Sunday, July 11, 2010

Pathfinder House

With many dubious claims about Pathfinder House being made, I thought I would take a look at the funding of this building.

The one point that needs to be remembered, in all this, is loans for Government projects can be very cheap. The Public Works Loan Board is the Government Agency where Local Government goes for loans. These loans are raised through Gilts and so long as the UK Government is a good credit risk the loans can be cheap.

When HDC raised a £10 million loan to pay for part of the cost of Pathfinder House it did so at:
£10 million over the 49-50 year period of the loan is £200,000 a year in capital repayment. At 3.9% this equates to a £390,000 a year and will slowly decrease over the period. So there is an initial repayment of roughly £590,000 per annum. What has also to be taken into account is the loss of the £8,000,000 for this project from capital. At about 3% interest rate this would mean a loss in interest of £240,000. The yearly basic cost is roughly £830,000. 

The reason behind this rebuild is: "Independent structural engineers have confirmed that the irreversible deterioration of Pathfinder House’s walls will be at crisis point by 2010. The scaffolding which keeps it safe will have to remain in place until the building is demolished." The building was falling down and needed to be renewed.

I read weird ideas like renting a property instead. This would work out as very expensive compared to owning the building. The decision of rebuilding Pathfinder House is probably the best option considering the circumstances. Not the conclusion I wanted.

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