Agenda item

Report of the Director - Finance and Corporate Services

Mr Berry presented the Investment Property Review report and advised that the review provided an update on the Council’s commercial property portfolio over the previous two years.

Mr Berry informed the Group that the portfolio continued to perform well, with occupancy at 96.4% and income of approximately £1.9 million per annum, mainly generated from the investment properties the Council had purchased. He said that the portfolio was operating in a challenging market, with businesses facing inflationary pressures, wages and increased utility costs which had contributed to some tenants entering administration.  He said that the portfolio included a range of industrial estates, including multi-let and single-let properties. He also noted that since the previous review the Council had completed the sale of a freehold of Candleby Lane and had undertaken significant refurbishment works at Manvers business park.

Mr Berry explained that the review had assessed a range of factors, including asset value, projected rent and financial return, property condition and potential capital requirements for upgrading and statutory requirements, such as minimum energy efficiency standards (MEES), tenant covenant risk and economic obsolescence. He said that MEES presented a key risk and as such the Council had reviewed its portfolio to understand its position and potential future obligations, concluding that it was in a good position overall. Mr Berry took the Group through the portfolio of properties owned by the Council, explaining their current condition, occupancy and anticipated maintenance requirements. He noted that one property, at Walkers Yard, presented future capital risk due to its low EPC rating due to it being an old building.

Councillor Regan asked about valuations and Mr Berry advised that the figures were asset valuations informed by rental and market evidence rather than open market sale processes.

Councillor Regan asked about tenant bankruptcies and whether the Council had incurred additional liabilities or costs due to these. Mr Berry explained that as part of the bankruptcy process, the administrators would at some point issue notice to discharge leases but that the Council also had other ways to take back ownership of the property, such as through a forfeiture notice. He said that it some instances the administrators would pay the rental up to the point of auctioning off the goods.

Councillor Om asked how many units were let and vacant in The Point and Mr Berry explained that there were nine suites in total, with seven let and two vacant, which these two currently being marketed.

Councillor Om asked about the lower risk rating for units at Walkers Yard and Mr Berry explained that these were linked to the building condition and the EPC rating not meeting new Government regulations for when new legislation was brought in, and also that the tenant may leave and it may not be possible to re-let. He said that exemptions may be available such as where the cost of works may not be recoverable within a defined period, but that this was currently unknown.

Councillor Gaunt asked why the Council’s portfolio performed well compared with the private sector and Mr Berry said that the Council offered flexible, pro- business, lease arrangements which could be attractive to small businesses. He said that the Council charged market rate but was very flexible and offered good condition properties.

Councillor Wells noted that Bridgford Hall was listed and Mr Berry confirmed that this was the Council’s only commercial listed building.

The Chair referred to the Council’s asset management plan and register and asked about planned preventative maintenance and management of renewables. Mr Berry explained that assets were actively serviced and maintained and that Officers regularly viewed its properties and the Council received feedback and confirmation from its contractors about the condition of its assets to ensure that they were in working order. He said, however, that it was prudent for the Council to have a capital budget for potential future works and replacements when they may be required.

It was RESOLVED that the Governance Scrutiny Group undertook scrutiny of the review of the Council’s commercial property portfolio.