Agenda item

The Council’s Commercial Director presented the report, quoting that the Council’s Corporate Plan Theme 3 Asset Management states:

“To support our entrepreneurial and commercial aspirations the effective yet creative use of our land and property assets is a key driver. We will use our assets to drive and facilitate inward investment and to also provide social benefits to our communities. We will ensure that our assets are in a good state of repair and our commercial tenants record high levels of satisfaction. We will strive to maximise sustainable returns on our current assets and take a strategic approach to disposals. The acquisition of any new assets will focus on maximising return on investment but will also take account of appropriate social returns where relevant.”

In support of this objective the Council’s Commercial Plan identified the aim of “developing and delivering a land and property programme (capital development programme) to add value and diversify the Council’s property portfolio.”

In March 2016, Council approved a five year capital programme as part of the Medium Term Financial Plan.  The capital programme allocated £20m for the acquisition of commercial properties during 2016-2020.  The report set out the proposed process for acquisition and sought approval to negotiate commercial property deals.  The Chief Executive had suggested that delegation to negotiate be delegated to herself however the Committee felt that the most appropriate posts be those as set out in the report i.e. the Commercial Director and s151 Officer, following consultation, with the Leader and Chair of Policy Resources.  Assurance was given that due diligence and governance would be adhered to and that the final decision on any commercial acquisitions would be put to the Committee for approval.

However it was recognised that The Leader of the Council and the Chairman of Corporate Policy and Resources were now the same person, therefore it was proposed that the recommendation be amended to be “following consultation with the Leader and Vice-Chair of Corporate Policy and Resources”.

The current net book value of the Council’s land and property assets was £10.9m and included 104 properties.  The property portfolio included a number of retail units and offices (properties leased to commercial businesses) that generated a rental income of approximately £0.507m per annum.  It was proposed that the Council sought to acquire additional commercial properties in order to extend its property portfolio and increase the annual rental income.  The principles which should guide the acquisition of new commercial properties were set out in the report.

Members felt that a minimum gross return of 8% and a net return of approximately 3% was an ambitious target, these figures however were still under review.  It was also noted that consideration would be given to the acquisition of commercial properties both within the district and beyond the local authority boundaries.  This would give greater scope to generate a reasonable rate of return as the Council could invest in more buoyant property markets.

It was moved and seconded that the amendment to recommendation 4 be agreed, and on being voted upon it was:

RESOLVED that the Commercial Director and s151 Officer be authorised to negotiate the acquisition of commercial properties, in consultation, with the Leader and Vice-Chair of Corporate Policy and Resources Committee.

The recommendations with the amendment were then proposed en bloc.

RESOLVED that:

a)    the acquisition of commercial properties up to a value of £5million during the financial year 2016/17 be approved in principle;

b)    commercial properties locally, regionally and nationally to respond to competitive market conditions may be acquired;

c)    the Council acquires and manages the commercial properties, in line with the agreed acquisition and disposal policy, using in-house staff resources and its retained agents;

d)    the Commercial Director and s151 Officer be authorised to negotiate the acquisition of commercial properties, in consultation, with the Leader and Vice-Chair of Corporate Policy and Resources Committee; and

e)    the Corporate Policy and Resources Committee will make the final decision on the acquisition of individual commercial properties based on the business case and due diligence.