when it was
transferred into the fund, from Welsh Government into RIFW. We
continued to manage the land after the sale had taken place. The
fact was that RIFW had sold all of the assets, completed on all of
the assets, but hadn’t completed on the Brackla site because
that was subject to this agreement with Linc, and there was a delay
of 12 months from exchange to completion. The value was
crystallised on the exchange date. The only detriment, really, or
potential conflict, if you could argue that was a conflict, was
that that site had not completed, which brings back into play the
individual who was actually monitoring the planning, because both
the interests of RIFW and South Wales Land were aligned in terms of
the fact that South Wales Land could have stepped away from that
contract to buy that land if the Linc deal hadn’t completed,
because, basically, the 30 per cent social housing commitment would
then have transferred onto the RIFW land. So, it would actually
have been detrimental to RIFW, and we did provide valuations at
that time of, if that scenario had arisen, what impact it would
have had on RIFW.
|
[310]
Julie
Morgan: Would you agree
that, to the public, it seems extraordinary that you can be acting
on both sides in this sort of way?
|
[311]
Mr
Mogridge: I do. This was in
a planning capacity. There was no effect on the value. There could
not have been an effect on the value other than a positive value
towards RIFW. Yes, I can absolutely see that, if you’re
acting for two parties, there is potentially a conflict of interest
that could give rise to a problem, but in this
instance—
|
[312]
Julie
Morgan: And could
influence the price of the land.
|
[313]
Mr
Mogridge: No. The land sale
had already happened. It was exchanged, so the contract price was
set. So, this conflict of interest would have had no bearing at
all—the only bearing would have been a positive bearing on
RIFW, because if that Linc deal hadn’t happened—.
Basically, they’d taken out all of the social housing
commitment from the remainder of the land and put it on a
site-specific piece of land, which Welsh Government was giving to
Linc. If that hadn’t happened, any application made on the
Brackla site would then have been subject to a social housing
commitment of up to 30 per cent. So, that would have negated 30 per
cent of the site in terms of land value, so there would be a
decrease in value. So, if South Wales Land had stepped away from
that deal, RIFW would have actually taken Brackla back in-house,
and we would have had to remarket it at a lower price.
|
[314]
Darren
Millar: Do you
accept—sorry, Julie.
|
[315]
Julie
Morgan: Did you have any
discussions with South Wales Land Developments before moving over
to work for them—before these contracts were set
up?
|
[316]
Mr
Mogridge: These were
passed-on management contracts. They are quite small
contracts.
|
[317]
Julie
Morgan: The issue
isn’t whether they’re small or not, it’s whether
this was an ethical way to behave, really.
|
[318]
Mr
Mogridge: It’s how the
market works.
|
[319]
Darren
Millar: Well, you say
it’s how the market works, but it’s against your own
company’s policy, isn’t it? And it’s against the
Royal Institution of Chartered Surveyors professional standards as
well. In addition to that, you say that your interests were
aligned, but, of course, your interests weren’t aligned in
terms of the potential receipts in terms of overage, were they? As
far as RIFW was concerned, it wants to maximise overage, but South
Wales Land Developments wants to minimise overage payments. So, the
interests, whilst they may have been aligned in terms of the total
value of the land at Brackla going up, they certainly weren’t
in terms of the overage.
|
[320]
Mr
Mogridge: There was no
overage on Brackla.
|
[321]
Darren
Millar: No, but there was
overage on the other pieces of land where contracts had been
exchanged in terms of South Wales Land Developments.
|
10:45
|
[322]
Mr
Mogridge: But we had no
conflicts of interest in terms of—
|
[323]
Darren
Millar: You did have a
conflict of interest because presumably you were advising South
Wales Land Developments on how to minimise the impact of the
overage clauses so that they could pay less to RIFW, and yet
advising RIFW, supposedly, that they should be maximising how much
they could get back in overage.
|
[324]
Mr
Mogridge: How does land
management influence an overage provision?
|
[325]
Darren
Millar: So, you were only
acting in terms of land management.
|
[326]
Mr
Mogridge: Yes.
|
[327]
Darren
Millar: You weren’t
marketing that land for South Wales Land Developments.
|
[328]
Mr
Mogridge: No, not at the
time. We took an instruction after the sale—
|
[329]
Darren
Millar: Were you at any
time representing the interests of South Wales Land Developments in
terms of trying to minimise overage whilst at the same time acting
for RIFW?
|
[330]
Mr
Mogridge: Absolutely
not.
|
[331]
Darren
Millar: Not at
all.
|
[332]
Mr
Mogridge: Not at
all.
|
[333]
Darren
Millar: Okay.
