CIFCO’s annual Business Plan is on the agenda for Councillors over the next few weeks, as the property investment company continues to weather the coronavirus storm and to provide Babergh and Mid Suffolk with vital funding to aid the districts’ recovery.
Property investment company CIFCO, which is wholly owned by Babergh and Mid Suffolk District Councils, is presenting its third annual business plan to Councillors, detailing its performance over the last year and its investment strategy for the forthcoming year.
While CIFCO has inevitably felt the impact of Covid-19, its company directors are confident that their rigorous risk management and diverse portfolio has put them in good stead to weather the storm.
Through CIFCO, the Councils have benefitted from £1.633m of net income after costs in 2019/20. This is the equivalent to 10% of the Councils’ annual staff costs or a 13.5% increase in council tax.
Over the last 12 months, CIFCO has acquired two additional properties taking the total number in the portfolio up to 14, located largely in the east of England and balanced across commercial sectors to minimise exposure to any one sector, tenant or location. Throughout the year the CIFCO Board considered almost 80 opportunities, rejecting most, and only progressing those that best meet the investment criteria and most benefit the balance and risk profile of the portfolio as a whole.
CIFCO Capital Ltd was established jointly by Babergh and Mid Suffolk Councils in 2017 to generate income through property investment which is then ploughed back into council services within the districts to offset reductions in funding from central government. Since its launch, almost £3m has been reinvested into council services.
Councillors are now being asked to consider CIFCO’s performance and business plan for 2020/21 which, subject to approval at Full Council meetings in July, will continue to provide a framework and guidance for trading over the next 12 months. Last year the Councils approved the CIFCO fund being increased from £50m to £100m. To date, approximately £60m has been invested by CIFCO. Within this year’s business plan, the timescale within which to invest the remaining £40m has been adjusted from April 2021 to October 2021 due to Covid-19 market impact.
CIFCO chairman Sir Christopher Haworth commented on CIFCO’s performance and the impact of coronavirus on the commercial property market:
“The impact of Covid-19 has been felt up and down the country and while CIFCO is weathering the storm, we are aware of the demands in the current economic climate. We are closely monitoring CIFCO’s performance and while we predict the next quarter to be more challenging, we still expect rents received to exceed any borrowing costs that need to be covered by the councils.
“Our business plan is setting the parameters for investment over the next 12 months meaning we can move swiftly, invest wisely and continue to bring in income for the councils to support service delivery and aid the districts’ recovery post-COVID.”
The CIFCO accounts for the year ending March 31 2020 show a loss of £3.5m which is made up of one-off acquisition costs for the two new assets (including stamp duty and fees) as well as a re-adjustment on the value of the portfolio as whole. This loss would only be realised if the investments were sold in the current market. Despite any fluctuations in the value, these are long terms investments which continue to deliver regular rental income.
Cllr David Busby, cabinet member for assets and investments for Babergh District Council said:
“CIFCO’s performance is providing significant returns to the Council, even in these unprecedented times. As with any investment, there will be initial, one-off costs and over time property values will fluctuate. In the long term, we expect our investment to grow providing a valuable revenue source for the Councils to benefit our residents and businesses.”
Cllr Peter Gould, cabinet member for assets and investments for Mid Suffolk District Council said:
“Like all local authorities, we are under unprecedented financial pressure to deliver services to our residents. The aim of our investment through CIFCO is to deliver a source of income for the long term rather being forced to make reductions to our services.
“The income we receive from the properties in the CIFCO portfolio can already be seen within our districts, enabling us to invest in local regeneration and in meeting the needs of our residents.”
This local regeneration includes building more than 180 new homes across Babergh and Mid Suffolk over the next two years. Work on sites for over 100 homes is due to start this year at sites across Needham Market, Shotley and Brantham, while a further 80 homes are due to be started next year in Stowmarket, Eye and Hadleigh. There is also local investment by Mid Suffolk District Council in Gateway 14, a new mixed-use business park outside Stowmarket which is set to boost local economy by providing up to 2.3 million sq. ft of business, logistics and commercial accommodation over the next 10-15 years.
The plan will first be considered by Joint Overview and Scrutiny Committee on June 22 and then it will go before Full Councils on July 21 and 23. You can view the council papers on our website and watch both council meetings live via the councils’ YouTube account.