Taxpayer loan of almost £5m to be written off after Leeds hotel project collapses

The revelation was made at today’s full council meeting at Leeds Civic Hall, following a question from councillor John Procter, deputy leader of the opposition Conservative group, on behalf of party leader Andrew Carter.

He asked for confirmation that “the £4.8m loan given by the LEP (Local Enterprise Partnership) and held by Leeds City Council for the Arena Hotel scheme has now been lost”.

Coun Lewis confirmed that the money had been “written off”, but also that work on the site was due to recommence by an unnamed developer.

The YEP understands the site, near Leeds Beckett University, will now be turned into student accommodation.

As previously reported in the YEP, the site had been languishing in development limbo for two years, after the original contractor went into administration.

The scheme was part funded by a £4.8m taxpayer-backed loan from the Leeds City Region Enterprise Partnership (LEP) to Oxford GB Two Limited, the hotel development arm of the original contractor. However in March last year, that company also crashed.

Property agent Lambert Smith Hampton was eventually appointed to sell the freehold interest in the unfinished 206-bedroom scheme near Leeds Arena for offers in excess of £6m.

Coun Carter has repeatedly questioned the local authority - in its supporting role - on whether taxpayers’ money will be paid back.

He previously branded the saga a “sad and sorry tale of incompetence and evasion.”

And before that, Labour councillor Peter Gruen had also raised concerns, stressing the site was in “one of the most important locations in the whole of the city” and the delay had meant “half the road system around it is closed off” and the site had become an eyesore.

Speaking after today’s meeting at Leeds Civic Hall, Coun Carter said: “I have been pursuing this issue for months now, having been blocked at every turn in trying to access information and in the end having to resort to Freedom of Information requests to get to the bottom of what actually occurred.

“It is now extremely disappointing to finally learn that such a large amount of public money, £4.8m, has been wasted, as the loan will not be repaid.

“Frankly, very serious questions remain about the process that led to this loan being approved and the public bodies involved, including Leeds City Council, must answer for any mistakes that were made.

“At a time when we’re trying to make the case for devolution of more power and resources to the region, this whole debacle is certainly not the way to show government that we know how to make best use of public money. We must ensure there is proper public scrutiny and democratic accountability of decisions involving the use of public funds.”

A spokesperson for West Yorkshire Combined Authority said: “Since the original developer went into administration, the Combined Authority, LEP and Leeds City Council have been working together to ensure that the economic opportunities of this important city centre development site are fully realised, using all powers at our disposal.

“So that the development can resume as quickly as possible, the Combined Authority has agreed to release its financial interest in the site, which will enable it to be sold to a new developer unimpeded and both the site and the existing infrastructure to be put to productive use.

“This fulfils the aim of the Government funding that was put towards the development, which is to kick-start schemes that could not be fully funded through commercial finance.

“The Government’s Growing Places Fund was created at a time when the housing and development market had stalled due to the unavailability of commercial finance.

“The nature of the funding means that schemes supported present a certain degree of risk. The Leeds City Region Enterprise Partnership (LEP) took a strategic decision when government first awarded it the funding to offer loan rather than grant investment.

“It has since taken a portfolio approach to its investments, supporting projects with a strong prospect of loans being repaid alongside schemes offering significant economic benefits but with a higher degree of risk.

“As a result of these investments 371 new homes have been built (plus a further 47 affordable homes), 5,900 jobs are forecast to be created or safeguarded and close to a billion pounds of additional investment has been unlocked.

“To date over £7m in repayments and interest has been returned to the Combined Authority, creating a revolving fund that can be re-invested in other schemes to create jobs and growth in the City Region.”