Like all other local authorities, Bracknell Forest Council is having to look very closely at how it funds its services owing to a significant reduction in government grants in recent years. This includes exploring suitable income generation projects.
One of the income generation projects the council has pursued is investment in commercial property, which was adopted as a way of creating surplus money to reinvest in our services back in 2016.
This strategy is currently generating £2m for the council annually and, with additional investments, it could generate up to £3m by 2019/2020.
Earlier this month, the council's decision making executive was asked to consider investing additional sums of up to £30m in commercial property so that the return is maximised to £3m. The executive agreed this approach at its meeting on Tuesday, 21 November.
Bracknell Forest Council is not unique in developing this type of investment scheme; many other local authorities operate similar schemes.
The council does not invest in any high risk properties and has a careful due diligence process in place for considering which properties to invest in, this includes:
- detailed building condition surveys
- independent RICS valuations
- legal audits
- the financial strength and stability of tenants
- the length of tenancy, which must be at least 10 years
- physical site inspection by trained property experts and market consideration
All of the income generated by the investment strategy is used to directly fund council services for the benefit of local people. The strategy is part of the council's overarching transformation programme to provide more efficient and cost effective services by 2020 - plugging a £25m funding gap and improving services at the same time.
Cllr Peter Heydon, executive member for finance and transformation, said:
Given the financial challenge facing the council, we've been looking at ways of generating income to supplement our reducing levels of government funding. To this end we have been successfully investing in commercial property and this provides around £2m in net revenue for us to fund services for our residents.
In order to see that annual income rise to £3m, the executive looked at increasing our investment in commercial property by up to £30m last week. The additional income this will generate will be used to benefit local residents and the community via the services we are able to provide.
Bracknell Forest Council is not unique in this investment strategy, many other local authorities successfully invest in commercial property and see a healthy return. We always strenuously vet any property that we are considering, the figures must stack up and the risk must be minimised - we will always reject properties that do not meet our strict criteria.