West Berkshire Council defends selling off property to fund budget saying ‘its not a fire sale’
West Berkshire has lost millions for taxpayers – by publicising that it needs to sell off its property to prop up its budget – claims the political opposition.
“We have shown the buyers our hand,” said Ross MacKinnon (Con, Bradfield), leader of the Conservative group.
The council reported a budget overspend of £6.3 million for the first quarter earlier this year.
So it is looking to sell off up to £62m of investments it made a few years back.
But those investments, including supermarkets, commercial warehousing and even a bank and a petrol station up north, have fallen in value - by around £7m.
“It is not a fire sale; we will not sell unless the price is right,” said Iain Cottingham (Lib Dem, Thatcham Central), finance portfolio holder.
But he was pushed further by another senior Tory at Tuesday night’s (Nov 28) Scrutiny Committee.
“I spent many years working in the commercial property sector,” said Howard Woollaston (Con, Lambourn). “They say you should never sell at the bottom of the market. I just question the whole timing of this. The timing could not be worse.”
The challenging economic environment has resulted in declining property valuations, and as at March 2023 the portfolio was valued at £51.4 million, compared to a purchase value of £58.6 million - but the council spent £62m with purchase costs added in.
“We are aware of the financial pressure we are facing to make sure we have a balanced budget so we have been looking at options to do that,” said Mr Cottingham.
“In reality this is not the primary reason for divesting our property portfolio.
"Government policy says we should not take undue risk with taxpayers' money and being a commercial buy to let landlord is risky.
“At the time we borrowed  we were at 2.5 per cent, which was a good rate to borrow at, but since those assets were bought we have seen a decrease in the value of those assets.
"So we want to reduce the risk, but also in line with what the Government is telling us about using capital receipts to reach a balanced budget. This allows us to use those monies rather than borrow at around 5.7 per cent.
"Those properties will also need around £2m of maintenance over the next ten years.”
Kevin White from Montagu Evans, the estate agents appointed by the council, said he was asked how they could best find £10m by selling the assets.
“The right time to sell is the right time for the owner, and it is difficult to say if prices will increase if interest rates come down,” he said.
The council makes £1.3m profit from rent, but any final decision on the move will now be made at full council in February.
It is likely to rein back from selling them all off at once by a certain date.
Dominic Boeck (Con, Aldermaston) disagreed with the change in strategy.
“This was always intended as a long term strategy, that over the long term it would ride out the rises and falls,” he said.
Mr Cottingham added: “Economic climate is different now. Lloyds bank is cutting back its workforce. Retail rental is falling, as is office space.
"The commercials rental sector is heading for stormy waters. We might find ourselves with a portfolio which does not cover its costs through the rent.
"I would be very surprised if we have 100 per set occupancy over the next ten years."