Councillor Gerard Brewster – Chair MSDC (Suffolk Holdings) Ltd

12.1          Councillor Brewster introduced MC/19/16 Capital Investment Fund Company (CIFCO) Business Trading and Performance Report 2018/19 and said that the report compared the performance of CIFCO against the Key Performance Indicators (KPI) set out for the company. He summarised the main points in the report and the draft Business Plan for 2019/20, set out in the Confidential Part of the agenda as Appendix A. The Business Plan 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 and Babergh District Council on the 23 July 2019. The Business Plan formed an important part of the Governance of the Company.

12.2           Councillor Brewster MOVED recommendation 3.1 and 3.2, which was SECONDED by Councillor Meyer.

12.3           Councillor Mansel asked that Members voted separately on each recommendation, which the Chair agreed to.

12.4           Councillor Mansel asked for clarification for the business investment criteria on page 66 in paragraph 8, which had changed in the Business Plan from the one last year.

12.5           Emily Atack, Assistant Director for Assets and Investments, responded that the business investment criteria had changed in relation to the target yield based on the experience on the previous year’s market. The principles remained the same. Other changed related to the change in the kind of properties invested in by the Council. More investments were to be made in industrial and office properties due to the resent fluctuations in the retail property market.

12.6           Councillor Field asked for further explanation of the revaluation of the properties and the loss incurred to CIFCO.

12.7           The Assistant Director explained that the loss of £1.3M to CIFCO was a result of set-up costs, stamp duty and actual acquisition of properties. She detailed the relation between the management of the portfolios, acquisition of properties and the income to the Council.

12.8           In response to Councillor Field’s further questions, the Assistant Director clarified that the £1.5M was an income to the Council after the loan interests had been paid. The loss to CIFCO was a capital loss and did not affect the income to the Council as the income from the rents were not affected.

12.9           Councillor Stringer stated in the current Business Plan higher risk investments were no longer included, which was confirmed by the Assistant Director for Assets and Investments.  She explained that the Board of CIFCO had made the decision to invest in lower risk assets, which had resulted in a lower yield in the property portfolio.

12.10        Councillor Otton referred to the Overview and Scrutiny Report and stated that the report indicated that the board of Directors were confident that there could be no drastic result of the a ‘no deal’ Brexit and that once Brexit was attained, the commercial property market would not be affected.  She was concerned that it was yet unknow what effect Brexit would have on the property market and on the Council’s Investments.

12.11        Councillor Eburne enquired about the KPI in Section 5, which had not been completely met and if changes would be made to these. Also, she asked for clarification of Section 10.3 and the fees for CIFCO Capital investments and related increases.

12.12          The figures in paragraph 10.3 were an estimate of future fees, which were a percentage of the investments, so if the portfolio grew, the fees would increase. Section 12 of the Business Plan contained the updated KPI for 2019/20 proposed for the next financial year.

12.13          Councillor Brewster summed up the comments and the perceived loss, explaining that it was not a loss in rents, as these remained fixed and was still forthcoming.

12.14          Recommendation 3.1 was put to Members for voting and was CARRIED

It was RESOLVED:-

That Council notes that CIFOC Capital Ltd. trading activity and performance for the year end April 2019

14.15 Recommendation 3.2 was put to Members for voting and was CARRIED

It was RESOLVED: -

That Council approves CIFCO Capital LTD’s 2019/20 Business Plan for adoption by CIFCO Capital Limited.