To respond to questions from members of the public, received in accordance with Procedure Rule 10.
The deadline for receipt of questions is 5pm on Tuesday 16 February 2020.
Minutes:
85.1 The following questions were received from members of the public in accordance with Procedure Rule 10:
From Mrs Karen Lankester of Godalming:
“How/by whom is the new £10m property investment fund to be managed; what percentage fee will be charged for management and administration?”
Response from Cllr Mark Merryweather, Portfolio Holder for Finance and Property:
“I’d like to unpack the question into its 3 elements which I’ll deal with separately.
Firstly - on the existence of a property investment fund, the short answer is that we don’t have one and I’m very happy to clarify that, but as part of our Capital Strategy we do have a property investment strategy, one of the pillars of our MTFP, which is specifically targeted at capital investment in assets that generate much needed revenue income and otherwise advance our Corporate Strategy.
We have to do this, reluctantly, to replace the revenue that the Government is – one way or another - denying us. We also have to do this within public sector financial regulations that differ to those in the private sector and where for example even the terms “fund” and “funding” have important differences in meaning. These rules also mean for example that even if we have the “cash”, we can’t use it to spend on services unless appropriate revenue “funding” is also available, but we can use capital funds, and even borrow, to invest in property to generate revenue funds that we can spend on services.
Second I’d like to clarify how we do manage our investment properties and other property assets. Our investment property portfolio, which we own directly, is only about 5% of our total property assets: we also own and manage around 5,000 council houses, plus our own estate which includes offices, leisure centres, car parks, sports grounds and pavilions, play parks and all sorts of other community facilities from public halls to youth club huts. All of these we manage ourselves internally, and have dedicated housing and estates teams to do that.
Third I’d like to clarify the policies the Council has to govern its investment property activities. They are codified in the Property Investment Strategy I mentioned earlier, which covers all appropriate aspects of this including the legal framework under which our powers are regulated through to the due diligence risk and return appraisals that are required for individual asset assessments. The Property Investment Strategy is reviewed regularly and was last updated by Council in February 2020. It’s pubic and published on our website, and in fact prior to its final approval, it went through its own governance journey with reviews by the Executive and an Overview & Scrutiny committee. All of these meetings – Council, Executive and O&S – were broadcast to the public on our Council YouTube stream, and the recordings of all of those meetings are still publicly available on demand.
As well as the Policy itself, individual investments are also subject to a process as they arise, although in some cases we are obliged to discuss some details in confidence if they are commercially sensitive for our counter-party. For that reason the Executive has established a cross-party “Advisory Board” to work with Officers to pre-filter opportunities so that only the most appropriate ones advance for consideration. Embedded in this process is the securing of appropriate independent expert professional advice. The most recent investment decision, which I think may have inspired this question, was made in November and December last year. While these meetings did have to go into confidential session, I was glad to be able to at least introduce the investment in the context of the strategy while we were in public session. These meetings and the relevant reports are again published on our website and they were again broadcast on our YouTube channel where recordings remain available on demand today.”