Agenda item

Purpose of Report

To approve a revised Commercial Property Investment Strategy and approve an amendment to the delegate of Executive powers given to the Council’s Strategic Property Manager with regard to the acquisition of General Fund commercial property investment opportunities.

Decision

(1)       That the revised Commercial Property Investment Strategy, as set out in Appendix A to the report, be approved.

(2)       That the Strategic Property Manager delegated function, as set out in the Constitution, be amended to reflect that the postholder can negotiate terms to acquire the freehold of land or premises, in consultation with the City Solicitor, Chief Finance Officer, Leader of the Council, Deputy Leader of the Council and Portfolio Holder for Economic Growth.

Alternative Options Considered and Rejected

None.

Reason for Decision

The revised Commercial Property Investment Strategy, attached as Appendix A to the report, had been updated to reflect recent guidance issued by the Ministry of Housing, Communities and Local Government, the Council’s latest financial position and desire to achieve further sustainable income through property investment. It also strengthened the set of assessment criteria by which all proposed commercial property assessments would be scored.

The principal reason for property investment by the Council was defined as being to secure the economic wellbeing of the city by generating additional income for the provision of services, for the purpose of economic development or regeneration, or a combination of both. This was supported by the five key objectives, as follows:

·         deliver sustainable income, to support the continued provision of Council services by growing the Council’s property portfolio in a measured and incremental way;

·         build financial resilience through the creation of a diverse portfolio in order to balance risk and return;

·         acquire land or property for the social and economic wellbeing of the city on a long term investment basis;

·         support the economic development of the city by acquiring assets that encouraged local business growth, inward investment and/or new entrepreneurial business start-ups;

·         develop a governance framework that enabled the Council to move at a timely pace in line with the market.

The strategy built on the criteria for investment as agreed by the Executive in August 2017 and strengthened this criteria through the development of an assessment matrix. All investments would be subject to an initial pass or fail criteria in respect of the initial yield, which was expected to be in the range of 5% to 8% per annum. Subject to meeting this criteria investment opportunities would then be assessed against the following criteria:

·         tenure;

·         covenant;

·         occupiers lease length;

·         building quality/obsolescence;

·         repairing obligations;

·         location/sector;

·         sector;

·         rent review mechanism.

In terms of the governance process, wherever possible a report would be submitted to the Executive for approval to acquire the investments. However, given the often fast pace of the property market and the four-weekly frequency of Executive meetings, the situation may arise where an offer for an investment which met the assessment criteria needed to be submitted ahead of the next available meeting. In such cases, and with the agreement of the Corporate Management Team, the following approval process would be undertaken:

·         the Strategic Property Manager, in consultation with the City Solicitor, Chief Finance Officer, Leader of the Council, Deputy Leader of the Council and the Portfolio Holder for Economic Growth shall have authority to submit, offer and negotiate on behalf of the Council with a subsequent report to be submitted to the next available Executive meeting.