Agenda item

To consider the attached report (C-029-2019-20).

1.    The Cabinet noted that in accordance with the agreed Asset Strategy and the delegations from Cabinet that the Authority had acquired 195-200 and 222-226 High Road Loughton, a mixture of retail and residential units. The total costs of the purchase was £23,820,950; consisting of the purchase price of £18,645,000, Stamp Duty of £921,750, legal and professional fees of £340,805 and VAT of £3,913,950. (It should be noted that these figures are subject to alteration as the Authority has elected to add this property to its HMRC approved VAT scheme and that other minor changes in Stamp Duty and fees may occur, all to the financial benefit of the Authority).

2.    The Cabinet noted that Councillors S Stavrou, H Whitbread and A Patel in discussion with the Leader and the assistance of the Estate Team and Section 151 Officer, formally considered and unanimously agreed the purchase and signed the decision sheet accordingly.

2.    The Cabinet noted that the information provided to the decision makers showed a gross annual revenue yield of £1,425,602, or 5.98% against the guiding benchmark of 6.00%.

3.    The Cabinet noted that the information provided to decision makers showed a net (after £390,780 of building depreciation costs as per the historic approach in EFDC, and insurance and £309,000 of financing costs including the cost of lost interest on current cash surpluses), annual revenue yield of £717,823 or 3.01% against the guiding benchmark of 3%.

4.    The Cabinet noted that the information provided to the decision makers showed an analysis of key risks and sensitivities that could be appropriately managed.

5.    The Cabinet noted that the information provided to the decision makers showed that future capital growth was a possibility with additional expansion and improvement to the flat units, (this development was not planned at this stage).

6.    The Cabinet noted that the Authority was awaiting confirmation of the VAT status of the project and a final statement of fees and charges for the solicitors. All the expected movements in costs were marginal and would work in the Authority’s favour.

The Commercial and Regulatory Services Portfolio Holder, Councillor Patel introduced the report on the purchase of Loughton Centric Parade. It was noted that in line with the direction set-out in the Asset Strategy (that was approved by Cabinet in June 2019) and the specific delegations to designated Cabinet members (that was approved by Cabinet in September 2019), Loughton Centric Parade had been purchased with completion having taken place on 9th December 2019.

In terms of further investment in assets, it should be recognised that the Authority only gained around 0.8% from traditional investments but should get 6% gross from asset investments. The Authority should and needs to benefit from this increased level of return.

Councillor Heap asked who the vendor was and noted that at Council it was said that the price would be £18.25million, however this report had two other figures in there. Councillor Patel replied that the purchase price was £18.65 million but the report added on the fees, VAT etc. The vendor was on behalf of Schroders.

Councillor Chris Pond questioned if this was such a good investment given the state of High Street shops in the present climate.  Councillor Patel said that this would enable the council to do something positive and to keep a good balance of retail in our High Streets and gave us some control.

Councillor Murray agreed with Councillor Pond. He noted that the purchase had already been made and asked if the legal situation was correct and that this indeed had been purchased. Councillor Patel noted that due diligence had taken place over this purchase and key financial assessments had been made. Difficulties faced by the High Street had also been factored in. Delegated authority to take this decision had been agreed by full Council. Councillor Murray said he understood that due diligence had taken place but what could councillors do if they disagreed with the decision. Councillor C Whitbread said that the Council had to change with the times, he understood the challenges that the High Streets faced, but they always changed to meet the difficulties they faced. And, the increased revenue to the Council would help to protect its front-line services in the future.

Councillor Murray went on to comment that at Councillor level, not officer competence, that over the years, he did not see us having the ability to manage retail businesses. Councillor C Whitbread said that he was surprised at these comments as what they have done over the years did not bear out this assertion.

Councillor Wixley noted that this was not Centric Parade as set out in the report but included other properties as well. The report should list all the properties purchased. Councillor Kaufman also asked that the recommendations be made simpler with less jargon. Councillor C Whitbread agreed and asked that the recommendations be amended accordingly for the minutes.

DECISION:

1.    The Cabinet noted that in accordance with the agreed Asset Strategy and the delegations from Cabinet that the Authority had acquired 202-226 (even) High Road and 200 High Road, Loughton (Centric Parade No.1-6), a mixture of retail and residential units. The total costs of the purchase was £23,820,950; consisting of the purchase price of £18,645,000, Stamp Duty of £921,750, legal and professional fees of £340,805 and VAT of £3,913,950. (It should be noted that these figures are subject to alteration as the Authority has elected to add this property to its HMRC approved VAT scheme and that other minor changes in Stamp Duty and fees may occur, all to the financial benefit of the Authority).

2.    The Cabinet noted that Councillors S Stavrou, H Whitbread and A Patel in discussion with the Leader and the assistance of the Estate Team and Section 151 Officer, formally considered and unanimously agreed the purchase and signed the decision sheet accordingly.

2.    The Cabinet noted that the information provided to the decision makers showed a gross annual revenue yield of £1,425,602, or 5.98% against the guiding benchmark of 6.00%.

3.    The Cabinet noted that the information provided to decision makers showed a net (after £390,780 of building depreciation costs as per the historic approach in EFDC, and insurance and £309,000 of financing costs including the cost of lost interest on current cash surpluses), annual revenue yield of £717,823 or 3.01% against the guiding benchmark of 3%.

4.    The Cabinet noted that the information provided to the decision makers showed an analysis of key risks and sensitivities that could be appropriately managed.

5.    The Cabinet noted that the information provided to the decision makers showed that future capital growth was a possibility with additional expansion and improvement to the flat units, (this development was not planned at this stage).

6.    The Cabinet noted that the Authority was awaiting confirmation of the VAT status of the project and a final statement of fees and charges for the solicitors. All the expected movements in costs were marginal and would work in the Authority’s favour.

Reasons for Proposed Decision:

This was a report for information only.

Other Options for Action:

N/A.