Commercial Assets Update
To receive a presentation from the Executive Member for Contracts & Assets, Councillor Paul Hewett.
The Executive Member for Contracts and Assets introduced the presentation explaining it was a small team delivering a big service with £45m of Assets that allowed the Council Tax to remain low within the District.
The Strategic Property Manager continued with the presentation that provided a detailed picture of the performance of the commercial portfolio during the first financial quarter. Whilst the pandemic would have an effect within the commercial market both locally and nationally the effect was yet to be seen.
The Team continued to work proactively with tenants to provide contact and support during the crisis and the performance would be closely monitored. Whilst the Commercial Property Team had seen less activity during the crisis, enquiries had been received and a letting had been made. The Business Centres had remained open which was vital for keyworker tenants such as DWP, health service and social services who had welcomed the properties remaining open and being as safe as possible.
The Council had created a rent deferral scheme during the crisis for those tenants that were experiencing hardship which had helped to control the state of the portfolio as well as on a legal perspective with the tenants. The initiative had been welcomed by businesses who had needed to use the service which had, in turn, helped stabilise their business. Some lease terms had been restructured to protect the longevity of the leases of the properties.
Through COVID-19 there had been new protection legislation for rent arrears and how it should be managed. As at June 2020, the Council was at 0.2% of arrears for 90+days, the target would usually sit at 0.3%. The figure was expected to rise over the coming months, however, the Team were continuing to work closely with all tenants to provide support where possible.
Nationally there were issues with the larger retail and hospitality chains who were seeking alternative support such as Company Voluntary Arrangements. The process was extremely complex and action was required at pace with support from legal and external expertise. There had been two tenants within the Breckland area that had required support.
The Strategic Property Manager concluded that the pandemic had caused an unsettling time and the impact would continue long after normality resumed. This would lead to changes within the commercial property market place that could see a review of the Asset Property Strategy which could possibly affect future investments and the level of risk the Council could take in the future.
Councillor Birt asked for an ‘asset by asset’ assessment as he felt that this would be valuable to see the direction of the assets and get ahead of the curve. He understood it was a dynamic situation but felt the information should be made available on a monthly basis rather than on a quarterly basis. He also felt that it would be useful to see a prediction of the yield on a worst and likely case scenario of how it could develop appreciating that it was likely to change. He went onto ask if the Capital Value had been determined at the end of March, and if so, if that figure could be seen.
The Strategic Property Manager explained that subject to the commercially sensitive data, the Team would consider and look into supplying information to the Commission on an asset by asset basis. With regard to the ongoing assessment data to view the trends, the information could be produced within the regular performance data that the Commission received if required although not all performance measures were measured monthly. The yield prediction would be difficult to predict and could only go on the data that was available. The capital values had been received on 31 March, and these were updated on an annual basis. Whilst there would not usually be much change, analysis would take place during July and August to seek what would come forward for the coming year.
Councillor Clarke thanked the Strategic Property Manager for the detailed presentation, and asked how the commercial activity would be affected by future risk. Whilst he appreciated that the tenant information would be commercially sensitive, he asked if Members could see that information to be able to understand and provide support to tenants where appropriate.
Members were informed that pre-Covid19 the CIPFA guidance on investment in commercial property raised concern about local authorities over stretching themselves. However, concern had been based on the fact that a number of authorities borrowed to invest, which Breckland had not. In addition, the Treasury Policy allowed control and a balanced view of the risk. He would consider what information could be shared with Members bearing in mind that the data was commercially sensitive and if appropriate would provide information to Members at a local level as and when requested.
Councillor Jermy asked for clarification on occupancy levels given within the presentation. Additionally, he went onto ask if the Council was looking to maximise the opportunity of working with businesses to provide their services to Breckland where possible - given the increased dialogue that had happened during the past four months.
It was confirmed that the presentation gave the occupancy levels as a square-footage.
The Executive Member for Asset and Contracts added that wherever possible, the Council looked to locally based suppliers to provide services such as the refurbishment of the Committee Suite, as an example.
Councillor Eagle had not been aware that the Council had owned property on the High Street and asked for confirmation if they were retail units and which market towns they were in. He went onto ask how actively the Executive Member would look to change the portfolio as he felt that this could be a short term pain for a long term gain.
Members were informed that mainly there were a small number of retail units that were within Thetford Town Centre. In addition, the Asset Management Strategy was due for renewal so this would be a good time for Members to consider the Strategy in terms of the way in which the commercial property was managed and maintained.
Councillor Atterwill asked what percentage of the Council’s stock was made up of office space as the pandemic had shown that there would be more homeworking and therefore less office space would be required. In addition, he asked if there could be a piece of work to consider the office space held and if the properties could be re-furbished and if a budget would need to be set aside for that.
The Strategic Property Manager advised that he would provide the percentages on all sectors of assets held to Members of the Commission separately. Prior to COVID-19 the office space market had struggled, the Council owned two business centres in Thetford and Dereham, and space within Swaffham and it was expected that it would be different in the future; therefore, alternative uses of the assets could be considered and provision would be made within the Capital Programme accordingly subject to approval.
Councillor M Chapman-Allen felt that the information between the tenant and the Council should remain strictly confidential. The Chairman noted the point and the sensitivity.
Councillor Turner added that as Chairman of the Council, she had been contacted regularly by commercial practices who were diversifying and offering their services to the Council and wanted to welcome the local interest in making Breckland a better place. She reassured Members that any information had been forwarded onto the relevant department.
The Chairman thanked the Strategic Property Manager for the detailed presentation and the comprehensive responses provided.