Agenda item

Purpose: To agree that the current capital budget for the acquisition of commercial property of £50m, approved as an addendum to the Council's Investment and Borrowing Strategy 2017/18, be extended by an additional £50m to offer a total capital budget of £100m.

The Council considered a report (Agenda Item 14) proposing that the current capital budget for the acquisition of commercial property of £50m, approved as an addendum to the Council’s Investment and Borrowing Strategy 2017/18, be extended by an additional £50m to offer a total capital budget of £100m.

MOTION: Proposed by Councillor Anthony Chadley and seconded by Councillor James Fredrickson:

That the Council resolves:

(1)       “to approve the additional £50m to the Property Investment Strategy (set out in appendix B) as an addendum to the Council’s Investment and Borrowing Strategy 2018/2019 for the purposes of acquiring additional property assets;

(2)       to approve the recommended limits for external debt to include this additional £50m investment for 2018/19 and the following two financial years as shown below in comparison with the agreed level for 2017/18: 

(3)       to delegate to the Head of Legal Services in consultation with and having received agreement from the Property Investment Board to purchase investment property in accordance with the above Strategy up to a maximum of £15m per transaction; and

(4)       to delegate to the Head of Legal Services in consultation with and having received agreement from the Property Investment Board to dispose of property in accordance with the above Strategy up to a maximum of £15m per transaction.”

Councillor Anthony Chadley acknowledged that the proposal was asking the Council to commit a significant amount of money to this scheme. However, the additional £50m expenditure, if approved,  would generate an additional £1m of income by 2022. He noted that just over a year ago the Council had first agreed the Property Investment Strategy, The Council had now invested a substantial proportion of the initial £50m of funding.

Risks to the Council were reduced by strict adherence to the Property Investment Strategy which reduced risk through the acquisition of a balanced portfolio. Both Members and Officers on the Property Investment Board were acutely aware that they were spending significant sums of money and any potential purchases were scrutinised throughout the process which was set out on page 39 of the paperwork.  It was important to note that a significant number of properties had already been rejected by both Officers and the Property Investment Board.

Councillor Anthony Stansfeld noted that Property Investment Strategy, under the sector weighting, permitted up to 40% of the fund to be invested in retail and he questioned the wisdom of this.

Councillor Quentin Webb noted that there was a typographical error on page 20 of the document where it stated in the Equalities Impact Assessment that the proposal was to increase capital borrowing by £5m instead of £50m.

Councillor Alan Macro commented that he was broadly supportive of the proposal but that he too had concerns about investing in the retail sector given the current market trends.

Councillor Emma Webster responded by saying that each potential investment was considered on its own merits and that the Council had procured specialistists to provide advice on potential purchases.

Councillor Jeff Brooks countered that one should treat advice from experts with due care. He felt that the Strategy should be kept under careful review and that potential purchases in the retail sector should be carefully considered. He felt that the Council should not be wedded to spending 40% of the fund in the retail sector.

Councillor James Fredrickson stated that the Council would continue to carefully consider advice from the Council’s advisors on each potential purchase. All potential purchases were also subjected to due diligence. He stated that the Strategy proposed a maximum of 40% of the fund being spent in the retail sector. This was a cap not a target.  

Councillor Fredrickson stated that increasing the fund from £50m to £100m would provide an opportunity to generate additional income to support the Council’s budget. This would help  the Council to continue to support its most vulnerable residents. The first tranche of the project had been successful and based on that success the Council was now looking to expand the project.

Councillor Chadley stated that he would like to reassure the Council that all purchases were carefully considered. Retail was a broad sector and there were successful retailers that could be invested in. He reiterated that the 40% was the maximum that would be invested in this sector. He also reassured Councillor Brooks that the Property Investment Strategy was constantly being monitored and was subject to annual review by full Council.

The Motion was put to the meeting and duly RESOLVED.