Tue, 24 Jul 2018
WEST Berkshire Council has agreed to borrow an extra £50m to expand its commercial property portfolio – taking its total amount of investment to £100m.
It is anticipated that this will bring the cash-strapped local authority an extra £2m of profit every year from 2021/22 onwards.
The council has been forced to look at different ways of generating additional revenue after a huge reduction in Government funding in recent years.
The extra investment was approved unanimously by all members at a full council meeting on Tuesday, July 3.
Introducing the proposal, the council’s executive member for finance, Anthony Chadley, said he recognised that £50m was a “significant amount of money”.
However, he reassured his colleagues that every investment was scrutinised by a professional team of advisors and insisted that the council was “not playing games with people’s money”.
The £1.25m-a-year interest from the loan will be paid out of the rental receipts from the properties.
Council papers, circulated in advance of the meeting, said: “In the event of rental streams from these acquisitions not covering these loan debt charges, then alternative funding sources would have to be found along with covering any reduction in value of assets due to unforeseen factors.
“However, it is considered that risks associated with this further investment can be appropriately managed for a council of this size and scale, and will be kept under regular review.”
A year ago, councillors approved the original proposal to borrow £50m and Mr Chadley informed members that £39m of that had already been invested in commercial property.
All acquisitions are managed by the West Berkshire Council property services team, which makes use of both in-house resources, specialist property agents and the council’s legal services team for all legal due diligence.
Montagu Evans has been appointed to both strategically manage the invested portfolio and conduct property management (rent collection, building condition etc).
However, Anthony Stansfeld (Con, Kintbury), said: “I am just slightly concerned about investing in retail because, at the moment, until we have a proper tax system on retail shops and we start penalising the massive online ones, this is going to go down, not up.
“It requires a change in the law to actually see an asset value increase
“I am just worried that 40 per cent [proposed investment] in small supermarkets, restaurants and shops is a wise policy in the overall investment.”
Deputy leader of the opposiion Alan Macro (Lib Dem, Theale) echoed those concerns, saying: “Although we on this side are broadly in support of this way of raising extra revenue, we are very concerned about exposure to retail properties.
“I would have liked to have seen the proportion of our investment in retail held down so we don’t invest any more.”
Mr Chadley replied: “Retail can be invested in if it’s the correct retail.”
He added: “There are successful retailers.
“Just because there are some bad companies out there that have made some bad decisions, it doesn’t mean they are all bad.”
Emma Webster (Con, Birch Copse) reminded members that the council pays specialist advisors to provide professional investment advice.
James Fredrickson (Con, Victoria) said the council was “making this move to protect the most vulnerable”.