Aled.
|
[334]
Aled
Roberts: A
gaf i fynd yn ôl at fis Mawrth 2011 achos mi wnaeth Mr
Jonathan Geen, yr adeg hynny, ddatgan achos posibl o wrthdaro
buddiannau? Pam na wnaethoch chi yr un peth ynglŷn
â’ch perthynas eisoes efo Mr Langley Davies?
|
Aled
Roberts: May I go back to
March 2011, because Mr Jonathan Geen, at that time, expressed a
possible conflict of interest. So, why didn’t you do the same
thing in relation to your standing relationship with Mr Langley
Davies?
|
[335]
Mr
Mogridge: In 2011, we had no
relationship with Mr Langley Davies.
|
[336]
Aled
Roberts: In March
2011.
|
[337]
Mr
Mogridge: In March 2011,
no.
|
[338]
Aled
Roberts: I
symud ymlaen, felly, roeddech chi wedi llofnodi cytundeb efo Mr
Langley Davies ar 3 Mawrth 2012, diwrnod ar ôl i’r tir
yma gael ei drosglwyddo. Am ba hyd yr oeddech chi’n trafod y
cytundeb yna efo Mr Langley Davies, felly, os ydych chi’n
dweud nad oedd gennych berthynas ym mis Mawrth 2011?
Pryd
ddechreuwyd y trafodaethau ynglŷn â chi’n
gweithredu ar ran Mr Langley Davies?
|
Aled
Roberts: To move on,
therefore, you signed an agreement with Mr Langley Davies on 3
March 2012, which is a day after this land was transferred. For
what length of time did you discuss that agreement with Mr Langley
Davies, if you say that you had no relationship in March 2011? When
did those discussions begin about how you would operate on behalf
of Mr Langley Davies?
|
[339]
Mr
Mogridge: That is a question
I don’t know the answer to, but I can check with our
management people to find out.
|
[340]
Mr
Green: I think I can
answer that. There was a letter that was written to the Wales Audit
Office in March 2013, which identified that an initial meeting took
place on 22 February 2012 between Langley Davies and two
representatives from LSH. That was after the exchange of
contracts.
|
[341]
Aled
Roberts: Pan
wnaethoch chi drafod efo Mr Langley Davies y ffaith bod yna
bortffolio ar gael, pa bryd oedd y cyfarfod hwnnw?
|
Aled
Roberts: When you discussed
with Mr Langley Davies the fact that a portfolio was available,
what was the date of that meeting?
|
[342]
Mr
Green: Sorry, could you
repeat that question?
|
[343]
Aled
Roberts: Mi
wnaeth Mr Mogridge ddweud bod Mr Davies wedi dod ynglŷn ag un
eiddo—Universal House, neu beth bynnag oedd o—a’i
fod o wedi cynnig i Mr Langley Davies bryd hynny eich bod
chi’n gweithredu portffolio ar ran RIFW. Pa bryd oedd y
cyfarfod hwnnw?
|
Aled
Roberts: Mr Mogridge said
that Mr Davies had approached him about one
property—Universal House or something similar—and that
he proposed to Mr Langley Davies then that you would be operating a
portfolio on behalf of RIFW. So, when did that meeting take
place?
|
[344]
Mr
Mogridge: That would have
been February or March 2011.
|
[345]
Aled
Roberts: Felly, rŷch chi’n dweud eich bod yn
trafod—
|
Aled
Roberts: So, you’re
saying that you discussed—
|
[346]
Mr
Green: No. The meeting
that I referred to was in February 2012.
|
[347]
Aled
Roberts: Rwy’n deall hynny, ond roedd y llythyr y gwnaethoch chi
gyfeirio ato yn nodi mis Chwefror 2012, ond rydw i jest eisiau
gwybod pryd roeddech chi’n trafod efo Mr Langley Davies, hyd
yn oed os nad oedd pethau i lawr yn ysgrifenedig. Rydych chi newydd
ddweud eich bod wedi cyfarfod â Mr Langley Davies ym mis
Chwefror 2011, neu roedd Mr Mogridge wedi.
