Essex County Council pulls back from property investments after increased risk in property markets

Politics / Mon 5th Nov 2018 at 06:21pm

Essex: County Council has decided to pull back from property investments after increased risk in the property markets

By Local Democracy Reporter
Piers Meyler

IN the past financial year Essex has launched a Property Investment fund of £50m, with the first purchase of a Grade A office block for £11.1m, generating a “significant financial return” for the council.

However the Chartered Institute of Public Finance and Accountancy has raised its concerns over councils in England putting public funds at “unnecessary or unquantified risk” when borrowing to invest in commercial property.

Speaking at an ECC meeting last week, Councillor Malcolm Buckley echoed those suggestions that local authorities, including Essex, were investing in commercial properties disproportionately to their resources.

He said: “I recognise the investments we have made are high yielding but given reports in the financial media relating in particular to retail investment it does appear the only buyers for retail investment are local authorities making investments similar to what Essex has done.

“Given the preponderance of CVAs and the demise of organisations I’m questioning whether it is an an appropriate risk to put money in retail – that’s not to say we shouldn’t be investing in other areas.”

Nicole Wood, Director Finance and Procurement at Essex County Council, said: “We approved at cabinet a spread of portfolio so we are not allowed to over invest in a particular sector.

“But we don’t disagree with that – the risk profile has changed and when we went to cabinet we got approval for a first tranche investment of £50m.

“At this point we are not pursuing further investment because the market and yields have moved slightly.

“However we have also created a reserve to put 50 per cent of all the net proceeds from our property income stream. So we have built into the balance some resilience should there be downturn.

“The insight we have got is that retail maybe is more difficult looking ahead but we have put appropriate provision to manage that risk.”

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