Decision details

The report was introduced by the Director of Resources and sought to approve the strategy for the investment property portfolio and delegation of decisions to the Director of Resources in consultation with the Chair of Corporate Policy and Resources.

As part of the Commercial Strategy agreed in 2015 the Council agreed to develop an investment portfolio that would deliver a minimum of 3% net return with a maximum expenditure of £20m.

The report set out a proposed strategy for the acquisition of additional properties to be managed alongside existing commercial assets.  WLDC currently managed a mixed portfolio of freehold and leasehold properties totalling 54 lettable units with a rental income and Service Charge contributions.  The objective was for WLDC to increase the size of this portfolio by making a further investment in commercial property over the next four years to generate a target net income.

Working with the commercial property consultant, Cushman & Wakefield, officers had developed an investment strategy for the Council that aimed to balance risk across the portfolio whilst achieving the target returns required.  The key recommendations and proposals were contained within the Cushman & Wakefield report, appended to the report.

The report from Cushman & Wakefield set out the current market assessment and indicated that it was still possible for WLDC to make investments based on current borrowing rates and provide additional income to support the Council’s medium term financial position. The use of borrowing costs as part of the business case allowed the Council to borrow, where that was necessary, and ensure a prudent approach to managing the risk of market volatility through providing at an appropriate level for property value variations.

Members sought clarification on the legal status of loans and investments and it was noted that it was not allowed to borrow money to invest, however to obtain a loan to purchase property or commercial establishments in order to generate revenue was acceptable.  Other Councils were taking this route, and whilst the risks were acknowledged it was acknowledged that such projects were long term investments.

The recommendations as set out in the report were moved, seconded and on being voted upon it was:

RESOLVED that:

a)    the strategy, scoring criteria and the minimum score for property acquisitions, attached to the report, be agreed;

b)    a Capital Budget of £20m be released for investment and this be financed by Prudential Borrowing, be agreed;

c)    decisions to acquire assets in accordance with the recommendations within the strategy and with a total cost not exceeding £20m be delegated to the Director of Resources in consultation with the Chairman of Corporate Policy and Resources;

d)    the Director of Resources provide an annual report to Corporate Policy and Resources Committee on the Investment Property Portfolio; and

e)    a Valuation Risk Reserve be created.