|
Aled
Roberts: I understand that,
but the letter that you referred to mentioned February 2012, but I
just want to know when you were discussing with Mr Langley Davies,
even if nothing was down in writing. You just said that you did
meet with Mr Langley Davies in February 2011 or Mr Mogridge
did.
|
[348]
Mr
Mogridge: Yes, but that
wasn’t related to the management; that was related to the
sale.
|
[349]
Aled
Roberts: Ie,
ond mae yna berthynas, onid oes? Mae yna berthynas os ydych yn
trafod efo rhywun yr ydych yn ei adnabod.
|
Aled
Roberts: Yes, but there was
a relationship, wasn’t there? There’s a relationship if
you discuss with someone whom you know.
|
[350]
Mr
Mogridge: I didn’t
know him, to start with, but the—
|
[351]
Aled
Roberts: Well, you knew him
well enough to offer him a portfolio.
|
[352]
Mr
Mogridge: I responded to
requests for information on a portfolio, as I would respond to
anybody who made a request for information on a portfolio that we
were likely to be selling. The relationship was on that basis, as
with every other potential purchaser.
|
[353]
Aled
Roberts: Mae’n rhaid bod yna gyfarfodydd eithaf rheolaidd yn
cymryd lle achos mae eich tystiolaeth ysgrifenedig chi’n
dangos bod yna adroddiad yn cael ei baratoi ym mis Rhagfyr 2011. Ar
dudalen 116 yn ein pecyn ni:
|
Aled
Roberts: There must have
been quite regular meetings taking place because your written
evidence shows that a report was being prepared in December 2011.
On page 116 in our pack, it states,
|
[354]
‘These
provisions have been subject to recent debate, with the purchaser
suggesting that it would harm his interests and could prejudice the
portfolio transaction if he is forced to carry out a formal
valuation now or is in a position where the portfolio may be
subject to a formal valuation within the next two years.
|
[355]
‘A
substitute arrangement has been proposed by the
purchaser….
|
[356]
‘LSH support
the adoption of these new arrangements’.
|
[357]
Mr
Green: Sorry, I didn't
follow where you were reading that from.
|
[358]
Aled
Roberts: Pack page
116.
|
[359]
Mr
Green: We haven't got
that pack.
|
[360]
Aled
Roberts: Okay. It's your
report—
|
[361]
Darren
Millar: It's your
supplemental transaction report, 15 December.
|
[362]
Aled
Roberts: —your
supplemental transaction report for RIFW assets dated 15 December
2011. Paragraph 3, ‘SECURITY’.
|
[363]
Mr
Green: Yes, okay. Sorry,
what was the—.
|
[364]
Aled
Roberts: I'm just saying
that you were obviously having a great number of meetings, because
you're stating that the provisions of the agreement had been
subject to recent debate and the purchaser had suggested that it
would
|
[365]
‘harm his
interests and could prejudice the portfolio transaction if he is
forced to carry out a formal valuation now or is in a position
where the portfolio may be subject to a formal valuation within the
next two years.
|
[366]
‘A
substitute arrangement has been proposed by the
purchaser….
|
[367]
‘LSH support
the adoption of these new arrangements.’
|
[368]
Darren
Millar: What was the
rationale behind that?
|
[369]
Mr
Green: The majority of
those meetings, actually, were taking place between Amber and the
purchaser.
|
[370]
Aled
Roberts: Well, this is a
joint report from yourselves and Amber.
|
[371]
Mr
Green: This is a
joint—. Correct, yes. So, the security arrangements—.
