Around 35 people attended the Questions & Answers session in The Reading Room on Wednesday 5th July 2023.
The meeting was opened by Chris Delf who thanked everyone for attending. Chris summarised progress to date, with contributions from Jonathan Mosley and Richard Wall.
- Share pledges totalled £261,500 which is phenomenal… well done everyone.
- Offer for purchase of the Black Lion freehold has been accepted by Admiral Taverns (AT), although they didn’t accept our request to take it off the market. Exchange of contracts scheduled for 31st July 2023, with completion by 23rd October 2023.
- The Business Plan and Share Prospectus were issued last week and are available on the website (Share Scheme link above).
- The Community Ownership Fund (COF) application is nearly ready for submission. JM explained that the COF application involves a lot of work and is a very detailed document. The Plunket Foundation have been very helpful and are impressed with the draft application. We are all very confident that we will be successful. RW said that the COF website, with an introduction from Michael Gove, emphasises that projects like ours are exactly what COF and the Levelling Up White Paper are all about: an opportunity for local groups like ours to take over vulnerable local assets for the benefit of our community.
- RW thanked everyone who has already paid for shares. The Share Prospectus was only published last week and already we have £100,750 in the bank. He emphasised the need to convert the remaining pledges into cash quickly and, in any event, by 24th July. Everyone understands that circumstances change, and some people will not be able to honour their pledges. However, to compensate, some people will be able to buy more shares than pledged. In any event, RW asked people to let him know if people are not going to be able to pay for shares, or later than 24th July.
Chris opened up the meeting to questions, the first of which was submitted by someone unable to attend the meeting. Please see below for the Questions & Answers.
Before Chris ended the meeting RW acknowledged Mike Ramshaw who has been instrumental in driving this project forward. Unfortunately, Mike had to leave the group due to pressure of work, but everyone is hugely grateful for his contribution.
Are shareholders financially liable for the pub going forward and would any debt be passed on to shareholders?
Shareholders of Skelton-on-Ure Pub and Hub Ltd, which is a Community Benefit Society, have the same liability as would a shareholder in a limited company. Therefore, the maximum you can lose is the cost of your investment.
What is the timescale for the COF? Is there likely to be a delay?
The COF application is about to go in (well before the deadline of 12th July). The team is confident that we will be successful, and our advisors Plunkett also think we have a strong case. The decision is either Yes or No, however that is not expected until September which is not in time for the deadline for exchange of contracts on 31st July.
The COF grants applied for are £250,000 for the purchase and renovation and a £50,000 revenue grant which will cover initial project running costs such as surveyor and project management fees.
Drawdown of COF funds will be in stages, the proportion for completing the freehold purchase will be available when needed, however the balance for the renovation will be in phases.
What is AT’s position?
AT haven’t taken the pub off the market. Dates for exchange and completion are firm. We believe that AT are not at all interested in our community, and there is a risk that they will sell to a higher bidder. However, we believe that the Black Lion can only be rescued via this community project, with substantial financial support from the community and from the government (via COF). The Asset of Community Value (ACV) status will be awkward for anyone else, such as a developer, due to a change of use being needed, the restrictive covenant and the public footpath going through the site. If exchange doesn’t happen, share money will be returned in full.
Does the ACV protect us?
The initial moratorium (whereby AT could not sell to anyone else), expired in April, so they can sell to anyone. The ACV is still very valuable though as it demonstrates that the local authority has recognised the importance of the Black Lion to the community (which also strengthens the COF application).
Please explain how pledges-in-kind work?
When we launched our share pledge campaign, we were expecting COF to match both share pledges and in-kind pledges. However, our share pledge target of £300,000 alone is above the £250,000 COF claim, therefore in-kind pledges are no longer needed from a COF standpoint. We will of course welcome in-kind donations of services, labour, materials etc. when the renovation project is underway. There will be a lot to do and we have already had a number of in-kind pledges for which we are grateful.
Once the pub is done up and its value is increased, will this affect the value of shares?
As per the Share Prospectus:
This is a long-term investment for the benefit of the community. Community Shares do not change in value and cannot be traded. We expect to be able to pay a modest amount of interest annually from year 4 onwards.
In the unlikely event of the Society being wound up, shareholders would get back no more than the value of their investment, even if the Society’s assets (mainly the freehold) are worth more than the share capital.
Similarly, shareholders have no liability beyond the value of the shares they buy – their face value is the most you could lose. Any excess from the sale of the Society’s assets would be transferred to another community organisation with similar community benefit aims. This is known as an Asset Lock and ensures that any remaining assets remain in community hands after creditors and shareholders have been repaid.
What happens if the COF application is not successful?
As per the Share Prospectus:
If insufficient funds are raised (for example being rejected for COF grants). If that results in SPHL not proceeding with the purchase of the Black Lion, there is a risk that only 86.6% of shareholder funds will be returned (reflecting the £35,000 deposit paid to the seller and £261,500 issued shares target). However, the Management Committee feel that this risk can be mitigated by securing sufficient additional funding to at least complete the purchase and decide on renovation funding later.
It was stressed in the meeting that we have to get the full value of pledges converted into cash. It would be unfair on shareholders who have paid, to risk losing more than 13.4%. Circumstances change and it was recognised that some pledges will not convert, however any shortfall will need to be made up to get back to the £261,500 figure. We need to convert as many pledges to shares by 24th July, to give us enough time to discuss plans well before the deadline for Exchange of Contracts on 31st July.