Agenda item

Purpose: the report provides a review of the Property Investment Strategy which was initially implemented by the Council under the previous administration in May 2017, and makes recommendations designed to support the financial resilience of the Council in the current economic environment.

Resolved that:

·       The Council disinvests from the commercial property portfolio over the medium financial term (MTFS) in order to generate capital receipts.

·       Resulting capital receipts should be applied to future capital financing of the approved capital programme and agreed transformation projects with a view to generating longer term revenue savings.

·        Approve the proposed disposal in the Part Two appendix E.

This decision is eligible to be ‘called-in’.  However, if the decision has not been ‘called-in’ by 5.00pm on 10 November 2023, then it will be implemented.

In accordance with the Council’s Constitution eight Elected Members (Councillors Dennis Benneyworth, Dominic Boeck, Paul Dick, Clive Hooker, Paul Kander, Ross Mackinnon. Biyi Oloko and Howard Woollaston) called in the Executive Decision (EX4402) on the basis that they believed that having a publicly stated and explicit strategy to disinvest from the entire portfolio over a specific time period puts the Council at a severe commercial disadvantage when negotiating disposals with potential buyers.

The Members of the Council who submitted the call-in an alternative course of action as follows:

·       The decision is not implemented and the Council’s Property Investment Strategy reverts to the status quo ante;

·       The Property Investment Board, in line with its current Terms of Reference, may from time to time advise the Executive that particular assets may be disposed of, if capital receipts represent best value for the Council;

·       In the absence of property disposals the Council should continue to benefit from rental income in excess of all costs, and

·       The lack of a hard deadline for disposal of the portfolio will allow the Council to retain a strong hand in commercial negotiations.

Councillor Iain Cottingham introduced and proposed a report (Agenda Item 12), which recommended disinvestment from the commercial property portfolio over the medium financial term in order to generate capital receipts, due to the financial difficulties facing the Council. Councillor Cottingham referred to the Government urging local authorities not to take excessive risk with taxpayers’ money and commented that this was such a risk and hence the proposal to disinvest.

Whilst Councillor Ross Mackinnon recognised the logic of the proposal, he suggested that capital values were currently at their lowest since the commercial property portfolio had been established and suggested that it was madness to consider selling at the bottom of the market. Further Councillor Mackinnon suggested that the numbers detailed within the table at section 7.3 of the report appeared to be incorrect, as they suggested annual savings of £6.9m, which did not seem feasible given current interest rates.

Councillor Cottingham clarified that the Executive was not proposing a ‘fire sale’ but would be following a phased approach and utilising some of the capital towards transformation.

Joseph Holmes, Executive Director (Resources), clarified that the Minimum Revenue Provision (MRP) amount represented the cumulative amount over three years and that the table detailed the net value of £1.3m per annum. It was explained that it was a cumulative amount rather than annual sum. Councillor Mackinnon suggested that the table was incorrect as it was not possible to save £6.9m annually when the balance was only £51m, and further suggested that without clarification the Executive should not vote on the paper.

Councillor Cottingham commented that the Executive were voting on the strategy to divest in principle with particular reference to one asset rather than to all of the assets. 

Councillor Mackinnon commented that the Executive had been commercially inept in publishing the value of the assets and should have retained the information as confidential. Councillor Cottingham commented that the valuations had been produced by third party consultants, provided only an indication and a book value estimate and would be easily accessible on the internet anyway. 

Councillor David Marsh commented that he had always opposed the concept of the commercial property portfolio and felt that it was the wrong way to invest money, and that there was no social value to West Berkshire to continue with the investment.  

Councillor Howard Woollaston commented that he understood the rationale of disposing of assets to fund the Council’s capital account however questioned the timing given the particularly poor market. Councillor Woollaston requested that there be clear timescales as to when capital was specifically required, with an appropriate schedule to sell accordingly. Councillor Cottingham repeated that the process would not be a ‘fire sale’ and that the Executive were aware of the need to obtain the best possible value for the residents of West Berkshire, however noted that sale of the property was one of the few levers available to the Executive to balance the budget. 

Councillor Boeck reminded Members that the Liberal Democrats had supported the strategy to invest in commercial property throughout. Councillor Dillon clarified that he had also requested that there be investment in Social Housing, but that he was now in favour of disinvesting in order to minimise the risks to the Council.

Councillor Jeff Brooks seconded the recommendations within the report and commented that there would not be an actual loss in the sale of the property and that it was the best option to minimise the financial risk to the Council.

Recommendation (Vote to be taken in Part II):

·       The Council disinvests from the commercial property portfolio over the medium financial term (MTFS) in order to generate capital receipts.

·       Resulting capital receipts should be applied to future capital financing of the approved capital programme and agreed transformation projects with a view to generating longer term revenue savings.

·        Approve the proposed disposal in the Part Two appendix E.