This was in order to secure the phased payment—so, the second
and third payments that were made under the terms of the
contract.
|
[372]
Aled
Roberts: Perhaps we could
have a note of all the meetings that took place perhaps between
February 2011 and March 2012.
|
[373]
Have
you also any comment on the following paragraph? ‘Related
Parties’,
|
[374]
‘we do not
have any related party issues resulting from this
transaction.
|
[375]
‘We have
acted for Langley Davies on other projects and do provide property
advice to companies where Langley Davies is a
Director.’
|
[376]
Mr
Mogridge: Yes we do act
where he is a director, or we did act where he was a director on an
office building, which was in a different property vehicle, but
we—
|
[377]
Aled
Roberts: And how far back
do those relationships go?
|
[378]
Mr
Mogridge: I would need to
check that with agency colleagues.
|
[379]
Aled
Roberts: Okay.
|
[380]
Darren
Millar: Ffred.
|
[381]
Alun Ffred
Jones: Just on the
paragraph between those:
|
[382]
‘A
substitute arrangement has been proposed by the purchaser which
includes an arrangement whereby 50% of the sale proceeds or the
apportioned price… will be paid to RIFW on any
sale.’
|
[383]
Does
that suggest that they were proposing an overage on all the
assets?
|
[384]
Mr
Green: No. What that
was—that was in connection with, as I say, the security on
the—. And this was an arrangement that was negotiated by
Amber. The arrangement was that the assets were held as security
against the future payments, and what was agreed, what this
records, is that, if any of those assets were to be sold within
that period, as a condition of that asset being released from the
security, 50 per cent of those sale proceeds would actually be paid
back to Welsh Government—sorry, RIFW.
|
[385]
Darren
Millar: Sorry, can I just
pursue this paragraph in relation to a requirement for valuation
and the potential harm to the interests of the purchaser? Do you
have any explanation as to what those potential harms might be or
the rationale behind these claims that harm might come to the
purchaser and this threat not to proceed with the transaction if
any valuation was taking place within two years of the sale? Why on
earth would that be in there? It seems very odd.
|
[386]
Mr
Green: I must confess, I
don't recall the reason.
|
[387]
Darren
Millar: Well, you jointly
provided this paper.
|
[388]
Mr
Green: Yes, I did, which
was in December 2011. I regret I don't recall the reasoning behind
that statement.
|
[389]
Darren
Millar: You don’t
recall it at all. So, you didn’t ask any questions of Amber
or—. Was it your request to put that in? You drafted these
reports, didn’t you? Was that in your draft or Amber’s
draft—their redraft?
|
[390]
Mr
Green: Again, I
don’t want to speculate, so—
|
[391]
Darren
Millar: Have you got
any—? Presumably, that was communicated to LSH by the
purchaser. Have you got any correspondence around that? Any
letters? Any e-mails?
|
[392]
Mr
Mogridge: Not necessarily,
because Amber were having direct meetings with South Wales Land to
actually sort out the security provisions over the assets, because
of the phased payment agreement.
|
[393]
Darren
Millar: It’s not so
much about the security as this, ‘I don’t want a
valuation. If there’s a valuation, I’m stepping away
from the deal’, which is effectively what—that’s
the threat that’s being made, isn’t it?
|
[394]
Mr
Green: As I said, I
don’t recall those discussions. The majority of the
arrangements over security were handled by Amber. This is a record,
primarily, of discussions that Amber had been undertaking with the
purchaser.
|
[395]
Darren
Millar: Many people will
assume that the reason the purchaser didn’t want a valuation
was because he was not paying the full price of the
land.
|
[396]
Mr
Mogridge: But he did get a
valuation.
|
[397]
Darren
Millar: Yes, but the point
that’s being made here is that you’re supporting the
adoption of an arrangement whereby there is no valuation.
That’s what it says at the bottom of that section. You
support the adoption of the new arrangements, including,
presumably, that there shouldn’t be a valuation.
|
[398]
Mr
Green: Our support of the
arrangements was the security and the payment of half of the
proceeds on any sale in order to release that particular
asset—
|
[399]
Darren
Millar: So, did you
support this suggestion that there shouldn’t be a valuation,
then, because of the potential harm that it could do to the
interests of the purchaser?
|
[400]
Mr
Green: As I’ve
said, I don’t recall the discussion that took place around
that.
|
[401]
Darren
Millar: Okay, you
don’t recall. Looking back at it now, do you
support—
|
[402]
Mr
Green: I’m not
willing to speculate as to what we—
|
[403]
Darren
Millar: Okay, but you can
provide us with any exchanges of e-mails and letters that you had
about that particular paragraph in the report or about that
particular issue, yes?
|
[404]
Mr
Green: We can do,
yes.
|
[405]
Darren
Millar: Thank you. Jenny
Rathbone wanted to come in.
