Issue - meetings

Report of the Director – Finance and Corporate Services.

The Senior Property Surveyor presented the Review of Investment Assets report, which provided the Governance Scrutiny Group with an update on the performance of the commercial property estate. The objective of the asset review being to assess all of the Council’s commercial property portfolio, how individual properties are performing and what the expectations are for the next 5 to 10 years in terms of income and costs.

The Senior Property Surveyor advised the Group that the portfolio consists of mainly industrial with some office and retail units and provided the Group with the salient points as follows:

·       No property has an average risk score higher than 4.75 (on a scale of 1-10)

·       A proportion of properties have low maintenance costs over the next 10 years

·       Some maintenance costs are high but generally this is for commercial estates rather than individual assets, with the exceptions of unit 1 Bardon, Unit 10 Moorbridge Road and the Point

·       Properties requiring significant maintenance costs have seen reductions of between 8% and 22% to Net Rent values, but are still considered to provide a good annual return compared with their asset value

·       Unit 1, Bardon is the only one of the recently purchased investment properties that is identified as a risk and all of the others are performing well, particularly the 2 units at Edwalton Business Park and the Co-op on Trent Boulevard.

The Senior Property Surveyor advised the Group that the situation with commercial property can change relatively quickly due to tenants leaving and unexpected maintenance costs. Through ongoing monitoring of the Council’s assets this is not anticipated to cause any significant challenges over the coming months. The Senior Property Surveyor informed members that occupancy rates were high and the assets had coped very well during the Covid pandemic.

Overall members were satisfied with the review of the Council’s Investment Assets and complimented the property team on such positive outcomes at Cotgrave and Edwalton.

Members raised their concerns in respect of Unit 1, Bardon, as this appeared a greater risk to the Council, and asked if there was a process in place regarding governance and risk and whether the Council had considered an exit strategy for disposal of such assets. The Director – Finance and Corporate Services explained that the property sector is a fluid environment, the Council’s assets were under constant review and any issues or suggestions of disposal of an asset would be reported to Cabinet as the decision executive.

The Group were advised that a further update would be reported to Governance Scrutiny in 2 years time.

It was RESOLVED that Governance Scrutiny Group:

a)    Approved the review of the Council’s commercial property portfolio with both the review and any scrutiny comments being reported to Cabinet

b)    Receive a bi-annual report on the Council’s commercial property portfolio