Cornwall councillors critical of building company Treveth

"One said the house-building entity would be declared insolvent if it was a ‘normal’ company, while another said the council would be better off buying houses and ‘getting rid of Treveth’.

Treveth was created by Cornwall Council in 2019 with a mission to provide high-quality sustainable new homes, communities and commercial spaces for the benefit of people who live and work in Cornwall.

Operating under a ‘profit with purpose’ ethos, all surpluses generated by Treveth’s activities are returned to the council for use in public services, benefiting residents of Cornwall. A meeting of the council’s audit committee has heard that Treveth is expected to return a profit in the next two years. At the end of this financial year it was operating at a loss of £8.3m.

Capital repayments due to Cornwall Council on loans taken out by Treveth stood at £90.8m at the end of March. The value of its properties stands at £41.5m.

Tim Mulholland, the company’s managing director, told councillors that Treveth currently has 170 homes under management, 375 homes in build and about 700 homes planned for the next three to four years. “All of the homes have gone to local people and definitely not used as second homes or holiday lets,” he said.

The very first business plan approved by the council in 2019 saw a target break-even point in 17 years, which included schemes it inherited from the council. “Through the management of those schemes and by introducing new schemes which are non-council owned we are now predicting we will break even in Year 7.”

Mr Mulholland said Treveth’s housing plan will “make a very substantial return to the council in the next few years”.

However, a number of members of the audit committee were critical of the company. Peter Norvill, a co-optee on the committee, told the Treveth board: “Structurally, your cost of administration is more than your sales. If you were in the private sector, you’d have to do a sustainability model for your ability to be a going concern.”

Cllr Philip Desmonde (Conservative, Pool and Tehidy) said: “The current liability is £72.4m and the net current assets are £36.4m. Does that give you cause for concern?”

Adam Ronaldson, Treveth’s finance director, replied: “No, it doesn’t give me cause for concern. If you look at the business plans and the remit and structure Treveth was set up to achieve, there was a break-even point within 17 years. Our current business plan is showing us bringing that break-even point forward to Year 7/8. Treveth is a development business which then turns into an investment and asset management business.

“Holding up to 85 per cent of any scheme long term within Treveth is really capital hungry. That’s why that loan portfolio grows fairly rapidly. However, the time happens – next year or the year after – when that balance flips the other way.”

Cllr Desmonde responded: “I have quite a strong construction background and it’s my experience that where your current assets are nearly half of your current liabilities and you start talking to your bank, there are some really heavy duty red flags being waved.” He suggested it would lead to insolvency in any other company.

Mr Mulholland reiterated that the company was set up in the knowledge that it would be “underwater” for a long period of time. “It’s an asset-holding company – we’ve got to generate the assets.”

He added: “At the moment you could declare us insolvent if we were a commercial business working to commercial parameters, but our funder or our bank is the council. Everything we do is within the direction of travel in which the council asked us to trade.”

Cllr Desmonde added: “As I understand it, you’re saying ‘trust us, we’re managing this insolvency situation, it’s expected and it’s going to improve’. In that context that you’re asking us to have faith in the management of the business, is it reasonable to provide us with a half-term report?”

He was told by the council’s acting monitoring officer it wasn’t an appropriate question when discussing the 2023/24 financial report and was more apt as a question for senior officers and the scrutiny committee at another time.

Mr Mulholland said: “I’d like to take issue with the term ‘insolvency’ Cllr Desmonde. Our auditors have signed off our financial reports. There is no mention of insolvency in anything. At no times in the five years we’ve been operating has anyone raised that concern.”

Cllr Steve Arthur (Non-aligned, Perranporth) entered the debate: “I’m glad Cllr Desmonde’s brought that up because I’ve got serious concerns about Treveth. Admin costs have been brought up at a previous meeting about them being extortionate. If you look at the money we’re putting into it, if our ambition is to get more people out of the housing register, we’d be better off going out and buying houses off the shelf and just getting rid of Treveth.

“Sorry, I know there are jobs involved here, but I think we are a bank, we do have shareholders and they are council tax payers. This council is getting into debt faster and faster, and we’re just featherbedding a company which isn’t providing the houses that it should. Sorry if that’s offended anyone.”

Treveth’s MD replied: “I can understand where you’re coming from, but I’d like to challenge back. We were asked to deliver open market housing as part of the housing supply issue in Cornwall and, in particular, private rent which is a massive issue still. It takes a while to set a development company up. We’ve been going for five years – we saw 116 units last year and hopefully we should see 145 this year.

“Certainly from the feedback we’ve had from people living in our houses, we’ve made a huge difference to their lives. We don’t take lightly the fact that we’ve got a a responsibility to deliver to the communities we build in. Some of the testimonials we’ve had – people who have never had their child in the same school for the next term let alone being able to put them through three or six years thanks to rental is significant. People who have been living in caravans have now got shared ownership houses.

“In terms of the last 18 months, we’re the biggest developer in Cornwall. We’re the only real scale developer of housing in Cornwall.”

Mr Mulholland added that the supply chain was weakened in Cornwall by the insolvency of construction company Midas and in the current economic conditions there is a “reduced risk appetite” within local and regional contractors.

Cllr Tamsyn Widdon (Green Party, Penryn) added: “Just because we’re not seeing a return yet, I just wanted to highlight how we’re going above and beyond, we’re leading the way. We are doing fantastic things and we’re delivering in a very complex, difficult market in a way that returns more to the communities here.”