Cabinet considers plans to develop a £multi-million property portfolio Cabinet considers plans to develop a £multi-million property portfolio
Posted on Tuesday 11th July 2017
Proposals to invest in commercial real estate to create new income streams to help safeguard frontline services is due to go before Bournemouth’s Cabinet later this month (19 July).
As part of the adopted Capital Strategy & Corporate Asset Management Plan 2015-2018, the report to Cabinet recommends the approval of an updated Asset Investment Strategy which seeks to identify investment assets suitable for purchase by the Council.
Following best practice in other local authorities, Bournemouth’s Cabinet will be asked to approve the updated strategy which sets out plans to acquire a property investment portfolio, which will generate significant income for the Council year on year.
Taking advantage of the low interest rates available through Public Works Loan Board, the repayments on borrowing used to fund asset purchases will be fully met from rental income generated by the investment portfolio, as well as delivering a surplus that will be used to support council services.
Whilst the updated Asset Investment Strategy is focussed on investments within the conurbation, the Strategy provides the flexibility to operate on a regional and even national basis.
Councillor Philip Broadhead, Cabinet Member with responsibilities for Economic Growth, said; “Many local authorities have already built up large investment property portfolios to generate additional income to help underpin their financial position. In Bournemouth, we have the opportunity to create a portfolio of income generating property assets and replenish our freehold stock for the next generation, which could make a significant contribution to securing the Council’s financial position whilst protecting frontline services.
“After taking advice from independent experts, we are confident that this forward-thinking Strategy not only provides a sound investment for the Council but also gives us the opportunity to safeguard key employment and economic sites within the town and wider conurbation.”
The report going before Cabinet also recommends the setting up of an Investment Panel which will include the Council’s Managing Director and other senior officers, as well as the Leader of the Council, and Cabinet Member with responsibilities for Economic Growth to oversee the implementation of the updated strategy. As part of the Strategy the Panel will consider new investment opportunities, monitor progress on the delivery of approved investments, and will review performance of the whole portfolio at regular intervals.
Councillor Broadhead, continued; “Establishing an Investment Panel will ensure the Council is able to respond quickly to market opportunities, whilst ensuring the assets targeted for purchase represent sound investments.
“We of course have to be mindful to balance the risk and rewards of any property investments, although it is worth remembering that Bournemouth Council has been managing a significant number of assets for decades with an excellent record. Unlike some councils around the country which are taking an aggressive approach to their investment portfolios, quite often putting all their eggs in one basket, we are proposing a more measured strategy, spreading our investments across a range of sectors, with no more than 25% in one sector.
“Furthermore, we have a team of internal and external experts who will subject each investment acquisition to a detailed business case, including proposed mitigation measures if necessary. We believe this careful approach, coupled with our track record, demonstrates our effort to make the most of the opportunities available whilst being fully aware of ups and downs of any long-term investments.”
In addition to the updated Asset Investment Strategy, the Cabinet will also consider a separate confidential report which examines the business case for the purchase of an off-market property investment asset in Bournemouth, identifying the cost/benefit and associated risks and recommendation that this acquisition is progressed. Due to the commercial sensitivity of this acquisition the report is confidential.