To receive
a presentation from Paul Brooks, Executive Head of Regeneration and Property,
Helen Bristow, Property and Estates Manager and Chris Hornung, Managing Director
LSH Investment Management, on the Council’s commercial property investment
portfolio. The presentation will cover the management arrangements, the
quarterly performance report (copy attached of confidential report) and the
impacts of COVID-19.
Minutes:
The
Committee welcomed Paul Brooks, Executive Head of Regeneration and Property,
Helen Bristow, Property and Estates Manager and Chris Hornung, Managing
Director Lambert Smith Hampton Investment Management (LSHIM), who attended the
meeting to give a presentation on the Council’s commercial property investment
portfolio. The presentation covered the management arrangements, the quarterly
performance report and the impacts of COVID-19.
Ms.
Bristow, gave an overview of the management arrangements. It was noted that
between 2016 - 2018 the Council’s property investment portfolio had increased
in value to £105 million and it had been decided that more expertise was
required to help manage the existing portfolio and develop it further. In
November, 2019, LSHIM had signed a three year contract with the Council to
manage the portfolio. It was advised that LSHIM worked closely with the
Council’s Estates Team and the Property Investment Advisory Group (PIAG) to
manage two portfolios, the “Investment Portfolio”, including all new
acquisitions and the “Legacy Portfolio” which included properties which had
been owned by the Council for some time and had an amalgamated annual income of
around £40,000.
It was
noted that monthly meetings were held with LSHIM to discuss asset management,
the action plan, individual cases/events and managing agent updates and
monitoring. Quarterly reports were also provided to the PIAG, which covered
rental data, portfolio data updates and market and sector advice. This way of
working encouraged collaboration, with mutually agreed objectives and
understanding of the Council’s requirements that worked well for both parties. The
benefits of working with LSHIM were considered to include:
·
A
market wide and cross sector analysis of the existing portfolio
·
A
sifting process of opportunities and recommendations for future investment
purchases
·
A
review process of the existing portfolio with options for change/disposal
·
Access
to specialists and a sounding board on specific projects
·
Advice
on regeneration projects, particularly the Civic Hub development
The
Committee was advised of the working arrangements and purpose of the PIAG. The
purpose of the non-decision making group was to review any potential
opportunities for acquisitions, raise any queries or concerns and discuss the
merits of proposals before the opportunity was submitted to the Cabinet for
agreement and any offers were made. In addition, the PIAG also reviewed the
running of the portfolio and could make recommendations as part of that review
process. It also reviewed the risk and use of the property reserve held by the
Council and acted as a consultee on acquisitions and disposals.
Mr. Brooks
then gave an overview of the Council’s Property Investment Strategy, the key
objectives of which were:
·
A
low risk profile
·
A
£170 million proportionate level of investment
·
An
ensured net income of 0.8% (after borrowing)
·
A
balanced investment portfolio across different property types
Mr.
Hornung, then gave an overview of the quarterly report, this included an
executive summary which detailed key areas, including:
·
Sector
portfolio split, maximum limits had been set at – retail 25%, office space 35%,
industrial 35% and alternative (living sector) 15%
·
Acquisition
and disposal information – none in the current quarter
·
Asset
management arrangements by property
·
Performance
and objectives
·
Financial
summary by property
In response
to a query regarding future procurement, Mr. Hornung advised on the importance
of ensuring the balance of the portfolio matched the limits set. Currently the
portfolio was over weighted in retail, so future opportunities would be focused
on industrial/office spaces which were currently performing well. Should there
be any doubt over the viability of an opportunity the team would look elsewhere.
Measures
for dealing with tenants/businesses struggling due to the COVID-19 pandemic
were discussed. It was noted that the situation would be monitored closely with
the management agents and options considered to fill the space should the
property become empty. Should a property need to be disposed of, it was noted
that all opportunities would be maximised to gain the
best deal available.
The
Committee discussed the financial aspects of the portfolio and understood that
it was important to have a realistic budget to continue growing the portfolio
without overspending. Commercial property investment had been part of the
Council’s wider savings programme by securing
significant income and it was imperative that it was a balanced and
proportionate part of it.
The
Chairman thanked Mr. Hornung, Mr. Brooks and Ms. Bristow for their
presentation.