• Home
  • About
  • 151 IMPACT AWARDS
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

Impact Awards –>
  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Gloucester council borrows £80m for property fund

0
  • by Colin Marrs
  • in 151 News · Development
  • — 24 Jul, 2017

Photo: Pixabay

Gloucester City Council has announced that it is borrowing £80m to invest in property.

The council last week voted to create a property fund entirely consisting of borrowing from the Public Works Loan Board.

The council says that a portfolio of this size would help it close an income deficit of around £2.6m across the next four years by raising annual income of around £500,000.

David Norman, cabinet member for performance and resources at the council, said “Although property investment is a risky business, we have been fully briefed on how the property portfolio will be managed and risks will be mitigated.

“We’ll be taking expert advice from industry professionals to help inform the decisions and we can mitigate risks through very strict investment criteria.

“We have to diversify to help generate income in the future and we’ve spoken with other local authorities who have taken this approach and been very successful.”

A report by council officers said the overall investment quantum and strategy is “designed to provide sufficient income to cover a meaningful proportion of the entire predicted budget gap”.

The council said that although it would use receipts from land sales to help finance acquisition costs, the main source of financing would be from borrowing.

The £80m borrowing would be among the largest loans taken by a local authority from PWLB to fund property investment.

“The initial loan to value ratio would be close to 100%, and this creates a risk that members should be aware of,” according to the officer report.

The new portfolio could take up to seven years to acquire, and would be overseen by a new property investment board, which would be disbanded on completion of the final transaction.

Housing schemes could also be included within the portfolio, if the yield is deemed attractive enough.

The section 151 officer would be authorised to approve purchases of up to £15m, in conjunction with the investment board.

Purchases above that sum would be referred to the council’s cabinet. The net initial yield (NIY) range that the council expects to achieve on any investments is likely to be between five and nine percent, it said.

Should the portfolio yield drop below 5.75%, a review of the strategy will be  triggered, according to the council documents.

The council will go out to tender later this year for an external partner with property experience to help identify and assess potential acquisitions and to help manage its property portfolio

Paul James, leader of the council and cabinet member for regeneration and economy, said: “We have to make £1.65m of savings in the current financial year alone, and property investment will be a step which many other local authorities have taken; they have proved this can be a successful way to raise funds.”

The move has not gone down well in all quarters, with the council’s Liberal Democrat leader Jeremy Hilton (Kingsholm) quoted in a local paper as saying: “This is one of the most reckless things I have seen this council do. If you get this wrong you could bankrupt us.”

Get the Room151 Newsletter

Share

You may also like...

  • Property investment set to face ‘security, liquidity and yield’ test Property investment set to face ‘security, liquidity and yield’ test 14 Sep, 2017
  • Businesses failing on LEP match funding, MPs told Businesses failing on LEP match funding, MPs told 21 May, 2019
  • Councils isolating CFOs risk  failure, warns new CIPFA code Councils isolating CFOs risk failure, warns new CIPFA code 21 Mar, 2019
  • More than a third of councils at risk of financial failure over  next decade new study finds More than a third of councils at risk of financial failure over next decade new study finds 9 Jan, 2019

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 2 days ago

    Impact Awards: Cheltenham’s tech hub and Hackney’s recovery from cyber attack: The CCLA/Room151 Impact Awards spotlight  finance teams with a direct impact on their local communities and the environment. This week we explore Cheltenham Borough Council’s… dlvr.it/Rxg53h pic.twitter.com/iH8oGKOfSs

    Room151 3 days ago

    Collaboration the key to district recovery post-pandemic: Regeneration and economic growth will depend on districts’ ability to secure funding and work with public and private partners, argues Sanjiv Kohli. Covid hit us in March 2020 and immediately[...] dlvr.it/Rxb4VK pic.twitter.com/FiMynEQVPU

    Room151 1 week ago

    Impact Awards: Liverpool’s cafe culture and Warrington’s investment in homes: The CCLA/Room151 Impact Awards showcase  finance teams with a direct impact on their local communities and the environment. This week we spotlight Liverpool City Council’s… dlvr.it/RxJsKb pic.twitter.com/dEYpaz6HP0

    Room151 1 week ago

    Doing something in #localgov #finance for housing or regeneration? Check out the 'Place Shaping' category room151.co.uk/impact-awards/… sponsored by @31tenConsulting in the CCLA/Room151 Impact Awards. #timetoenter !! pic.twitter.com/dU99vE6Wws

    Room151 1 week ago

    Doing something in #localgov #finance for Adult Social Care & Health? Check out the ASC&H category room151.co.uk/impact-awards/… sponsored by Fundamentum Social Housing REIT in the CCLA/Room151 Impact Awards. #timetoenter !!

    Room151 1 week ago

    Doing something in #localgov #finance for the environment? Check out the 'carbon management' category room151.co.uk/impact-awards/… sponsored by @ACSLLP in the CCLA/Room151 Impact Awards. #timetoenter !!

    Room151 1 week ago

    So what are the seven categories for the CCLA/Room151 Impact Awards? Here they are room151.co.uk/impact-awards/… #localgov #finance #outcomes

    Room151 1 week ago

    Why should LGPS be concerned about rising inflation?: The impact of the coronavirus pandemic, lockdown and wider economic uncertainty created  deflationary pressures which raise important considerations for the Local Government Pension Scheme writes… dlvr.it/RxF7Fs pic.twitter.com/JlcjROBIpz

    Room151 1 week ago

    JOB ALERT: LPFA Finance Director vacancy: London Pensions Fund Authority Finance Director and s151 Officer Competitive salary and benefits The largest Local Government Pension (LGPS) provider in London with around £6.5 billion of assets and 135[...] dlvr.it/RxBdJP

    Room151 1 week ago

    Richard Harbord: Further signs that local government finance is failing: The crisis in Liverpool and a fix for education budgets are further indication that local government finance is in need of a root and branch review. Even for those students[...] dlvr.it/Rx9PSV pic.twitter.com/sAanC2gEyu

    Room151 2 weeks ago

    Impact Awards: Finance helps launch school meals company and support business during lockdown: The CCLA/Room151 Impact Awards will showcase the way finance teams have a direct impact on their local communities and the environment. This week we spotlight… dlvr.it/RwnlF4 pic.twitter.com/AJhne1MVG4

    Room151 2 weeks ago

    "This work has made a vital, practical contribution to ensuring people have been supported through the pandemic." #impact #151awards #covid #s151 room151.co.uk/treasury/impac… #impactcasestudies #councilfinancemakesadifference

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Terry Crossley: LGPS pooling still faces a ‘host’ of issues to resolve
  • Next story West Midlands to establish finance commission

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.