Published Friday, 16th September 2016
A commercial property and investment company is to be set up by the Council to boost the local economy and to help plug the future funding gap caused by the termination of government grant.
The Council’s Executive agreed to set up the company at their meeting on Thursday 15 September 2016.
Valuable income stream
Cllr Mrs Natalie Bramhall, Executive Member for Property, said of the plans: “This is an ambitious vision but one which will help us generate a valuable ongoing income stream for the Council to help off-set the cessation of our government funding.
“Our government grant has reduced by 45% since 2010 and is set to end by 2017/18. We have so far managed the changes without cutting services by making efficiency savings and looking for new opportunities to bring in income. However if we are to become financially sustainable by 2018 it is essential that we generate additional, secure sources of ongoing income, such as rental income from property assets.
“Setting up our own property company will make it quicker and easier for us to respond to opportunities in the fast-paced, competitive property market in which we cannot currently compete.
“For example under the Housing Act we cannot as a council invest in and keep residential property because we cannot grant shorthold tenancy agreements. To be able to do so would enable us to provide much needed new homes for our residents and provide a secure source of rental income.
“It also means that would no longer be restricted to act with in our borough borders and can take advantage of opportunities that bring the most benefit, wherever they are.
“It goes without saying that we would ensure that the appropriate governance structure is put in place to ensure sound and robust management of the company and to protect the Council’s investment.”
The Council already has a strong record in property acquisition and development to benefit the community while bringing in income, including the acquisition the long leasehold interests of M&S in Reigate; the proposed cinema and retail scheme at Marketfield Way, Redhill; development of two new leisure centres funded by sale of land for new homes; and the redevelopment of the vacant Newman House office site in Horley for much-needed affordable housing.
The company will be a commercial trading company wholly owned by the Council. It would be funded through a combination of council reserves, the Public Works Loan Board (via the Council) and commercial sources and is expected to generate a minimum of 6% return on investment.
New acquisitions are expected to include a mixture of residential, offices, industrial and retail properties to provide a balanced, sustainable property portfolio. Some of the Council’s existing assets will be transferred to the company so that schemes can be progressed for maximum benefit.
Work will now begin to set up the company and make the appropriate governance and funding arrangements.