Meeting documents

To consider the attached report.

Contact Officer:  Teresa Lane (01296) 585006

The Committee received a report that would be considered by Cabinet on 6 September, 2017, in relation to a proposed Commercial Property Investment Strategy, including on how it would be funded and implemented.  The detail would be included in the Minutes of Cabinet.

The overall aim of the Strategy would be to acquire and build a commercial property portfolio that generated income for the Council using a strong, stable, financial model with an acceptable degree of risk.  Commercial income generated from property acquisitions would be used to help fund the delivery and enhancement of services to the local community and support the delivery of the district’s growth. It had been modelled on a ten year plan.

The Council had been working with consultants with extensive experience in this field and a representative of the company attended the meeting to give a presentation on the rationale and how the strategy might work and to answer technical questions.  All Members of the Council had been extended an invitation to the Committee meeting to listen to the presentation.  This matter would in due course be considered by full Council.

The strategy proposed the Council establishing a property acquisition capital fund of £100m sourced from a loan from the Public Works Loan Board.  An additional revenue sum of £100,000 was being requested to support the fees needed as part of the acquisition process e.g. agents, legal and stamp duty. These fees would be deducted from the purchase price to give a NET yield against the purchase price and  recovered from the income over time.  If approved, changes would be required to the Treasury Management Borrowing limits for 2017/18 and reference had been made to this in the report on Treasury Management Strategy appearing elsewhere on the Committee agenda.

Depending on the number of assets acquired, the in-house asset management  capacity needed to manage the asset after acquisition would be reviewed.  Each acquired asset would require an asset management plan and any additional capacity needed to deliver this, would be factored into the business case for acquisition and recovered from the income over time.

Strong governance was needed coupled with agile decision making to ensure that suitable opportunities which came to the market could be effectively bid for. It was proposed that a Commercial Property Investment Panel be established to consider the business cases put forward for acquisition (and disposal) for any property, with delegated authority being given to  the Chief Executive in conjunction with the Director with responsibility for Finance and after consultation with the Panel.

The Strategy and performance against the objectives would be reviewed annually by this Scrutiny Committee, Cabinet and Council with a high level summary report included in the Quarterly Financial Digest.  Town centre developments or other developments which had a stronger orientation towards regeneration/place making would not be included in the Strategy which was purely commercially driven.

The Council already owned a number of commercial assets and the intention was that, if approved, these assets and their performance would be measured against the Strategy and the objectives to inform decisions about their future.

The Cabinet report contained three confidential appendices (Appendix 1: specific supporting information used to shape and develop the Strategy; Appendix 2: the Strategy that had been developed with the support of Montagu Evans and Appendix 3: Investment Return information) and the Scrutiny Committee considered these as part of their deliberations.

Members asked questions on sought clarity around the following:-

(i)            The proposed governance arrangements and noted that these had been carefully drafted to ensure accountability and transparency.

(ii)           The rules around the use of New Homes Bonus (NHB) funds and noted that there was complete discretion on how these funds might be used.

(iii)          The scope of the property portfolio.  Members were advised that every investment opportunity would be the subject of a detailed business case and risk assessment.

(iv)         Reference was made to recent media comment about investment proposals such as these.  Members were however satisfied that AVDC’s proposed policy had been carefully formulated with a view both to protecting the Council’s investments and optimising the income generated.

(v)          The need to protect the Council from significant fluctuations in returns and noted that consideration might need to be given to the creation of an equalization reserve similar to that created to smooth out interest rate fluctuations within the context of treasury management.

(vi)         Members noted that investments would not be limited to the Vale, although all local opportunities would be examined.

(vii)        Members commented on the relationship with Aylesbury Vale Estates (AVE), but were satisfied that this scheme would not be in "competition".

(viii)       It was noted that the governance arrangements had been formulated to ensure that the Council could react quickly to investment opportunities whist maintaining the necessary checks and balances.

RESOLVED –

That Cabinet be advised that this Committee was supportive of the proposal.