Agenda item

Investment Property Portfolio Report


(Link to Council Priorities: All)


The Portfolio Holder for Resources introduced the item that set out the first annual report on the Council’s investment property portfolio.


The Cabinet noted that there were 13 investment properties within the portfolio and at the end of March 2018, the investment properties held by the Council had been valued at £74.015 million.  Whilst the gross rental income received during 2017/18 had been £3.1 million, it was noted that at 2018/19 rent levels, these investment properties, which included those investment assets already owned by the Council prior to 2012, would produce a total of £3.8 million gross annual income.


As outlined in the report, whilst the majority of the property owned by the Council was managed in-house within the Asset Management and Property Services team, the multi-tenanted investment properties were increasingly managed by external managing agents given that they had the expertise and resources to deal with the intensive nature and large service charges often attributed to these types of assets.


Members noted that when acquiring properties, officers would use external agents to advise on the purchase which provided an independent view and also benefitted from their external expertise, to ensure the best result was achieved and the Council’s position was fully protected.


The Portfolio Holder advised that individual property asset management plans were produced for each of the investment properties to help manage the asset.  These plans set out a brief synopsis of the key criteria of the investment property and included tracking the value together with a clear short to medium term strategy for each individual property.  These asset plans were reviewed and updated on a quarterly basis and provided a clear picture of the property, its strategy and what the Council was looking to achieve moving forward.


The Portfolio Holder also provided an update in respect of the Property Acquisition Strategy.  Whilst acknowledging that the Strategy had been considered and approved in 2012 and then again in 2014, the opportunity had been taken to review the investment criteria, taking into account the Council’s Council Plan and property market trends and outlook.  In light of the review, the Cabinet noted that it had been considered that the previously agreed investment criteria were still valid.


In respect of the strategic aims of the Council’s investment property portfolio, whilst the Council had decided not to look at specific sector weightings for the investment properties held, it was agreed that consideration should be given to not place too much reliance on a specific sector so as to ensure a balance was created and the risk was spread across all sectors, albeit still within Elmbridge Borough boundaries.  In addition, an increased focus should be on regeneration benefits of purchasing certain assets within the Borough; not necessarily at the expense of income on the asset but an additional consideration / benefit in considering whether to purchase an asset.  The hold period of an asset should also be considered on purchase and as part of the approval process, whether short term to meet regeneration requirements or long term where a single let investment provided a long term stable rental income for the Council.


The Leader invited Councillor S.J. Selleck, Group Leader of the Residents’ Associations Political Group, to address the meeting.  With regard to the current property portfolio, Councillor Selleck reminded Members that whilst the Council had invested £70 million in purchasing investment properties,
£47 million of this amount had come from borrowing.  Accordingly, he considered that when reporting the gross annual income for 2018/19 in respect of rent levels for these properties, the cost of the borrowing should also be included.


Whilst noting that the 2018/19 rent levels of £3.8 million had been reported as gross annual income, the Leader agreed that in future reports, the borrowing costs be included to make it clearer.  He commented that the Property Acquisition Strategy had been supported by all the Political Groups and as a Council, a prudent and sensible approach to investments had been taken.  He further commented that it was important to continue to maintain a balanced property portfolio and he hoped the current approach taken would continue in the future. 


Recommended: that


(a)      the progress made in implementing the Property Acquisition Strategy be noted; and


(b)      the strategic aims of the Council’s Investment Property Portfolio continue as set out in the report.

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