Meeting documents

To consider the information attached.

Contact Officer: Teresa Lane (01296) 585006

A report, together with confidential appendices which detailed Aylesbury Vale Estates (AVE) Business Plan for 2016/2017 was presented to give the Committee an opportunity to consider it and pass any comments onto Cabinet.  The Committee was reminded that, the Council and the Akeman Partnership LLP (Akeman) had set up AVE in October 2009, following a competitive dialogue procurement, to manage, improve and develop the Council’s commercial property portfolio and provide an income stream to the Council.  The partnership was governed by a formal Members’ Agreement and managed by a partnership board on which the Council had 3 representatives.

Akeman had produced a draft Partnership Business Plan for AVE as part of their bid, which had been approved by the Cabinet in June 2009. The final version of the Plan formed part of the completion documentation approved in October 2009.  The Board meet on a regular basis to review progress on the Business Plan and monitor performance of the Asset Manager, Akeman Asset Management LLP. The Members’ Agreement provided for AVE to prepare a new Business Plan before the end of each accounting year and for this to be circulated to the Council and Akeman for approval.  The Business Plan set out AVE’s objectives for the life of the Partnership (20 years) and the annual overarching objectives for each accounting period.  In particular, the Plan had to include a statement that AVE’s business would be operated with a view to producing the best risk adjusted profit obtainable and to maximise the risk adjusted rate of return to the Council and Akeman.

The Committee were advised that historically, the cycle for considering the draft Business Plan meant that it was retrospective and not aligned to the Council’s own budget setting process when any forecast distribution from AVE could be included.

A draft Business Plan for 2017/2018 would be presented in the December/January cycle to address this.

Meanwhile, the draft Business Plan submitted to the meeting identified the ‘core assets’ within the portfolio, i.e. those assets which had the greatest collective bearing on the portfolio in total, and were therefore the subject of greatest management attention, namely the estates at Rabans Lane North, Rabans Close, Edison Road, Bessemer Crescent, Stocklake, Gatehouse Way and Hale Leys Shopping Centre.  These assets had their own dedicated Asset Management Strategy which was submitted to the Board for approval.  During the 2012-13 financial year, AVE had purchased the Hale Leys Shopping Centre, creating a separate special purpose vehicle, Hale Leys LLP, to own and manage the centre. By value, the shopping centre made up about a quarter of the total portfolio value of AVE.  A separate cashflow for the Centre was detailed at Appendix 2 to the confidential pages

The Business Plan included a range of assumptions about the future behaviour of tenants and the wider market.  In order to provide Members with an improved understanding of the impact of future events on the performance of the business, two ‘cases’ were presented: a pessimistic ‘base’ case and an optimistic ‘enhanced’ case.  The expectation was that reality would fall somewhere between these two extremes.  The cashflows supporting the base and enhanced business plan were detailed at Appendices 3 and 4 to the confidential pages.

Looking back, the UK market had finally started to see more confidence in 2015 spread out from central London to other occupier markets which had benefited locations like Aylesbury.  However, the retail market remained volatile.  The core aims of the company remained the same to increase investor revenue flows and support the Council’s economic development ambitions.  During 2015/16, the following progress had been made:-

·                     completing the sale of the Whitehill Surgery and Ardenham Lane car park to the medical practice who occupied the site on a long and unsatisfactory lease.

·                     the sale of the Pembroke Road estate to AVDC to allow expansion of the Council’s depot, was due to be complete before the end of AVE’s financial year.

·                     the Phase 1 Gateway affordable housing project was due to be completed later this year.

·                     lettings had occurred across the portfolio in line with expectations with 23 new leases completed, 10 vacating (4 of which relocated to AVE premises elsewhere), and 8 renewing their leases.

·                     the overall vacancy level for the multi let estates had decreased and was now as low as 7.8% for some parts of the estate although it remained stubbornly high, over 25%, for other areas.

·                     despite market volatility, Hale Leys Shopping Centre was 100% occupied.

·                     a distribution to members of AVE had been deferred until 2016/17.

·                     a refurbishment of Bessemer Crescent units had been highly successful and resulted in an increase in lettings with an end year forecast of 7.8% vacancy.

Looking forward, the UK economy was doing well compared to many other countries although the market still needed to deal with uncertainties created by a possible exit from the EU, continued austerity and the slow down of the Chinese economy.

During the next 12 months, the Plan would focus on:-

·                     continuing and extending the refurbishment programme to improve the multi let estates to reduce vacancies, increase rent and help generate employment through the increased lettings.

·                     making a distribution to members of the partnership.

·                     identifying investment opportunities to grow/diversify the portfolio and enhance its value. This would include consideration of any opportunities arising from the emerging Vale of Aylesbury Local Plan.

·                     bringing forward a number of developments including the completion of the affordable housing project on the Gateway site (Phase 1) and bringing forward Gateway Phase 2.

·                     securing the renewal leases of key tenants of the Hale Leys Shopping Centre and engagement in the process to develop the next phases of the Waterside North development.

·                     the transfer of ‘community assets’ where there was a demand to do so and it makes economic sense from AVE’s perspective.

Members considered the information in the Committee report and confidential appendices, and in response to questions were informed:-

(i)         that AVE compared their performance against the Investment Property Databank (IPD) which was the standard benchmark for investors to analyse the performance of property in the UK market.  AVE’s performance was consistently better than comparable managed properties.

(ii)        on the work and measures that AVE were taking to mitigate market uncertainties.

(iii)       that broadband had been upgraded to properties in Rabans Close, with a view to attracting more higher end users.

(iv)       that every effort would be made to reduce the vacancy level for parts of the portfolio which remained high.

(v)       that while AVE had not externally benchmarked its performance there was no reason why this couldn’t happen in the future, subject to shareholder agreement.

(vi)       that AVE would be interested in investing/managing centres and general convenience facilities in Aylesbury, should the opportunity arise.

(vii)      that AVE would look to identify investment opportunities to grow/diversify the portfolio and enhance its value, in particular, opportunities that might arise from the emerging Vale of Aylesbury Local Plan.

(viii)     on a number of other issues relating to information covered in the confidential appendices.

RESOLVED –

(1)       That Cabinet be recommended to approve the AVE Business Plan for 2016/2017.

(2)       That a further report on AVE’s performance be submitted to the Scrutiny Committee in 6 months, or sooner if it was felt that it was appropriate.

NOTE:  Councillor Whyte declared a personal interest in this agenda item as a Council representative on the Aylesbury Vale Estates Board.