Greater Manchester councillors are investigating loans made to property companies while Andy Burnham was mayor, including three companies ultimately controlled by Manchester City's Abu Dhabi owner. Because nothing says "transparent public financing" like a £1bn loan fund and a few raised eyebrows.
About 50 developers have been lent more than £1bn between them from a fund managed by the Greater Manchester Combined Authority (GMCA) since 2015. The money came from the Greater Manchester Housing Investment Loan Fund (GMHILF), set up in 2015 with an initial £300m of government investment to help developers build new homes across Greater Manchester. Because what could possibly go wrong when you hand a billion pounds to property developers?
John Leech, chairman of the GMCA's Overview and Scrutiny Committee, told the BBC concerns had been raised about the transparency of the process to approve the loans. "We just want to be clear that there is a transparent rather than an opaque process," said Leech, who is the Liberal Democrat opposition leader on Manchester City Council. He said the approval process had been criticised as "very opaque in the past and that it's not necessarily been clearly understood why X was successful and Y wasn't." A GMCA spokesperson said it was supporting the committee with its enquiries.
Three property companies ultimately controlled by Manchester City owner Sheikh Mansour bin Zayed al Nahyan were granted loans worth about £55m in total. The decisions to approve these loans were taken in 2017, in two meetings both chaired by Andy Burnham when he was mayor of Greater Manchester. The decisions to grant loans from the fund were taken publicly by all members of the GMCA, not the mayor alone. So, to be clear, it was a group effort.
One of Manchester's leading property developers, Renaker, has received the majority of the £1bn lent out from the fund. Renaker has been involved in a long-running legal battle over £140m worth of loans made to the developer through the GMCA's fund. A rival developer, Aubrey Weis, claims the loans were unfair subsidies. In June, the Court of Appeal found there had been "no error of law" in the GMCA's decision to provide the loans but Weis is appealing the decision. Because of course he is.
The Overview & Scrutiny Committee, which reviews the activities of the mayor and the GMCA, agreed to launch an inquiry into the loans earlier this year and Leech is now taking that work forward, after being elected chairman recently. Leech, a former Lib Dem MP in Manchester, said he felt the fund was intended to be for property companies struggling to access financing. In 2015, when the loan scheme was launched, Bill Enevoldson, the GMCA's chief investment officer, said: "It is not designed to finance unviable projects but can unlock currently unfundable ones." An evaluation of the fund from 2025 said it was designed to provide loans for "projects which might otherwise struggle to secure financing".
Leech said it was "not unreasonable" to ask why seemingly successful businesses needed to borrow public money through this loan scheme. "In the case of Abu Dhabi, you would imagine that they wouldn't have any problem accessing funds from elsewhere as well," Leech said. "And so the process clearly does seem to be out of kilter with what the original stated aims were back in 2015." Leech said the committee had asked GMCA officers to produce a report about the use of these funds. He said the committee will ask officers questions about the fund at a private meeting, before potentially making recommendations to the Greater Manchester mayor. The committee does not have the power to sanction the mayor but it can investigate, require answers, expose problems and challenge decisions. The committee could call forward witnesses, such as current Greater Manchester Mayor Bev Craig, to give evidence as part of the inquiry.
Conservative shadow sports minister Louie French said Burnham had "serious questions to answer" about the loans. French said "taxpayers deserve transparency over how this money was awarded". In a statement, the GMCA said the funding for the loans had been lent "at commercial rates" and had delivered "11,000 new homes and regenerating brownfield land across the city region". The GMCA said "not a single viable scheme was ever turned down". A GMCA spokesperson added: "The fund is open to all developers, with lending criteria based on parameters set by the government and developed with external financial experts to reflect due diligence standards in the private sector. Every penny loaned from the fund is being fully repaid, delivering billions of pounds worth of development at no cost to the taxpayer."
In 2014, Manchester City Council and Abu Dhabi United Group, which owns Manchester City FC, formed a joint venture called Manchester Life. Abu Dhabi United Group and Manchester Life were involved in three property developments that were partially financed through the GMCA's loan fund. A Manchester Life spokesperson said: "It is standard for property development to be funded through a combination of investor equity and borrowing. All three sites had previously been derelict. The loans were provided on commercial terms and have been repaid in full, including interest." The BBC asked Renaker for comment but it did not respond before publication.
Julia Hatmaker, the editor of the Place North West property news website, said viability was "always a struggle" in the development world. She said the GMCA's loan scheme had been successful in building more homes in the city and generating a return on that investment. But she said it's a "good time for the combined authority to re-evaluate what kind of project it wants to support with similar loan programmes and whether it wants to put stricter rules in place as to what developments can benefit from them".
Ex-Manchester leader defends deals with Man City owners
What Manchester's 'super-profit' deal with City owners has paid out so far
Burnham had two hospitality dinners with Man City chairman, deleted records show