Issue - meetings

The Investment Advisory Board is exploring the advantages and opportunities that would be offered should the Council set up a property company.  Most important amongst these is the ability of a company to pursue opportunities to acquire commercial properties that are beyond the Council’s powers i.e. solely for income generation purposes.

The Executive is requested to consider these advantages and the opportunities and challenges such a vehicle might offer and to approve the creation of a company as set out below.

Recommendation

It is recommended that:

1.         the Overview and Scrutiny Committee be thanked for their consideration and comments;

2.         the Council be recommended to create a company as described in this report, after the consideration of detailed legal advice; and

3.         the Council agree to delegate the final details of the matters set out in paragraphs 12 and 13 above, in relation to the initial set up of the company, to the Investment Advisory Board after consideration by the Value for Money and Customer Service Overview and Scrutiny Committee.

27.1    The Investment Advisory Board is exploring the advantages and opportunities that would be offered should the Council set up a property company.  Most important amongst these is the ability of a company to pursue opportunities to acquire commercial properties that are beyond the Council’s powers i.e. solely for income generation purposes.

27.2    The primary objective of the Council’s Investment Strategy, and therefore of the Investment Advisory Board, is to contribute to offsetting the overall budget deficit.  The Council is currently constrained under s.1 of the Localism Act 2011 when it comes to acquiring property for investment purposes.

27.3    Should the Council wish to do so it has the ability to establish a ‘Local Authority Trading Company’ via section 95 of the Local Government Act 2003.  Such a company would in effect be a subsidiary company of the local authority and as such the shareholder (i.e the Council) would have ultimate control over activity and operational matters.

27.4    The company as a property vehicle would target a specified minimum return with funding either from loans from the Council or commercial sources. The aim would be to maximise the opportunities within the existing portfolio where there is a clear business case and an acceptable level of risk, and to bring in new opportunities to increase the assets the Council already owns in cases where this falls outside of the Council’s legal powers.  Every property option would be looked at on its own merits to decide whether to purchase through the Council or the Company dependent upon the business case and legal implications of the opportunity concerned. 

27.5    It is the intention that the company has enough flexibility to acquire and work on a commercial basis across a range of activities if appropriate. This may include joint ventures, special purpose vehicles, operating existing council assets and possibly the development of management agreements.

27.6    Initially, the focus of the company would be to concentrate on property investment and development work both inside and outside of the Borough which is needed to provide a valuable income stream to the Council. The company would mainly operate in situations where the Council can’t or where there is a need to respond more quickly and effectively to market opportunities where the Council is more disadvantaged by the regulations on decision making which affect speeds of response.

27.7    The detailed legal implications are included at Annexe 2 which was the information reported to the recent Investment Advisory Board Meeting. A summary of the main points is below.

1.    An appropriate governance structure will be needed to ensure sound and robust management alongside protection of the Council’s financial and reputational investment. The Council as shareholder would control the company and delegate operational matters via a Shareholder’s Agreement.

2.    The company would be subject to the Local Authorities (Companies) Order 1995. The order sets out regulations that are specific to controlled companies and start from the basis that the public should be aware that the company they are dealing  ...  view the full minutes text for item 27