Agenda item

To consider any questions by Members under paragraph 19.3 of Part 2 (The Council and District Council Members) of the Constitution, notice of which have been duly given.

Question 1: Cllr Dr Canet

 

" Given that we have seen at least two periods of recession, in property values since the 1990s, a strategy which relies on borrowing (even at below market PWLB rates) to fund the property income needs to make allowance for the risk of capital losses as well as the costs of acquiring and managing properties.

 

What risk analysis has the Council completed to ensure that investing in property --which some industry experts believe to be at or past peak values- will not expose the council to financial risk?

 

Given that there are risks inherent in any commercial investment strategy, Shouldn't the Council be looking to achieve community and social benefits from its investments, for example in a worthwhile quantity of affordable housing investment in Sevenoaks District? "

Minutes:

One question had been received from a Member in accordance with paragraph 19.3 of Part 2 (The Council and District Council Members) of the Constitution.

 

Question 1:   Cllr. Dr. Canet

 

Given that we have seen at least two periods of recession, in property values since the 1990s, a strategy which relies on borrowing (even at below market Public Works Loan Board (PWLB) rates) to fund the property income needs to make allowance for the risk of capital losses as well as the costs of acquiring and managing properties.

 

What risk analysis has the Council completed to ensure that investing in property - which some industry experts believe to be at or past peak values- will not expose the council to financial risk?

 

Given that there are risks inherent in any commercial investment strategy, Shouldn't the Council be looking to achieve community and social benefits from its investments, for example in a worthwhile quantity of affordable housing investment in Sevenoaks District?

 

Response: Leader of the Council

 

You are quite right that investing in property does come with specific risks and as with any investment, the risks and rewards should be fully considered.

 

The Property Investment Strategy Update report contains a risk analysis that shows differences to the one reported to Council a year ago reflecting the changing views of the property market.  The Audit Committee analysed the risks of the strategy after it was first agreed and continue to review it each year as the Property Investment Strategy is an area detailed in the Strategic Risk Register.  An audit of the strategy was also completed in 2017/18.  In addition, the Scrutiny Committee set up a Property Investment Strategy Member Working Group which concluded that the benefits of the strategy do outweigh the risks.

 

Thorough due diligence is carried out for each potential investment to reduce the risks as much as possible.  Our current holdings are reviewed on a regular basis and it is recognised that there is likely to be a time when there are business reasons to dispose of assets currently owned.

 

The main aim of the strategy is to produce income to replace Government support to allow us to provide excellent services to our residents and therefore achieve community and social benefits.  The Council has Quercus Housing whose aim is to use s106 funding to provide affordable housing in the district and we are in the final stages of due diligence for a 14 unit property that was likely to provide ten affordable housing units and 4 market units.

 

None of the assets currently held in the strategy have been funded by external borrowing but it is recognised that future assets may be.  This is why we are looking to revise the strategy criteria to ensure that the Council does still receive a good return after paying any interest on a loan.

 

Supplementary question: Cllr. Dr. Canet

 

Cllr Dr Canet stated that she remained concerned as it was different times commercially and politically, that this was a risky strategy and was concerned that investing within a 50 mile radius was still being considered.

 

Response: Leader of the Council

 

The Leader responded that it remained a 50 mile radius in order to spread the risk around a wide geographical area.

 

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