|
[406]
Jenny
Rathbone: I just wanted to
come back to the driving force behind selling off all these pieces
of land, because the WAO say that both Amber and yourselves
maintain that getting the ERDF match funding was the reason why you
needed to sell all the assets. I wonder if you can just clarify
what role that played in all this.
|
[407]
Mr
Mogridge: The ERDF money,
the £25 million of ERDF money, had to be deployed by December
2015. To deploy it, we also had to match fund the cash element of
it, which was about £15.4 million, by December
2015.
|
[408]
Jenny
Rathbone: Right. You already
had £9.4 million. What was the—
|
[409]
Mr
Mogridge: No, it was
£25 million; £25 million was the total.
|
[410]
Jenny
Rathbone: No, the match
funding was £15 million.
|
[411]
Mr
Mogridge: We had £9.6
million.
|
[412]
Jenny
Rathbone: You had £9.5
million or £9.6 million. So, you needed a further £6
million to top that up.
|
[413]
Mr
Mogridge: No, we needed a
further £15.4 million.
|
[414]
Jenny
Rathbone: But you already
had £9.4 million cash.
|
[415]
Mr
Mogridge: It was £25
million that the ERDF put in.
|
[416]
Jenny
Rathbone: That’s
right. But the match funding was a total of £15 million or
£16 million.
|
[417]
Mr
Mogridge: £15.4
million.
|
[418]
Jenny
Rathbone: £15.4
million. So, why was this used as an argument to dispose of all the
land—you know, at the bottom of the market?
|
[419]
Mr
Mogridge: It wasn’t an
argument to dispose of all the land. The primary objective of the
fund was investment in opportunities throughout Wales.
|
[420]
Jenny
Rathbone: I understand that,
but the urgency to get the match funding for the ERDF JESSICA
project—. It was a relatively small sum of money, compared
with the size of the portfolio you were handling.
|
[421]
Mr
Mogridge: The intention of
the fund was not—. It was not set up as a property
development company. It was set up as a secondary bank.
|
[422]
Jenny
Rathbone: That’s
right. But why is it you were insisting you needed to dispose of
all the assets, when all you needed was about £6
million?
|
[423]
Darren
Millar: Just in answering
this, I mean, you’re—. It was very, very clear in the
information packs that were given by the Welsh Government that you
needed £15.4 million of cash in total, which included the cash
that had been transferred. So, it actually was just £6
million—not £15.4 million—that you needed to
realise in order to match the ERDF funding.
|
[424]
Mr
Green: As far as we were
concerned, RIFW was a £55 million business that
was—
|
11:00
|
[425]
Darren
Millar: I understand that,
but you only needed to realise, within the time to access the ERDF
funding, £6 million-worth of sales. Do you accept
that?
|
[426]
Mr
Green: The intention of
RIFW was to invest £55 million in regeneration projects in
Wales.
|
[427]
Darren
Millar: I understand that.
The point that’s being made is—
|
[428]
Mr
Green: We could not
invest £55 million in regeneration projects without releasing
cash from the sale of those assets.
|
[429]
Darren
Millar: I understand that,
but the impression we’ve been given is that there was this
hiatus towards, ‘We’ve got to sell; we’ve got to
sell; we’ve got to get these assets off our hands in order to
realise this cash in order to get the match funding for our ERDF
cash to come forward’—
|
[430]
Mr
Green: As I said before,
we were not—
|
[431]
Darren
Millar: —but,
actually, you only needed 6 million quid’s-worth of cash,
didn’t you?
|
[432]
Mr
Mogridge: We only needed
£6 million-worth of cash to invest in convergence
areas.
|
[433]
Darren
Millar: Well, why did you
tell Jenny Rathbone that you needed more than that?
|
[434]
Mr
Mogridge: Because
the—. Sorry—
|
[435]
Darren
Millar: A few moments
ago.
|
[436]
Mr
Mogridge: It’s a
misunderstanding. The money we needed to raise to match fund was
for investment in the convergence areas. We had a pipeline of
potentially 60-odd projects, a lot of which weren’t in the
convergence areas, which we could use the cash from the land sales
to facilitate. The objective of this whole thing was a regeneration
fund.
|
[437]
Darren
Millar: I understand that.
