Housing association’s loss amounts to almost a third of that predicted for the entire sector
Genesis land values plummet by £20.7m
The value of land owned by Genesis Housing Group has plummeted by more than £20 million - almost a third of the total losses predicted for all housing associations.
The 23,000-home landlord wrote down the value of its landbank in 2010/11 by £20.7 million, almost 30 per cent of the total writedown across the sector, according to the most recent projections from the Tenant Services Authority.
The regulator has been monitoring financial performance of Genesis since 2009, when it deemed the association’s financial viability was ‘of serious concern’. Since the beginning of the credit crunch in 2007, Genesis has been hit by annual writedowns of between £5.8 million and £6.9 million.
Robert Kerse, who took over as the group’s finance director in February following the sudden departure of Mark Gayfer last year, said the increased writedowns were the result of a change in the board’s risk management approach, coupled with the loss of government grant and changes to development plans brought about by the economic downturn that will see it garner smaller returns than anticipated at the time of purchase.
‘Genesis aggressively bought a lot of land as it wanted to provide a significant amount of new homes,’ he said. ‘We have now taken a view that, in terms of the land bank, we will get £20 million less than we thought last year.’
Some of that land bank was stockpiled for use under the Homes and Communities Agency’s affordable homes programme. This week, Genesis signed a contract to develop 285 homes by 2015 under the programme, a number thought to be significantly less than its original bid.
Mr Kerse said that the move should take the ‘bad news out of the accounts’ in future years but he could not rule out future charges.
The TSA expects to publish an updated judgement on Genesis before the end of the financial year.
Accounting regulations allow housing association boards some leeway on the value they ascribe to unused land, resulting in potential differences to so-called impairment charges.
‘There’s a great deal of subjectivity,’ said a finance director at another housing association when asked about impairment charges. ‘Relatively small changes can have much larger outcomes in terms of the final figure.’
Genesis spent just over £200 million on land between 2005 and 2007.