Agenda item

Purpose of the report: To receive an update about the Council’s property.

Witnesses:

Patricia Barry, Director of Strategic Land and Property Assets

Mel Few, Cabinet Member for Resources

Paul Forrester, Strategic Finance Business Partner

Edward Hawkins, Deputy Cabinet Member for Property

Leigh Whitehouse, Executive Director of Resources

Key points raised during the discussion:

1.    The Chairman mentioned that it had been some time since the Select Committee had reviewed the Council’s property function, and he highlighted that this report dealt solely with the investment portfolio.

2.    The discussion was opened up to Members’ questions. A Member praised the report as comprehensive and asked what key performance indicators (KPIs) there were underpinning the next step. How would these be monitored and reported back? The Director of Strategic Land and Property Assets said that the property team met every week to go through all the elements of the investment programme relating to applications for rent production and rental holidays. The situation surrounding Covid-19 and the changes to the market were also being monitored at the moment. The monitoring then went back through Cabinet Member involvement and reporting. KPIs included rent collection and service charge collection.

3.    A Member noted that even though the report stated that less than 50% of tenants paid their rent on time, it stated later than rent collection remained high. He requested more information on the Council’s rent collection, specifically in the retail sector, which made up the largest proportion of the Halsey Garton Investment (HGI) portfolio and had been hit particularly hard by Covid-19. The Director of Strategic Land and Property Assets replied that the figures referenced were national averages in terms of rent collection; this was poor nationally at the moment. Surrey County Council had an improved position on the national average, as it was working closely with tenants. Also, some of the Council’s retail tenants, such as supermarkets, had not been affected negatively by the pandemic. However, to address properties where tenants had been struggling or might struggle, the Council was looking at option appraisals for alternative use for that investment. The Director acknowledged that the Council needed to be proactively looking at where it might be approaching lease breaks or where a particular market was struggling. The Strategic Finance Business Partner added that the Surrey County Council portfolio stood at 92% rent collection; the Halsey Garton portfolio stood at 72%. Those numbers included some tenants who were on monthly (as opposed to quarterly) payments, so the figure would increase over the coming quarter.

4.    The Strategic Finance Business Partner confirmed that the £11.6m referred to on page 43 of the report was a net figure.

5.    A Member referred to the values over time chart on page 44 of the report and requested that officers share information of those values relative to purchase price of assets when the Council purchased them. The Director of Strategic Land and Property Assets responded that she would provide those figures outside of the meeting.

6.    On page 56, a Member noted, there was mention of the purchase of 23 houses on a 40-year lease. He expressed concern at this, as he had assumed it was impossible to buy something on such a short lease. The Strategic Finance Business Partner stated that this transfer had passed through legal due diligence. The Cabinet Member for Resources added that what was being described on page 56 was the transfer of Surrey County Council properties (those under the ‘SCC’ property investment portfolio) to the Halsey Garton Residential (HGR) portfolio. HGR – owned by Surrey County Council – was effectively purchasing the lease from the Surrey County Council portfolio, as the objective was to move all the residential property into HGR. With regards to the tenants, the lease carried on as normal.

7.    A Member enquired what the contingency plans mentioned on page 59 were, suggesting that the Select Committee review them as part of the next property programme update report. The Director of Strategic Land and Property Assets explained that the property team was looking at option appraisals and alternative use for properties in the worst-case scenario, in order to safeguard the investment and revenue stream. More detail could be included in the next update to the committee.

8.    A Member asked what the overall cost was of external consultants, as mentioned on page 59. The Director of Strategic Land and Property Assets agreed to respond to the request outside of the meeting with estimated costs. No external consultants had been engaged as of yet.

9.    A Member asked why the Council had three separate ways of holding property: HGI, Surrey County Council properties and HGR. The Cabinet Member for Resources responded that all three were owned by Surrey County Council, but properties had been split into three different portfolios. The Surrey County Council portfolio comprised properties that could have a service use, while the other two were for investment or residential purposes respectively. Moreover, this arrangement alleviated pressures on Council Tax.

10.  A Member requested an update on construction of the joint venture with Places for People. The Director of Strategic Land and Property Assets stated that the Council was in discussions with Places for People about the future of the joint venture, and that while the programme was not in a position to be progressed on-site, the Council was looking at a redesign. By the end of 2020 it would be known what the plans were for the joint venture.

11.  A Member asked for a breakdown showing the income and cost associated with holding each property, as well as a risk rating for each property, taking into account the length of the lease and likelihood to default. The Strategic Finance Business Partner said that this information was available and could be shared privately.

It was agreed that the meeting would enter confidential discussion of commercially sensitive information under Part 2 of Section 100(A) of the Local Government Act 1972.

Specific questions were considered in private by the committee. However, the information set out below is not confidential.

12.  The Director of Strategic Land and Property Assets gave details of the managing agent contracted by the Council and the retainer paid to the managing agent. All properties were on full repairing leases.

13.  A Member asked how many voids the Council had, the length of time they had been voids and the loss of rent implications. The Director of Strategic Land and Property Assets agreed to share this information privately.

The meeting returned to public discussion.

14.  A Member noted that an asset and place strategy refresh would be presented to Cabinet in November 2020, and he asked what it would contain. The Director of Strategic Land and Property Assets informed the Select Committee that since the refresh would not include any fundamental changes, it had now been decided that it would not be brought to Cabinet in November after all. The strategy was being refreshed as, since it had been originally conceived in April 2019, a number of policies and strategies (such as Greener Futures) had been implemented by the Council, and these would now be incorporated into the refresh accordingly. It was agreed that the property team would attend a Select Committee meeting in early 2021 to provide an update on the strategy refresh.

Recommendations:

The Select Committee recommends that the Asset and Place Strategy Refresh be presented to the Resources and Performance Select Committee at its January 2021 meeting, alongside a schedule for continued updates to the Select Committee twice a year.

Actions/further information to be provided:

1.    The Director of Strategic Land and Property Assets to provide information on the current value of assets relative to purchase price when the Council bought them;

2.    The Director of Strategic Land and Property Assets to provide detail of contingency plans in the next property programme update to the Select Committee;

3.    The Director of Strategic Land and Property Assets to provide estimated costs for external consultants to be engaged in the next property programme update to the Select Committee;

4.    The Strategic Finance Business Partner to share privately details of income and cost of holding each property, as well as a risk rating for each property;

5.    The Director of Strategic Land and Property Assets to share privately information about voids.