Basingstoke builds housing into investment strategy
0A home counties borough council has agreed to amend its property investment strategy to include residential developments.
In February, Basingstoke Borough Council approved plans to boost its strategy for property investment by £30m.
However, it has now agreed that the strategy’s requirement for a rate of return of up to 8% makes it difficult to invest in housing, and has agreed to include a separate strand for residential.
Phillip Hood, head of financial services at Basingstoke, told Room151: “We are looking to amend the existing strategy to include a housing strand.
“We are not borrowing to fund this strategy — it is about enhancing returns from our treasury management, moving money from cash type investments.”
A document approved by the council’s cabinet this week, said an amendment was necessary because the current strategy prevents investment in housing.
It said the “agreed strategy is focussed on commercial investment and in many areas is not applicable to residential investments.”
The report said that adopting a lower target return of 5% for residential investments would allow the authority to fund market and affordable rental homes with the profits from higher yielding investments.
It added that the current “ticklist” for evaluating property investments was not suitable for residential investments.
The report added that the council’s current “evaluation matrix” prioritises factors such as prime location, tenant covenant strength, certain lease terms, a yield of 6%–8%, lot values of £1m to £10m, strong rental growth prospects, tenant repair terms and full occupancy.
The council will now consider evidence from other local authorities on the risks and benefits from initiatives undertaken elsewhere.
The value of the council’s investment portfolio in March 2017 was £254m, which generates an income of around £16.5m a year.
So far, around £24.75m of the additional £30m agreed in February has been committed, leaving around £5.25m available for residential investment, the report said.
