Are GMCA’s £500m Renaker loans problematic or prudent? 

Since 2015, the Greater Manchester Combined Authority has lent prolific developer Renaker half a billion pounds to develop more than 5,000 homes in Manchester and Salford. While many see this as good business sense, some industry noses have been put out of joint.

What is the problem? 

There seem to be two schools of thought when it comes to how much money the Greater Manchester Combined Authority has loaned to Renaker in recent years.

Some people see no problem with it. In their minds, it makes perfect sense to loan the city’s most prolific developer large sums of money to continue to do what it does best.

The developer has a track record of delivering homes something Manchester has a well-publicised shortage of.

To date, Renaker vehicles have received loans exceeding £500m for the delivery of 5,647 apartments from the Greater Manchester Housing Investment Loans Fund across schemes at Greengate in Salford, and New Jackson in Manchester, among others.

While the GMCA is at pains to stress that Renaker has never had more than £120m at any one time – it has to repay what it owes before the next loans can be confirmed – the loans it has received amount to more than half of the £942.5m total awarded. It is a lot of money in anyone’s book.

Eamonn Boylan, chief executive of the GMCA, argued that Renaker’s outputs justify the creation of the fund.

“The reason we went for the housing fund in the first place was to enable us to take decisions based on local intelligence about what was needed and what would work locally,” he explained.

“That was something that you couldn’t do by relying on institutional investors or national investors we need to do that ourselves and we’ve done that.”

Place reached out to Renaker for comment but did not hear back.

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Risky business 

While many see no problem with GMCA’s support of Renaker, some within the property industry and Place’s comment section are annoyed about the amount the developer has been given.

Many other well-known firms including Capital & Centric and Cityheart have benefitted from the fund but no other developer has received loans as large as Renaker’s.

Does putting more than half of its eggs in Renaker’s basket put the GMCA at risk?

The most recent Renaker loans amount to £120m – with the potential to rise to £140m – for two towers providing upwards of 1,000 homes. They were signed off at GMCA meeting last week.

The agenda item was resolved in less than a minute, which illustrates the regard Renaker is held in by city region bosses.

Trust is a powerful ingredient in Renaker and the GMCA’s relationship. However, some would argue that market forces are stronger. Bigger businesses than Renaker have gone to the wall in recent years.

Nobody is suggesting collapse is on the cards, though. On the contrary, Renaker seems to be at the height of its powers, a fact which tempers any feelings the GMCA may have about being over-exposed.

The four-tower Trinity Islands scheme has been backed by the GMHILF. Credit: via planning documents

Place North West has spoken to several of the developer’s peers in recent days. While some are miffed and cry favouritism, there seem to be fewer sceptics than believers when it comes to Renaker’s GMCA loans.

None wanted to put their thoughts on the record but the majority were ambivalent, even supportive, of the GMCA’s approach.

One said the amount Renaker has been loaned was “disproportionate” but understandable.

“The GMCA wants to lend to a safe pair of hands. I do not lose too much sleep over it,” he said.

Rates wrangling 

There is a perception that borrowing money from the GMCA is cheaper than getting it from a financial institution.

The GMCA does not publish this information due to “commercial sensitivities” but Boylan insists nobody gets preferential treatment.

“Everyone assumes that somehow this is cheap money. It is not. It is [at] commercial rates, effectively,” he said.

“In many instances, we are the lender of last resort. The reality is that an awful lot of institutional investors will take a very narrow view of places like Manchester.”

There is no flat rate for loans from the GMHILF, Boylan explained. The base rate is topped up with an add-on calculated against the perceived risk of a particular scheme. All are state-aid compliant, according to the GMCA.

The spirit of competition 

Renaker might not be getting “cheap money” but does the £500m it has received from a public sector fund raise questions around competition?

While the developer has unquestionably benefitted more than any other from the GMCA’s housing fund, the idea that awarding large loans to Renaker means that others miss out is not strictly true, according to Boylan.

“It is not the Renaker show by any stretch of the imagination,” he said. “We have not turned down a single viable scheme.

“Renaker obviously stands out because of the scale of what they’ve done but the fund has been very effective in supporting housing development right across the conurbation.”

In other words, any developer with a viable project is welcome to bid for money from the GMHILF and the GMCA makes no apologies for backing a developer Boylan describes as a “very very efficient deliverer of homes”.

Value for money 

Since emerging as Manchester’s most prolific developer, Renaker has been criticised for its record on affordable homes.

Renaker has not delivered a single discounted property within any of the schemes for which it has received GMCA loans. This has led some commentators to question whether the combined authority is getting the best deal for residents.

The GMCA says that more than 1,000 affordable homes have been delivered as a result of GMHILF loans. Boylan believes there is more than one way route to affordability, saying that many people who live in Renaker’s homes are young professionals who share flats.

“I’m not saying it is perfect or ideal for everybody,” he said.

Renaker argues that viability is tight and that the cost of developing on brownfield sites in the city centre puts limits on what can be delivered. This is an argument that Manchester City Council has found convincing over the years when determining the developer’s planning applications.

It has also left some people disgruntled. Some within Manchester’s development community feel that the city is not pressing Renaker hard enough on the affordable homes point.

Renaker’s recycling 

Loan repayments made by Renaker and others are recycled back into the fund. The £300m the government gave to the GMCA originally has ballooned to £940m.

The organisation’s outgoing chief executive claims that, by the time the fund ends, it will have delivered 12,000 homes, which is 3,000 ahead of the original target.

“It will not have cost the taxpayer a cent. In fact, we will have made a return on it,” Boylan said. “We’re using that return in large part to fund capability that districts need in order to be able to develop their own pipeline of schemes coming forward.”

Boylan added that the proceeds will go towards supporting cash-strapped local authorities.

“Many local authorities that have had years and years of austerity have lost out in terms of some of those professional technical areas and planning and development because they have had to focus on statutory responsibilities around children and adults.

“We’re using [the returns from the fund] as a positive generator of resource to enable us to broaden the offer.”

Where Renaker and Manchester would be without the £500m the developer has been loaned by the GMCA is hard to say. But it is not too much of a stretch to suggest that far fewer homes would have been built in the city over the last decade.

It is clear that as long as Renaker keeps delivering on tricky brownfield sites, the GMCA will keep lending it money.