We know what the objective was. Were you overegging the argument to
get these land assets sold too quickly? That’s the point
that’s being made.
|
[438]
Mr
Mogridge: No, we
weren’t.
|
[439]
Mr
Green: We don’t
believe we were, Chair.
|
[440]
Darren
Millar: Okay. Aled,
you’ve got a brief question.
|
[441]
Aled
Roberts: Cwestiwn olaf: cadarnhawyd gan Lywodraeth Cymru wythnos
diwethaf eu bod nhw’n dal i dalu’n fisol i Amber
Infrastructure. Rwyf jest eisiau gofyn: beth yw’r berthynas
rhwng Lambert Smith Hampton ar hyn o bryd â RIFW, Amber
Infrastructure a South Wales Land?
|
Aled
Roberts: A final question:
it was confirmed by the Welsh Government last week that they are
still paying monthly to Amber Infrastructure. I just want to ask:
what’s the relationship between Lambert Smith Hampton at the
moment, and RIFW, Amber Infrastructure and South Wales
Land?
|
[442]
Mr
Green: Our contract has
been terminated.
|
[443]
Aled
Roberts: Gan
Amber?
|
Aled
Roberts: By
Amber?
|
[444]
Mr
Green: Yes.
|
[445]
Darren
Millar: Okay. Just one
final question: there has been a lot of reference to the need for a
portfolio sale, one of the advantages of a portfolio sale being
that it’s a warts-and-all proposal and that it means that
difficult pieces of land would be out of the door, as it were, as
far as RIFW was concerned. But, of course, RIFW’s been left
with some lemons, hasn’t it, because some of the pieces of
land that were supposed to be part of the original deal were taken
out. So, one of the big benefits of this approach with the
portfolio sale has been severely undermined, hasn’t
it?
|
[446]
Mr
Green: I think
that—. You refer to some of the assets being lemons. I think
those ones that were taken out were rotten lemons, in as much that
they were considered to be so far impaired that—
|
[447]
Darren
Millar: So, these were
worse warts than the others, effectively?
|
[448]
Mr
Green: Yes, they were.
They were—
|
[449]
Darren
Millar: So, it
wasn’t a warts and all; it was some warts and all,
wasn’t it?
|
[450]
Mr
Green: —ransom
strips that no longer had a value as a ransom strip, because the
land that they were ransoming was no longer within an LDP, and one
of the sites was subject to, or was threatened to be subject to, a
site of special scientific interest.
|
[451]
Darren
Millar: It seems to me
that there were three arguments for a portfolio sale: we can sell
quickly, we can get all the cash upfront, and it’s a
warts-and-all sale. And the reality is that it wasn’t all
warts and all, it was only some, and that not all cash was received
upfront, but, of course, it was a quick disposal.
|
[452]
Mr
Green: The cash was
received over a timeframe that we agreed with Amber that the fund
could actually make use of that money. It was actually beneficial
that the money was not held as cash from day one, but, under the
terms of the agreement for the sale, we knew when the subsequent
cash receipts would come in.
|
[453]
Darren
Millar: One final
question, then: given what you now know, with hindsight, do you
think you made any mistakes in the advice you gave the board? Were
there things you would have done differently?
|
[454]
Mr
Mogridge: I think the advice
we gave the board at the time was absolutely correct.
|
[455]
Mr
Green: We continue to
believe that the advice we gave was correct. We believe that we
achieved good value for the sale of these assets. If we were to do
this again, the only thing we would do again would be to strive to
prove that we had achieved best value, so that we didn’t have
to actually sit here and answer these questions now.
|
[456]
Darren
Millar: Okay. And on that
note, Jeremy Green, Lee Mogridge, thank you very much for attending
the committee today. We look forward to your liaison with the
clerks in terms of the additional information that you agreed to
provide. You’ll receive a copy of the transcript from
today’s proceedings. You can check that for any factual
inaccuracies and report that back to the clerk, and we’ll
have those amended. We’re very grateful for your time; thank
you very much indeed.
|
[457]
Mr
Green: Thank
you.
|
[458]
Darren
Millar: We’ll take
item 5 as item 1 at our next meeting, and we’ll close the
meeting there. Thank you.
|
Daeth
y cyfarfod i ben am 11:05.
The
meeting ended at 11:05.
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