WOKING Borough Council is facing a write-down of more than £490million in the valuation of Victoria Square Woking Limited (VSWL).
VSWL is the immediate owner of Woking’s flagship new shopping centre, residential development and hotel – although backed by a longstanding agreement with Woking council.
Its financial position is represented in the newly-released accounts of VSWL for 2021, and highlighted by the council’s ruling Liberal Democrats, who described the figure as “a financial legacy of decisions made by the previous, Conservative-led, administration at that time”.
“The previous administration approved this development along with council loan funding in excess of £750 million,” continued the Lib Dems.
Cllr Ann-Marie Barker, leader of Woking Borough Council, said: “These belated accounts confirm our worst fears. However, this transparency is an essential step in a long and forensic discovery process.”
Cllr Dale Roberts, portfolio holder for finance and economic development at Woking Borough Council, added: “Even though we had fully anticipated massive losses and signalled them earlier in the year, this is still devastating news. It shows the degree to which our borough has been failed by Conservative leadership – and the enormity of the challenge we’re undertaking.”
That £490m write-down is not, however, the whole story.
Asked by the News & Mail to dig deeper into the figures, Cllr Roberts continued: “A write-down is a reduction in the value of the asset, the change versus what was assumed before.
“In this case it was previously valued only ‘at cost’ of what was spent but now we have a professional valuation, and the difference from incorrect assumptions was £490 million for 2021.
“That difference is construction costs versus the value of what was built. The new valuation is based on yield, that is, the potential future income from the flats, retail space and hotel.
“Some of the costs also relate to regeneration in Woking outside the core Victoria Square site, such as moving the fire station, so there are other benefits.
“However, the most recent valuation to compare to associated debt is the figure of £198,846,750 as at 30 June 2022.
“That means the council has committed to £745 million of borrowing to VSWL, secured by what we now know is closer to £199 million of assets.”
Taking the later figure, beyond the scope of the 2021 accounts, the write-down is pushed considerably higher, to around £550m.
“Looking ahead, though, it would be irresponsible to speculate on the details and timings of what happens next,” Cllr Roberts added.
In response, the leader of the Conservative group on the council, reduced to four after the recent elections, was quick to seize on one apparent discrepancy.
“The previous Conservative-led administration approved loans of £700 million, not the £750 million reported,” Cllr Kevin Davis said. “Subsequent loans were taken out following a path driven solely by the Liberal Democrats, because, as an opposition, we had different ideas that were rejected.
“The financial models from the start of the project that were regularly reported to the Finance Task Group and via dedicated councillor briefings showed a valuation that was significantly below the cost once the development was completed.
“This is the nature of regeneration projects and is a well-known phenomenon that with time will level out as the financial models show.
“It should not be a shock to any members of the council that the completed development is worth less than the cost of delivering the project, particularly Cllrs Barker, Forster and Johnson that supported the development from its inception and had access to the financial models.
“The figures were never projected to be at £490million though, so it will be interesting to dive deeply into the valuation to discover how it has been reached. Let’s not forget, infrastructure like the cost of relocating the fire station were part of the costs, along with the affordable housing built on top of the station.
“It’s doubtful these are included in the valuation of Victoria Place, which makes it appear poorer value than it is.
“We wholeheartedly agree with Cllr Roberts that speculating on what happens next would be irresponsible, so we hope his Liberal Democrat colleagues desist from making scaremongering statements as they have been doing for a long time.”