Agenda item

Purpose of the report: To provide an update to the Board on the Investment Strategy, noting the context of the Council’s total portfolio of land & buildings. 

Declarations of interests:

None

Witnesses:

David Hodge, Leader of the Council

Peter Martin, Deputy Leader of the Council

Julie Fisher, Deputy Chief Executive

Susan Smyth, Strategic Finance Manager

John Stebbings, Chief Property Officer

[NOTE: THE BOARD CONSIDERED THIS ITEM IN PRIVATE AT THE MEETING.  HOWEVER, THE INFORMATION SET OUT BELOW IS NOT CONFIDENTIAL.]

Key points raised during the discussion:

1     The revenue target from investments had been scaled down to reflect the competition from institutional investors in the market, but the key driver remained to provide a source of income to assist in the  Council’s aim of financial sustainability in the long-term.  Whilst the total returns so far had not been in line with the original expectations, progress was being made.  Capital gains were not a key driver for investment decisions, as the capital values varied over time according to the length of tenancies and the condition of buildings.  The Investment Advisory Board looked at scenarios for each potential investment, taking into account the age of the building, timing of refurbishment and the length of tenancies, prior to making any recommendations to Cabinet.

2     It was reported that the level of detail in the Investment Advisory Board and Cabinet reports on investments was the same, and Members of the Board were encouraged to look at the Cabinet papers in order to gain a full understanding of individual investments.  However, the Board did not feel that the figures reflected in the confidential annex were easy to understand without a comparison.  It would therefore be helpful to have a clear analysis of what the Cabinet had originally anticipated in terms of income and what had been realised on a year by year basis. 

Ben Carasco left the meeting at 12.25pm.

3     In relation to consideration of individual investment decisions, a lower return may be accepted on a Surrey-based scheme which provided regeneration benefit, but it would still need to be viable in terms of its contribution to the Council’s long-term income-generation target.  Whilst the aim of achieving a balanced portfolio was noted, it was queried why there had been no investment in residential properties.  It was reported that the provision of key worker housing was an important consideration for the Council, and there was an opportunity to make provision for this as part of a mixed development with two of the properties purchased.

4     In conclusion, the Board supported the principle of a broad portfolio of investments to provide a revenue stream for the Council, but expressed some disappointment with the returns achieved to date.  It was felt that the information on investment returns should be presented in a more transparent and accessible way to ensure rigorous scrutiny could be undertaken by the Cabinet.  It was therefore

       RECOMMENDED (to Cabinet):

That a report be presented to the Cabinet on an at least annual basis with a transparent and accessible summary of actual income compared to anticipated returns, to enable the Cabinet to review the performance of the investments made and consider whether any adjustments need to be made to the investment strategy.

Actions/further information to be provided:

None.

Board Next Steps:

The Board will consider the Cabinet response at its meeting on 6 July 2016.