I CAN seek to reassure Alan Richards that the POLP loan about which he wrote (9th July) will not need to be repaid from charitable donations, writes John Dodwell, one of the 10 volunteer Trustees of Canal & River Trust.
Before agreeing that the new Canal & River Trust should take over the assets and liabilities of British Waterways, the Trustees asked about the £12.9m loan to British Waterways from the Port of London Authority (PLA), especially when it was repayable. Apart from the £6m Government loan repaid as part of the Government funding deal, this was the only loan. What I learned about the POLP loan is set out below.
In 2001 British Waterways bought the freehold of several PLA owned properties for £20m, including Wood Wharf in London's Docklands. Part of the deal was that £12.9m of the price would be left outstanding as a loan. Interest was payable at 1% over Bank of England base rate. The loan did not need to be shown separately in the British Waterways balance sheet until accounting standards changed in 2007. By the way, Pommy Sarwal was not on the Board of either the PLA or British Waterways in 2001. He only joined the PLA board in 2006. He joined the British Waterways Board in 2007.
As we know, British Waterways/CART still owns the freehold of Wood Wharf. Having gained planning permission for a substantial redevelopment (obtained through the efforts of the Wood Wharf Limited Partnership in which British Waterways had a 50% interest), the freehold was leased earlier this year to the Canary Wharf group for 250 years for a rent rising to a minimum of £6m per annum—but hopefully more than this once the development is complete.
The cost of buying the Wood Wharf freehold was £16m, and British Waterways then spent another £5m buying out a subsisting interest making the freehold's total cost £21m. The freehold (with the benefit of the 250 year lease) was valued at £114.5m at end of June this year by Gerald Eve, chartered surveyors—not bad—a £93m increase over what was paid for it!
The PLA were content to have a loan due from a Government agency (British Waterways). They agreed to the loan moving to CART with the interest staying at 1% over Bank of England base rate; in view of the move out of Public Sector control, it was agreed that the PLA should have a mortgage over a small part of the £460m property portfolio which also passed to CART from British Waterways.
The earliest repayment date is now 2014. As it would be a shame if CRT had to sell properties producing rents at about 7% p.a. to repay a loan costing 1.5% p.a in interest, it's likely CRT will seek to extend the loan again. In the meantime, the interest is paid out of rents and will not be a call on charitable donations.
It is quite wrong to suggest that the Trustees might use charitable income to repay the loan in due course. May I remind your readers that CART has a property endowment pot of money (capital) which is kept separate from the spending pot of money (revenue). The property capital produces revenue in the form of rents—over £35m last year—for the spending pot which is used for maintenance etc. If the loan—which is under 3% of the property portfolio value—had to be repaid, then a suitable property would be sold.
I'll leave Alan Richards' other questions for the Freedom of Information (FoI) process. In view of the cost of dealing with FoI requests, I hope there will be less of these in the CART era. If your readers have questions, then just ask CART; if you don't know who to ask, try me at
and I'll try to reply or pass on the query.
We have a Trust (free of Government control on policy) which is determined to do its best for the waterways. As a Trust, we have already been able to get support from the Co-op Bank, Google and the People's Postcode Lottery; the latter have promised £1m over the next 10 years. We all need to build on this and other great support.
The response from Allan Richards to the above:
POLP loan was for property speculation
A £12.9m Port of London Properties (POLP) loan that Canal & River Trust (CART) inherited from British Waterways was taken out for the express purpose of property speculation, writes Allan Richards. Although CART remains obstinately silent on the matter, one trustee has spoken out.
2001 not 2007
CART trustee, John Dodwell, has informed narrowboatworld that, despite only showing in British Waterways' accounts from 2007, the POLP loan was actually taken out in 2001. Asked if the loan was taken out for the purpose of maintaining the waterways, he confirmed that it was taken out for property speculation.
Narrowboatworld has already reported that government imposed strict controls on British Waterways' borrowing which was normally limited to loans from the government run National Loan Fund (NLF) for the purpose of maintenance (Silence over possible perks—9/7/2012).
Asked specifically to confirm that government did not give permission for this loan to be taken out, John Dodwell dodged the question saying 'Generally, I try to avoid commenting on British Waterways matters as I have no responsibility for them...'.
NLF & POLP
Both a £6m NLF loan and the £13m POLP fell due for repayment when British Waterways became CART. It seems that government has been very happy to tell us that it gave the money to pay off the NLF loan. However, the fact that the public have been saddled with with £13m of debt in respect of the POLP loan has been swept under the carpet.
John Dodwell confirmed that POLP now hold a mortgage over some of the property transferred from British Waterways to CART due to the loan.
(CART's expected accumulated income from charitable giving (i.e regular givers, appeals, legacies and corporate donors, less costs) over the first ten years of its life will be in the order of £13m. That's the same as its POLP debt.)