Agenda item

Asset Management - Out-of-District Investment Properties

Purpose

To seek Cabinet’s approval to pursue options for the disposal of out of district Investment property(ies).

Recommendations

That Cabinet resolves to:

1. Approve the recommendation to actively market all 3 out of district investment properties for disposal.

2. Delegate to the Strategic Head of Housing, Property and Assets to progress negotiations with support from the Assistant Director of Legal Services.

Decision:

The purpose of the item was to seek Cabinet's approval to pursue options for the disposal of out-of-district investment properties.

The Leader of the Council, Councillor Mike Evemy stated that the public should not be excluded from consideration of the item and that it would be taken in open session. Members were reminded that exempt annexes were included in the agenda, but that discussion should be limited to the contents of the main report only.

It was noted that the item had previously been considered by the Overview and Scrutiny Committee, which had met in private session, it was further noted that the Overview and Scrutiny Committee had indicated support in principle for the recommendations.

Councillor Patrick Coleman, Cabinet Member for Finance, introduced the report in relation to the Council’s three out-of-district investment properties, which were acquired in 2010 following funding approval in 2009 to generate a stable rental income stream. It was noted that the properties comprised retail assets within the commercial sector and that their financial performance had declined in recent years. Reference was made to wider market conditions, including structural changes within the retail sector following the COVID-19 pandemic and evolving consumer behaviour, which had contributed to reduced returns and increased risk exposure. It was further noted that this reduced level of income had already been reflected within the Council’s medium-term financial planning.

It was reported that, having regard to financial performance, prevailing market conditions, and the Council’s Asset Management Strategy, the continued holding of the assets would result in reduced ongoing revenue income and increased exposure to risk, and that their disposal was therefore considered appropriate. In addition, it was noted that the proposed approach could assist in simplifying the Council’s asset position in the context of potential local government reorganisation.

The report therefore sought Cabinet approval to actively market the properties for disposal in line with the Council’s Asset Management Strategy.

The recommendations were proposed by Councillor Patrick Coleman and seconded by Councillor Mike Evemy.

Cabinet RESOLVED to:

1. Approve the recommendation to actively market all three out-of-district investment properties for disposal.

2. Delegate to the Strategic Head of Housing, Property and Assets to progress negotiations with support from the Assistant Director – Legal Services.

Voting record:

7 For, 0 Against, 0 Abstentions.

Councillor Dale, attending virtually, was not eligible to vote.

Minutes:

The purpose of the item was to seek Cabinet's approval to pursue options for the disposal of out-of-district investment properties.

It was noted that the item had previously been considered by the Overview and Scrutiny Committee, which had met in private session, and members of the committee had indicated support in principle for the recommendations.

Councillor Patrick Coleman, Cabinet Member for Finance, introduced the report in relation to the Council’s three out-of-district investment properties, which were acquired in 2010 following funding approval in 2009 to generate a stable rental income stream. The properties comprised retail assets within the commercial sector and that their financial performance had declined in recent years. Reference was made to wider market conditions, including structural changes within the retail sector following the COVID-19 pandemic and evolving consumer behaviour, which had contributed to reduced returns and increased risk exposure. This reduced level of income had already been reflected within the Council’s medium-term financial planning.

It was reported that, in light of reduced income, increased risk exposure, and prevailing market conditions, continued retention of the assets would be likely to generate declining returns. Disposal was therefore considered appropriate in accordance with the Council’s Asset Management Strategy. The disposal would also contribute, in a limited way, to simplifying the Council’s asset base in the context of potential local government reorganisation.

It was further noted that officers had undertaken detailed work to assess asset performance and market conditions, including indicative valuations and rental income trends.

Cabinet was advised that the proposal was to actively market the properties for disposal, rather than commit to sale, with any offers received to be assessed through the Council’s established governance and decision-making processes.

The Leader moved to the debate and members raised the following points:

· Members highlighted the constrained and volatile nature of the retail property market and the associated financial risks, including exposure to void periods and ongoing maintenance liabilities.

· It was noted that recent performance demonstrated declining net income, with income reducing from approximately £300,000 per annum at acquisition to around £188,000 in the current year.

· Members emphasised that the Council should focus on its core service delivery responsibilities rather than retaining a geographically dispersed investment property portfolio.

· It was suggested that market conditions provided an appropriate opportunity to test investor appetite for disposal, noting that any decision to proceed would be subject to offers received and further formal approvals.

· Members recognised the work undertaken by officers in assessing valuations, income projections, and market conditions to support decision-making.

The Chief Finance Officer confirmed that recent financial performance had shown marginal or negative net returns in prior years, and that projected income remained dependent on full occupancy and stable tenancy arrangements. He advised that the retail sector remained highly volatile, with continued risk of rental reduction and void periods, and that the current position represented an appropriate point at which to test the market. He stated that any disposal would be subject to the Council’s constitutional governance processes.

The Cabinet Member for Finance concluded that the assets had historically generated income but that changing market conditions and increased financial risk now supported a review of ownership, with a view to testing the market for potential disposal.

Members expressed support for the approach and emphasised the importance of focusing Council resources on core priorities.