Why we are engaging with New Gorbals Housing Association Ltd (New Gorbals)
We are engaging with New Gorbals about its financial management, tenant and resident safety and its development plans.
New Gorbals notified us in October 2019 of a potential tenant and resident safety issue relating to fire safety at two high rise blocks on Caledonia Road. New Gorbals has identified that this issue stems from works completed by another landlord prior to the transfer to New Gorbals. New Gorbals engaged specialists to better understand the fire safety issues and in particular the implications of timber framing connections between balconies which are a possible route for external fire spread.
After considering the options to address the issues, New Gorbals decided that the best long term solution would be to demolish the two blocks. New Gorbals is implementing a development programme of new homes for social rent to replace the two blocks and will receive significant public subsidy to help achieve this.
New Gorbals is in the process of rehousing affected tenants. It has provided assurance that it has assessed the risks for current tenants and has put in place a range of actions to mitigate these. New Gorbals continues to provide assurance that safety measures are in place and are being adapted as more tenants are rehoused. It has engaged openly and constructively with us during this time.
New Gorbals has told us it needs to obtain new private finance during 2022/23 to support its demolition and development strategy. We will engage with New Gorbals to get assurance about its borrowing strategy and how it is managing all of the risks associated with these plans.
What New Gorbals must do
New Gorbals must:
- provide regular updates on its risk assessment and the safety measures for remaining tenants and progress in rehousing tenants at its Caledonia Road high rise blocks;
- send us by 30 April 2022:
- an update on the borrowing requirement for 2022/23; and
- its latest projected monthly cash flows for the 12 months to 31 March 2023.
- send us by 30 June 2022:
- its approved business plan and report to the governing body about the plan and its updated risk register;
- 30 year financial projections consisting of statement of comprehensive income, statement of financial position and statement of cash flow complete with assumptions and explanatory narrative;
- a comparison of projected financial loan covenants against current covenant requirements;
- financial sensitivity analysis which considers the key risks, the mitigation strategies for these risks and a comparison of the resulting covenant calculations with the actual current covenant requirements;
- the report to the Board in respect of the approved 30 year projections, sensitivity analysis and covenant compliance; and
- evidence of how it demonstrates affordability for its tenants.
- send us an update on its demolition and development programme by 31 October 2022. This will include details of the scale and tenure mix, timescales for delivery and any material delays or changes to the programme; and
- tell us if there are any material adverse changes to its demolition and development plans which might affect its financial position or reputation, in line with our notifiable events guidance.
What we will do
We will:
- review New Gorbals’ progress with its actions to address the tenant and resident safety issues and rehouse tenants at its Caledonia Road high rise blocks;
- review the cash flow projections and liaise as necessary;
- review the business plan and financial projections;
- meet with New Gorbals’ senior staff to discuss the business plan, the financial information and any risks to the organisation;
- review the demolition and development update and liaise as necessary; and
- update our published engagement plan in light of any material change to our planned engagement with New Gorbals.
Regulatory returns
New Gorbals must provide us with the following annual regulatory returns and alert us to notifiable events as appropriate:
- Annual Assurance Statement;
- audited financial statements and external auditor’s management letter;
- loan portfolio return;
- five year financial projections; and
- Annual Return on the Charter.
It should also notify us of any material changes to its Annual Assurance Statement, and any tenant and resident safety matter which has been reported to or is being investigated by the Health and Safety Executive or reports from regulatory or statutory authorities or insurance providers, relating to safety concerns.