Councillor David Busby – Acting Chair BDC (Suffolk Holdings) Ltd
Minutes:
10.1 Councillor Busby introduced the report and explained that the performance for 2018/19 was set against the key performance indicators, which had been set out in the previous years’ Business Plan. The net initial yield for the first year of trading was 5.75%.
10.2 The draft Business Plan for 2019/20 was set out in the Confidential Part of the agenda as Appendix A and had been prepared by the Board of CIFCO in consultation with the Company’s financial advisors Jones LaSalle. It had also been approved by the Council’s Holding Company and endorsed by the Joint Overview and Scrutiny Committee. The Business Plan formed an important part of the Governance of the Company.
10.3 Councillor Busby MOVED recommendations 3.1 and 3.2, which Councillor Holt SECONDED.
10.4 Councillor Arthey asked for clarification of paragraph 10.5 on page 32, and the reference to £3,119,558.
10.5 Councillor Parker enquired which part of Appendix A was actually considered confidential.
10.6 Emily Atack clarified that the Business Plan contained details of the operations of the Business, and prospective tenants.
10.7 Councillor Lindsay asked how it would be possible to have a public discussion of CIFCO if the Business Plan was confidential.
10.8 The Deputy Monitoring Officer explained that the Business Plan would not be in the public domain and would remain unpublished and if Members required to discuss details of the Confidential Appendix the meeting would be going into a closed session.
10.9 Councillor Ward stated that in his personal view there had been a lot of criticism of CIFCO. It was clear that retail section’s return had not been as high as previously, and therefore the intention was to invest in office and accommodation units. Retail investment was a good strategy for the future.
10.10 Councillor McCraw suggested that since the Council meeting was live streamed on YouTube, a summary of the highlights of performance and returns of CIFCO should be provided to the Members.
10.11 The Chief Executive clarified that it was only the pink papers which were not available to the public and that the public pages 25 to 42, covered a lot of the questions raised in relation to CIFCO.
10.12 The Assistant Director – Assets and Investments then summarised the performance of CIFCO against the performance indicators as detailed in the report page 28. The rest of the report outlined details of the properties required. There was information from the Business Plan covered in the report to ensure the public had as much information as possible.
10.13 The report also outlined that CIFCO was to generate an income and that last year the net income had been £1.4M across both Councils. CIFCO had made a financial loss due to set-up costs, stamp duty and fluctuation in the property market.
10.14 Councillor McCraw stated that the portfolio value had been reduced, but that this did not have an influence on the amount the Councils received from CIFCO. He wondered how many properties were examined before a decision to purchase was made and many were actually purchased.
10.15 The Assistant Director - Assets and Investments responded that hundreds of properties were examined before perhaps eighty would be passed to CIFCO for consideration and then perhaps 8 would meet the criteria to be forwarded to the negotiation stage.
10.16 Councillor Busby referred to paragraph 10.4 on page 32. It was necessary to ensure that properties were the absolutely suitable to buy as they were going to be long-term assets.
10.17 Councillor Lindsay could not find any information for the average cost of borrowing, which currently was 5.5%, but asked what happened if interest rates increased in the future and why was there not a KPI for the borrowing.
10.18 The Assistant Director – Assets and Investment referred to table 10.1 which set out the Council’s position and the income from CIFCO, the cost of borrowing was included here and the net figure of £1.4M was the net income to the Councils.
10.19 Councillor Lindsay felt this did not answer his question and asked how much the Council could borrow in the future and what the return might be.
10.20 The Assistant Director responded that that target yields were set and that the Council’s borrowing rate was significantly below the normal borrowing rate. The net initial yield was 5.75% and therefore there was a gap between the borrowing interest rate and the net initial yield. This was reviewed on an annual basis.
10.21 Councillor Hardacre enquired about a bullet point on page 48 of the confidential papers detailing the return over the next five years for the retail section.
10.22 Neville Pritchard – Director of Capital Markets for Jones Lange LaSalle responded that various sectors including the retail sector had hit a low point and rents had dropped significantly but had now reached a level where a slight increase in rent could be seen. This would last for a while, and therefore it had been decided to spread investment across different sectors, including the industrial sector. Retail investments in smaller towns were less likely to grow and it was felt that in lager locations there would be more opportunities for rent increases.
10.23 The Chair asked if any Members wished to go into closed session to discuss the confidential papers and as none responded, recommendations 3.1 and 3.2 were put to Members for voting and the vote was CARRIED.
It was RESOLVED: -
1.1 That the Council notes CIFCO Capital Ltd trading activity and performance for the year to end April 2019.
1.2 That the Council approves CIFCO Capital Ltd’s 2019/20 Business Plan for adoption by CIFCO Capital Limited.
Supporting documents: