Issue - meetings

A report is attached on the Commercial Estate Acquisition Strategy which provides the Panel with an update on the achievement to date against the revenue targets set for the Commercial Estate during the periods 2016/17 and 2017/18.

Derek Quilter – Divisional Director of Property and Project Delivery introduced the report. He explained that a number of reports would be brought to the Panel in the coming months (Review of the Property Market; Review of Commercial Estate objectives; Generating Income and Review on performance of the Commercial Estate). He explained that acquisitions are an important part of our income and two acquisitions alone (Melksham and Aztec West – details in the report) have achieved the 2017-18 target.

Panel members made the following points and asked the following questions:

Councillor Goodman referred to the fact that two acquisitions form 10% of the Commercial Estate income – he asked if there is a break clause which may put this figure at risk and also asked if the officer thinks it could be dangerous to have 10% of income based on two acquisitions. The officer explained that there are a large number of small tenants and the authority has been advised to diversify with some larger clients. The officer also explained that a risk analysis is always done where issues such as these are concerned. The Cabinet Member for Finance and Efficiency added that he had asked for a second opinion before this decision was made.

Councillor Goodman asked about the risks associated with 107% borrowing for new acquisitions in the commercial market. Richard Long – Head of Property explained that due diligence was explored as part of the Single Member decision on this. Regarding a query from Councillor Goodman on stamp duty, the officer stated that he would check and come back on that issue. Andrew Pate – Strategic Director, Resources explained that the report provides a summary only and the details are in the original decision report. He further explained that the main idea behind acquisitions is to diversify the asset base and deliver extra income.  Borrowing on the commercial estate portfolio as a whole is low. Derek Quilter assured the Panel that there is an extensive sifting process and that 7-8 properties have been turned down due to risk.

Responding to a query from Councillor Pearce about protection from interest rate rises, the officer explained that it is a fixed term loan for 25 years. Councillor Becker asked if Local Authorities could be crowding out commercial investors (as they cannot get the 25 year fixed rate deals).  The officer explained that Local Authorities are sometimes outbid. The Strategic Director explained that a number of Local Authorities invest to grow their income in order to put the money towards essential services such as social care.

Councillor Barrett asked for information on housing acquisitions. The officer explained that a report on ADL is coming to the July meeting of the Panel.

[Further information on these questions is contained in a note attached to the minutes.]

Richard Long, Head of Property talked through the section on risk (page 30 of the report)

Panel members made the following points and asked the following questions:

Councillor Furse stated that he felt that  ...  view the full minutes text for item 8