Reigate & Banstead Borough Council continues to press ahead with its property investment strategy, with further acquisitions in the pipeline.
Last month the council’s executive committee agreed in principle to buy three industrial units in Redhill, and next week will decide whether to pursue some land in Horley and another Redhill building.
Locations and prices haven’t been made public. On property projects, the chief part of the executive’s discussions take place behind closed doors, for commercial reasons.
Properties that have been bought by the council over the last year include two office buildings: Beech House at 35, London Road, Reigate and Forum House, 41-51 Brighton Road, Redhill.
Each of those buildings cost the council around £6 million (price plus acquisition costs).
The council’s reason for sticking money into property is set out in the papers for the most recent Redhill proposal:
“The council’s corporate plan identifies property investment and development as one of its key objectives.
As central government funding reduces for local authorities this produces a budget shortfall.
In order to meet this shortfall, the Council has embarked on a programme of acquiring additional income and potential capital-generating commercial investment and development opportunities. […]
It is likely the council will be an unsuccessful bidder on some occasions, or that due diligence following agreement of terms may lead to a conclusion that a property is not a suitable investment.”
Back in December 2016, the council also took the step of setting up a wholly-owned property investment company, Greensand Holdings Limited.
The company appears to remain relatively small fry in terms of the council’s portfolio: as of the end of last year it held £2 million worth of property, the council having lent it a similar sum.
Both the council and the property company do have (limited) external borrowing powers, but reigate.uk hasn’t yet been able to work out whether these have been used, or if just council reserves are being employed for funding.
Last week reigate.uk sent the council some questions for an update on the property programme, but the council hasn’t come back yet.
*Update (13 July)*
Shortly after publication yesterday the council responded to reigate.uk’s questions, saying:
“Our property acquisitions are for income-generation purposes and for potential capital receipts to support council services as part of a programme to replace income lost as a result of the cessation of our grant from central government.
Source of funding are decided upon at the point of acquisition of each asset.”
And on the scale of the programme:
“There has been no change to the ambition.
The council’s Asset Management Plan and Medium-term Financial Strategy support acquisitions which add value to the existing asset or produce a greater financial return than alternative investment.”
- Next acquisition proposals: agenda for 18 July 2018 exec (items 7 and 8)
- Last acquisition proposals: minutes of 21 June 2018 exec (item 119)
- Earlier acquisitions: capital programme – exec report Nov 2017 (p.33 of PDF) , overview & scrutiny Q&A Nov 2017
- Greensand: accounts as at 31 Dec 2017, council press release Sep 2016