Issue - meetings

To consider an update on the Property Investment Group, specifically relating to the impact relating to the Covid-19 pandemic (20 mins)

The Committee considered a report, set out in agenda pages 5 to 14, which outlined the initial impacts to Wokingham Borough Council’s (WBC’s) property investment group as a result of the Covid-19 (C-19) pandemic.

The report outlined the basis for the Property Investment Group (PIG), including the origins of the group and decision making process. The report stated that the commercial investment fund represented about half of the Council’s overall property business. Historically the Council’s property exposure had been relatively modest compared to many other local authorities but it had grown significantly in the last 5 yearsthrough delivery of our Regeneration and Commercialisation agendas.The Commercial Property Team was currently responsible for managing approximately£8.0m p.a. rental income split across the three key portfolios: Regeneration, Operationaland Investment.

Around 75% of investments (approximately £3.3m per annum) were secured against institutional calibre tenants who were thriving at present. With all debt taken into account, WBC would see approximately a £400k per annum profit based only on institutional calibre tenants when secure debt was subtracted from the overall figures. Any surplus was used to fund other Council services. WBC’s approach was validated by reputable external agencies who looked at assets and performance. WBC only invested for the long term, and the situation as presented within the report would only get better with the current holdings, as debt would reduce towards 0 over a 40 year investment period.

The PIG focussed on prudent investments, with tenants such as supermarkets. There was a targeted return of 5% on 1000 homes built by WBC over a 5 year period. This was an example of how the PIG could be used to regenerate parts of the Borough in a positive way, whilst allowing for a financial return to fund other Council services.

John Kaiser (Executive Member for Finance and Housing), Graham Ebers (Deputy Chief Executive), Bernie Pich (Assistant Director – Strategic Property and Commercial Assets), and Damon Emes (Head of Investments) attended the meeting to answer Member queries.

During the ensuing discussions, Members raised the following points and queries:

·           Were smaller, independent units within the Wokingham Town centre covering the interest on the investment debt with their rents? In addition, how many units had to become vacant for the loan interest to no longer be covered by rental income? Officer response – At present, the rental income was covering the interest on the loans. It was felt that Wokingham deserved to be different with a variety of smaller firms within the town centre. Many other areas had an abundance of units, and Wokingham was currently bucking the trend in terms of vacant units. Specific information regarding vacancy rates and rental returns would be circulated to the Committee after the meeting.

·           What was balance of the Council’s rental income from the three different portfolios? Officer response received after the meeting –

WBC Commercial Property rental income (£p.a.) by portfolio, September 2020

Investment      £4.6m  50%

Regeneration  £2.9m  32%

Estates            £1.7m  18%

TOTAL  ...  view the full minutes text for item 32