Agenda item

This matter is the responsibility of Cllr Benet Allen, Executive Member for Corporate Resources.

Report Author:  Chris Hall, Director of Development and Place.

In the absence of the Executive Councillor for Resources, Benet Allen, the report was introduced by Chris Hall, Deputy Chief Executive and Director of Place and Climate Change.

Chris stated that it was a positive report which provided an overview of the current position. No acquisitions or disposals had taken place since December 2021, and all commercial obligations have been met. The commercial investment portfolio is now in the working phase.

A question was raised at the Scrutiny pre-meeting regarding the amount of debt remaining for the Council’s commercial investment. This is outlined in paragraph 5.7 in the report and was also covered in further detail in a report to Audit and Governance Committee on 7 November 2022 providing an update in the response to the external auditor’s annual report.

https://democracy.somersetwestandtaunton.gov.uk/documents/s20502/External Auditors 2020-21 key recommendations update.pdf

The debt position can be summarised as follows:

The total amount paid off of the initial investment to date is therefore £7.402m (3520 + 3882 per table above).

Comments from the Committee were as follows:-

·       Cllr Lisgo asked on a point of clarity if the Commercial Investment portfolio included the SWT housing stock? The housing stock is separately ring-fenced within the Housing Revenue Account (HRA). It is not part of the Commercial Investment Portfolio.

·       Cllr Mansell asked how many low cost loans applied to the commercial investment portfolio? The Council’s total borrowing position is determined within Treasury Management. This is currently set at £73 million for low-cost loans. The majority of this will be tied into the Commercial Investment Portfolio.

·       Steelite – This was the largest acquisition within the portfolio. It was tied into a long term lease and was performing adequately, but due to it’s high useage on utilities and the impact of the Cost of Living Crisis it was prudent to flag this as a risk.

·       Aztec West – Concern was expressed that one of the suites was currently empty. Jo Wharton confirmed that rent was being paid under the break-clause, and that it could be favourable as some of the neighbouring tenants were considering expanding. It may be possible to enlarge one of the other rented suites to incorporate this, which would increase the rental income and maintain a good relationship with the tenant.

·       A Commercial Property Investment Specialist, Harvey Gardner was now employed by SWT to build relationships with the occupiers of the commercial spaces and ensure good landlord/tenant liaison.

·       The income repayments have come from a variety of areas: Reduction in reserves, debt repayments, treasury management and reallocation of underspends from previous years.

Cllr Buller finished by saying that the responsibility for the portfolio would soon rest with the new authority, and uncertain times were ahead. She was concerned about the amount of investment in Steelite, due to the big charge against it from the USA commercial investors. She recognised however that SWT was being as prudent as it could be and thanked the officers for a comprehensive overview.

It had not been necessary to enter into confidential session, so the meeting was concluded.

Post Minute Note

Cllr Cavill requested a breakdown on the how the debt repayments related to investment activity have been funded. Paul Fitzgerald provided the following summary after the meeting:-

The total repayment of debt in 21/22 and 22/23 totals £7.402m as set out in the report, which has been funded as follows:

£1.805m       From investment income

£2.597m       From Business Rates Risk reserve surplus and Pooling gains

£2.000m       From Budget Risk Reserve surplus

£1.000m       From General Reserves

£7.402m