A council has been accused of being involved in a "disturbing" property deal, after turning down a chance to pay £10 million for an office block - but then buying it for almost £23m ten months later.
What happened?
In May 2019, Haringey Council was given the chance to buy Alexandra House, in Wood Green, where it rented office space, a council meeting was told this month.
According to an external auditor, the owners valued it “at about £10m", but a council officer turned them down, the council said.
In August 2019 a company called Ability (Wood Green) Ltd was set up by a businessman and secured the option to buy the property.
Its director and sole shareholder was Andreas Panayiotou, a billionaire property tycoon, who was once the largest private landlord in the UK.
After securing the option to buy Alexandra House, his company submitted plans to convert it into 219 flats.
But the plan sparked outrage from campaigners who said some of the flats would be smaller than budget hotel rooms.
Haringey Council rejected the planning application in December 2019 and then set about trying to buy the building after all.
But by then the price had ballooned, due to, according to the external auditor, its apparent residential potential.
And to complete the purchase the council also had to spend millions of pounds buying Ability (Wood Green) Ltd, the company which held the option to buy it.
Leigh Lloyd-Thomas, the external auditor, whose report into the affair was published on March 17, described this as a "a bit of a ransom".
According to council papers, the authority paid £6m for the company in March 2020.
Later that month, the now council-owned company purchased the building from the freeholder, a company called Workspace, for £15.5m.
In the end, the acquisition cost Haringey Council £22.6m.
A representative for Mr Panayiotou did not respond to a request for comment.
Whose fault was it?
The Labour administration said it always wanted to buy the site - but claimed it did not know about the option to buy it for less than half the price it paid a year earlier.
Noah Tucker, cabinet member for insourcing at the time, said: “If I had been informed of the opportunity to buy Alexandra House on good or reasonable terms while I was the relevant cabinet member, I would have very strongly advocated purchasing the building.”
However, some people at the council did know and the initial decision not to buy Alexandra House at the much lower price became the subject of an internal and external audit investigation.
The council has refused to publish the internal audit report but Minesh Jani, head of audit and risk, summarised its findings in a public meeting on March 17.
He said the decision "appears to have been made by the assistant director for economic development at the time, and neither the chief executive nor the leader were aware".
He said “weak” systems had led to “ad hoc” decision-making, but there was no evidence of “irregularity or improper acts”.
The officer in question said he did not wish to comment and the council said it had “already implemented a number of improvements” based on the findings.
But councillors said the investigation left "unanswered questions".
Some told the Ham&High they suspected the officer was a “scapegoat” for an expensive political U-turn.
“They have stuffed that officer,” said one. “It’s very unfair.”
A council spokesman said: “The audit report is clear that any weaknesses resulted from our corporate processes, rather than the actions of any individual officers or members. To draw other conclusions from the report would be inappropriate.”
What happens now?
Council sources said papers published last year suggested there had been a policy change regarding Alexandra House.
A February 2020 Cabinet report said Haringey had “planned to vacate” the block, but studies conducted after the decision not to purchase it had found the council did still need the offices.
There had always been a "strategic case for acquisition", it said. “Now that the alternative is residential development of a nature we would not support for strategic reasons, there is a much stronger argument for acquisition," it said.
Council leader Joseph Ejiofor told Cabinet that the council’s “accommodation needs had changed” and its “strategic ambition for Wood Green had evolved”, so “Alexandra House now had a greater importance to the council than before.”
A Labour source said: “So at the time, they presented it as a change of mind, but now they are saying there was no change of mind and somebody made the decision without telling us.”
Members of the council's Corporate Committee have ordered further investigation.
Chairman of the committee Isidoros Diakides said the current findings were “disturbing” but "limited”.
"It sounds a bit strange that nobody above that particular consultant, knew about it," he said.
"Is that the case, definitely, in other words, that that person acted completely off his own back? Or is it that, simply, the auditors couldn't find an audit trail?"
The new investigation should conclude by autumn.
Haringey Council announced last month that it was set to raise council tax by 4.99pc, after the Covid-19 pandemic caused an "economic crisis".
The council aims to save £11.1million over the next five years.
Plans include back office "efficiencies" and "restructuring" the team that organises events in the borough's parks.
In a column for the Ham&High, leader Joseph Ejiofor wrote: "As a council, we will never lose sight of the fact that we are spending public money, and for every penny that we spend, we are determined to get the maximum level of public benefit."
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here