Agenda item

To provide a formal policy for the acquisition of commercial investment properties that will provide a balanced investment portfolio from which West Berkshire Council can derive a long term, sustainable revenue stream; to convey the key elements and seek approval to the implementation of a Property investment Strategy; to seek approval to the formal governance arrangements for the acquisition and disposal of commercial investment property and ongoing management of the investment portfolio; and to agreed the acquisition and disposal of building assets up to a value of £10m by way of delegated authority. 

The Council considered a report (Agenda Item 18) which set out a formal policy for the acquisition of commercial investment properties that would provide a balanced investment portfolio from which the Council could derive a long term, sustainable revenue stream. The report also conveyed the key elements and sought approval to implement a Property Investment Strategy. In addition approval was also being sought for the formal governance arrangements for the acquisition and disposal of commercial investment property and ongoing management of the investment portfolio. Members were also being asked to agree the acquisition and disposal of building assets up to a value of £10m by way of Delegated Authority.

MOTION: Proposed by Councillor Dominic Boeck and seconded by Councillor Anthony Chadley:

That the Council resolves:

“(1)      To approve the Property Investment Strategy (set out in appendix C) as an addendum to the Council’s Investment and Borrowing Strategy 2017/2018.

(2)       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 £10 million per transaction.

(3)       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 £10 million per transaction.

(4)       To delegate to the Head of Finance and Property in consultation with the Portfolio Holder for Property, authority to appoint suitable consultants in accordance with the Contract Rules of Procedure (Part 11 of the Constitution).”

Councillor Dominic Boeck in introducing the report thanked Officers for developing the Strategy. The proposal represented an opportunity for the Council to realise a favourable rate of return by investing in commercial property whether it be inside or outside the District. The strategy sought permission to invest up to £50m which would be borrowed from the Public Works Loan Board and should generate around £1m of surplus income annually. The cost assumptions were set out in Appendix E to the report. The report also set out the governance arrangements for the acquisition of properties. Any acquisitions that did not meet the agreed criteria would be brought to the Executive for approval.

Councillor Alan Macro stated that while he welcomed the proposal he was concerned that the Council had taken so long to start investing. He was concerned that the Government might intervene and increase borrowing costs and he was concerned about the possible impact on the investment returns if this happened before the portfolio was complete. He noted that Members were involved in the governance arrangements and hoped that this would be cross party.

Councillor Alan Law commented that while he supported the principle he had reservations about the Council’s expertise to deliver it. He accepted that consultants would be employed but commented that they were not subject to any risks. He also had concerns about the return on investment calculation and stated that outside of London voids tended to be in the 10 to 15% range and the calculation was based on voids of 5%. According to his calculations the authority would lose money if the properties were vacant for 30% of the year and this was not uncommon in a recession. This Strategy would cost the Council a lot of money if the Council did not get it right.

Councillor James Fredrickson commented that this was one of the most important changes in the Council’s history. He thanked John Ashworth, Shiraz Sheikh and Richard Turner for all their hard work in putting the Strategy together. The Council would proceed with caution and care and ensure due diligence was undertaken. The proposal would make the authority more resilient and it would be better placed to address the needs of residents.

Councillor Graham Jones stated that it was not important that the authority was not the first to adopt this approach and it was often useful to learn lessons from others.  This Strategy would allow the authority to generate income which could be used to protect Council services in the future. The Council would proceed with appropriate caution.

Councillor Anthony Chadley noted that he had alluded to this Strategy when he had introduced the budget in March 2017. He noted in response to Councillor Law’s concerns that the authority would be purchasing going concerns which would help to reduce the issue of voids. The Strategy was based on clear financial evidence and took into account volatility over the past 35 years.

Councillor Boeck thanked Members for their support of this innovative initiative which would generate reliable secure income streams for the future. The legislation that underpinned this Strategy (the Local Government Act 2003) required authorities taking up the offer to consider three things namely; security, liquidity and yield and the proposal would meet these three requirements.

The Motion was put to the meeting and duly RESOLVED.