Agenda item

Imogen Shepherd-DuBey asked the Executive Member for Business, Economic Development and Strategic Planning the following question:

 

Question

We have recently seen the public information stating that WBC is proposing to spend up to £17.2 Million on a warehouse in Peterborough as one of its investment properties.  It seems a little odd that this property is so far outside of the Wokingham Borough Council area and is valued at only £15.9 Million.  Please can you explain how property investments are selected by the Property Investment Working Group and point in the direction of its terms of reference?

 

Minutes:


We have recently seen the public information stating that WBC is proposing to spend up to £17.2 Million on a warehouse in Peterborough as one of its investment properties.  It seems a little odd that this property is so far outside of the Wokingham Borough Council area and is valued at only £15.9 Million.  Please can you explain how property investments are selected by the Property Investment Working Group and point in the direction of its terms of reference?

 

Answer

The Council’s Investment Board has approved a proposal to bid to purchase an investment property in Peterborough, you are quite right.  The bid process is competitive, commercially sensitive and confidential therefore it would not be appropriate to discuss any of the specifics in a public forum at this stage.

 

The question is posed on the basis that the property “is valued at £15.9m” – which is in fact incorrect.  It is likely that the figure of £15.9m has been extracted from the seller’s agent’s marketing particulars which sets out a Proposal inviting “offers in excess of £15.9m”.

 

Unlike residential property where in most places of the market it might be assumed that an asking price is indeed the price at which a house might transact, the investment market is a little more complicated.  It is not normal for a seller to offer a commercial property investment asset for sale at a fixed price.

 

Instead, it is normal for a seller to invite competitive bidding so they can select their preferred buyer by reference to a wide range of criteria including, but not limited to, price.  The seller usually invites bids above a low threshold to ensure the proposal appeals to a wide audience.  Bids are then whittled down through a course of often several rounds until the seller selects a preferred buyer.

 

It is the Council’s actual experience that bids can be won primarily on track record, professional credibility and quality of bid without necessarily submitting the highest price, and I think you heard Anthony describe to you earlier that we have a very experienced team in this area.  Several of the Council’s acquisitions have been won on this basis in the face of higher bids indicating higher market value than the Council has actually paid.

 

The Council has acted in accordance with independent professional advice in all its investment dealings and in this case our advice confirms that the value of the Peterborough property is comfortably in excess of the level above which the seller has invited bids.  This is not surprising and is perfectly normal.

 

The strategic location of this property, together with all the other key criteria of this property, is crucial to its appeal and value as an institutional calibre investment asset. 

 

All the Council’s investment assets are selected in accordance with the Council’s Investment Policy approved by Executive on 28 September 2017 (Minutes 49 and 53 refer).  You will be aware that much of the detail of this Policy was considered under a Part 2 Report and remains commercially sensitive and confidential (Minute 53).

 

Supplementary Question:

You still have not pointed me exactly in the direction of where it is other than telling me where it was discussed.  I am really not impressed that when we are spending public money the process is not clear.  What I would like to know is on what grounds do you invest outside of the Borough?

 

Supplementary Answer:

That depends on the commercial suitability of the property.  There have been some changes also to the Government suggestions on what we should and should not do and we are adhering to those policies.  I am happy to give you fuller details.