Councils to consider CIFCO plans for 2021/22
CIFCO’s annual business plan is on the agenda for councillors over coming weeks, with the property investment company now having brought in more than £5.4m to help fund services and projects for residents in Babergh and Mid Suffolk.
Property investment company CIFCO, which is wholly owned by Babergh and Mid Suffolk District Councils, is presenting its fourth annual business plan to Councillors, detailing its performance over the last year and its strategy for the forthcoming year.
Last year alone, CIFCO brought in £2.29m to be ploughed back into services for local residents, with the net income produced described as “a significant contribution to the Councils’ budgets”.
CIFCO Capital Ltd was established jointly by Babergh and Mid Suffolk Councils in 2017 to generate income through property investment. The properties purchased are as a long-term investment, creating a legacy for future generations, while the income produced from rental return in the meantime can be ploughed back into council services to offset reductions in funding from central government.
In Babergh, CIFCO income has formed part of a 2021/22 budget designed to help the council to meet the medium-term financial challenges presented by the pandemic, help meet its climate change ambition to achieve net zero carbon emissions by 2030 and maintain services for residents and communities.
While in Mid Suffolk, CIFCO income has contributed to a £4m injection to support the district’s recovery – with cross-party working groups developing recommendations for the council’s cabinet over future investment in the district’s local economy, housing, communities and the wellbeing of its residents.
Over the last 12 months, CIFCO completed its £100m acquisition programme, taking the total number of properties in its portfolio up to 21, balanced across a range of commercial uses, including industrial, retail and office space to minimise exposure to any one sector, tenant or location.
In addition to seven new properties acquired over the last 12 months, the acquisition of a new build convenience store in East Anglia is also due to complete later this year. In total, throughout the year the CIFCO Board considered more than 110 opportunities, rejecting most and only progressing those that best met the investment criteria and the balance and risk profile of the portfolio as a whole.
Councillors are now being asked to consider CIFCO’s performance and business plan for 2021/22 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.
CIFCO chairman Sir Christopher Haworth said:
“This year has been an extremely challenging one for all of us, and the pandemic has been difficult for some of our occupiers. Some tenants have been lost and we have worked hard with others, as a responsible landlord, to ensure their continuing ability to trade successfully. Overall, the portfolio has held up well, due to the work of the board and professional team, the quality of the assets and diversity of the portfolio. Rent collection on a quarterly basis has been well above industry norms and the company has continued to make full debt repayment to our shareholders.”
The CIFCO accounts for the year ending March 31, 2021 show a paper loss of £4.4m made up of expected one-off acquisition costs of around £2m (including stamp duty and fees) as well as a re-adjustment on the value of the portfolio as whole. However, this loss would only be realised if the investments were sold in the current market. The rental income the properties deliver is not impacted by these fluctuations in their value.
Although CIFCO tenants have not been immune to the impact of Covid, CIFCO continues to generate more than enough income for Babergh and Mid Suffolk District Councils to cover all borrowing costs, as well as providing additional funds for the councils on top – and this is set to continue over the next year of trading.
However, in order to offset the impact of Covid, CIFCO is looking to manage its debt repayments to the councils so that, if required, it can defer a small proportion of the extra income it generates in order to help cashflow and ensure it is in the best position to support tenants over the next three years as they recover from the economic effects of the pandemic. These deferred repayments will then be paid to the councils together with additional interest at the end of the agreed period.
Cllr David Busby, cabinet member for assets and investments for Babergh District Council, said:
“We have all seen the economic impact that Covid has had on businesses – and, of course, CIFCO’s tenants aren’t immune, but it’s testament to the strength of the portfolio that CIFCO has weathered the storm. The sensible approach proposed for the next 12 months of trading means that despite the pandemic, we can look forward to further vital funding to help offset the financial pressure we are under in delivering services to our residents.”
Cllr Peter Gould, cabinet member for assets and investments for Mid Suffolk 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. But the aim of our investment through CIFCO is to deliver a valuable source of income for the long term, to benefit our residents and communities – and CIFCO is doing exactly that, generating more than £5m so far for our districts.”
The CIFCO business plan will first be considered by Joint Overview and Scrutiny Committee on June 28 and then it will go before Full Councils on July 20 and 22. You can view the council papers on our website and watch both council meetings live via the councils’ YouTube account.
Details of the whole CIFCO portfolio, plus quarterly statistics, can be found on the CIFCO website https://cifcocapital.com/our-portfolio/.