Issue - meetings

To consider Investment Opportunity 11.

The Director – Finance and Corporate Services gave a summary of the report, which detailed an investment opportunity that would be built into the 2020/21 revised budget and modelled into the new Medium Term Financial Strategy (MTFS) that would be prepared as part of the revised budget setting process.

The Director – Finance and Corporate Services summarised the advantages of Investment Opportunity 11. The Council had an opportunity to acquire an existing logistics building in an established prime distribution location. The site had been developed in 2012 and the tenant had signed a 30 year lease with no break clauses. The Director – Finance and Corporate Services said that the building was in immaculate condition. The agreed price for the investment was £55,000,000 which when the purchaser’s costs of £3,627,500 had been added gave a total investment of £58,627,500. With rental income of £2,465,000 p.a. this would give a yield of 4.2%.

He said that there were very tight timescale deadlines of 2 September for exchange and 16 September for completion but that this investment opportunity would provide additional income to the Council of around £1,000,000 this financial year after borrowing costs.

It was proposed that the funding would be on the same basis as other recent Council investments through £46,902,000 (80%) interest only borrowing and £11,725,500 (20%) fixed repayment loan for 40 years. The total cost of financing once long term and fixed was £1,340,093 per annum.

The risks had been identified and were debated by Members.

Concerns were expressed about the location of the logistics building, the future plans of the current tenant, the price of the investment when weighed against the yield and the possibility of changes to interest rates.

The Director – Finance and Corporate Services said that Cushman & Wakefield were satisfied that the price was reasonable given the credit rating of the tenant, the term remaining on the lease and the location,  and he said that the investment should be considered when looking at the Portfolio as a whole.

The Independent Member supported the purchase of this type of unit provided that it was for no more than the stated price of £55,000,000. There was no dissent and it was:

AGREED to recommend to Cabinet that:

a.    The purchase as set out in this report is agreed up to the sum of £60,000,000; and

b.    The funding should be split 80% interest only and 20% repayment funding.

c.    The purchase costs of £3,627,500 as set out in paragraph 27 are capitalised.

d.    The purchase is made as a direct investment by Uttlesford District Council.

Councillor Bagnall gave his apologies and left the meeting at 6.05pm.