Agenda item

Report of the Cabinet Member Finance

The Cabinet Member Finance introduced the report which set out proposals to increase investment in property in response to the financial pressures to increase revenue and to stimulate and encourage business growth and sustainable development by investing in sites for economic and regeneration purposes.

She reported that an initial allocation of £10 million in the Capital Programme was proposed for approval by Council and the report detailed the criteria for investment, the typical options available, the governance, and the available options for financing. The report also outlined the decision making process which utilized  the Property Acquisition Assessment Group

The Cabinet Member informed Members that the Asset Management Working Group (AMWG) had considered this report and gave their support. Should the report be approved by Council the group would have a key role to play on any acquisitions proposed prior to any formal decisions as set out in appendix 2 of the report.

The Council had aspirations to grow its already successful investment property portfolio with a view to generating much needed revenue support as set out in 4a of the approved Medium Term Financial Strategy.

Cheltenham was uniquely placed to grow, sustaining and growing Cheltenham’s economic and cultural vitality was one of the key outcomes set out in the Corporate Strategy. The property investment strategy would aim to support this by focusing initially on investments within or in close proximity to the Borough of Cheltenham which would help secure existing or increase business rates income.

The following questions/points were raised by Members and responses given by the Cabinet Member :

·         The Cabinet Member confirmed that there would be meaningful consultation with the Property Acquisition Assessment Group and Group Leaders and Asset Management Working Group. She highlighted that purchases over £5m would, in any event, be subject to Council approval. Cabinet could currently purchase property at up to £0.5 million.

·         When asked if there were any other examples of other authorities pursuing property investments the Cabinet Member referred to an officer visit to Eastleigh Borough Council. She also made reference to the council’s long standing investment in Regent Arcade

In the debate that ensued Members made the following comments :

·         They supported the proposals believing it was a good way to future proof income providing that such investments were sound.

·         A Member believed it was important to be clear why it would be purchasing a particular property, separating operational property from investment property. It should also be prepared to act as ruthlessly as the private sector.

·         It was important that the decision making process was robust and notice was given in advance.

·         There could be scope for using the “overview” function of Overview and Scrutiny more as this had often been overlooked. The Cabinet Member Finance said that in most cases it would be necessary to act quickly and with the associated commercial sensitivities.

·         Members recognised the decline in investment income which had dropped dramatically with low interest rates. Having all the available information in terms of clear facts and figures was essential before any potential purchase.

·         There may be more opportunity from the purchase, including collective use so the rules on investment should not be too tight.

·         The role of housing on brownfield sites was highlighted. There was a value in investing in property which provided necessary accommodation for people in the town.

·         It was important to acquire the right sort of commercial property which could provide the council with an important revenue stream. It was also important to consider the property portfolio and funds were available to kick start innovative projects to support companies were a resounding success

RESOLVED (unanimously) THAT

1.    £1 million from unapplied capital receipts be allocated to pump-prime a property investment fund, supplemented by £9m of prudential borrowing, (i.e. total allocation of £10m) subject to using the option appraisal process at Appendix 2 and the criteria as set out in para 6.1 of this report.

2.    £200k from unapplied capital receipts be allocated to fund external advisers and pre-acquisition costs.

3.    A minimum of 50% of all future asset disposal proceeds be ring-fenced to enhance the Council’s land and asset portfolio.

4.    Cabinet, in consultation with the Asset Management Working Group and the Chairman of Overview and Scrutiny Committee, be authorised to approve investments in commercial property up to £5m per transaction.