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Sadiq Khan's flagship London real estate fund may need a bailout after it repeatedly defaulted on a 300mn sovereign loan and failed to keep records on the debt, its auditors have warned.
GLA Land and Property (GLAP) Limited, i in London the mayor's property development vehicle, has repeatedly missed loan repayment deadlines over the past six years and made its first payment this year.
The company, which is owned by the Greater London Authority, may need financial “support” from the mayor's taxpayer-funded budget to repay the loan in full, according to an internal audit report this month.
GLAP was founded in 2012, when Boris Johnson was mayor, and owns 635 hectares of land in the capital, mainly in the London Docklands development area. Khan has been mayor since 2016.
The commercial vehicle was created from a merger of former community development agencies and inherited the £300mn debt owed to the Greater London Authority when it was set up.
The money was supposed to be paid from 2018, but GLAP failed to make any payments in successive years.
GLAP has GLA staff, while Khan manager David Bellamy and Tom Copley, London's deputy mayor for housing, sit on the executive team that makes executive decisions about the fund.
GLA's internal auditors raised concerns last year about poor management and decision-making at the company, and said they were “provided with no evidence” why returns were repeatedly missed, according to a December 2023 audit report.
“No supporting documents to legally approve the non-repayment of the loan were provided,” the report said. It added that “the minutes of the meetings . . . not taken to indicate any decisions made”.
The 2023 report warned: “There is a risk that the decisions made regarding the loan are not yet legally agreed, documented and procedures are not in place to manage the risk.”
Updated copies of the previously unannounced documents for 2023 and 2024 have been posted on the London mayor's website. Full, unedited versions of the reports were shared with the Financial Times by the London Centric website.
GLAP said it paid off $33.3 million of its outstanding loans in March this year, and an auditor's report from this year said some improvements had been made, including taking minutes.
The fund – which is one of the UK's largest public sector landlords – aims to deliver thousands of new homes on council estates. It is GLA's most commercial funding.
London needs to double its annual housing supply to meet its official housing target, even after the UK's new Labor government cut the capital target by 10 percent.
The UK government wants to increase housebuilding to its highest level in decades, building 1.5mn homes in five years. The number of new homes in England fell by 6 per cent to 221,070 in the year to March.
GLA said 13,460 homes were completed in the GLAP portfolio from 2016 to March this year.
It added the loan repayment schedule was revised “due to the slowdown in the national economy which has had a negative impact on the property and construction industries across the UK”.
The intervening years of 2018, when mortgages were starting due to start to recover, and the Covid-19 pandemic saw the highest level of housing supply in England since the financial crisis in 2008.