Post by Bartonite on Jul 22, 2017 11:01:35 GMT
...or Citizen spelling disaster, at least.
This needs recording for posterity...
'One of the most reckless things I've ever seen this council do' - Gloucester's opposition in uproar at colossal £80m property loan
The council is to plough ahead with borrowing £80million from the bank to invest in property.
The move is despite fears the “gamble” could potentially bankrupt the authority – and force tax-payers to foot the bill.
The authority is to embark on an ambitious programme of investment across the UK with the aim of making more than half a million pounds in profit from rent, if it can pay off £3.25m loan interest a year.
Despite refusal to back the plan from labour and the Lib Dems, the ruling Conservative party pushed through the move.
The authority hopes the plan can help fill a £2.6million black hole in the council’s accounts by 2022 as it claims it cannot cut council services anymore.
But Liberal Democrat leader councillor Jeremy Hilton (Kingsholm) said this “speculation” could potentially bankrupt the council if it did not go to plan.
“This is one of the most reckless things I have seen this council do. If you get this wrong you could bankrupt us.
“I think they forget not so long ago selling our housing stock to Gloucester City Homes for £65million to clear a debt because it couldn’t borrow anymore.
“Now they want to borrow £15m more than that.
“This is really really dangerous. This is going to cost hundreds and thousands in interest.
“If there is a drop in the yield expected this will put us in the red and risk tax payer’s money. This is a risky gamble and I am not confident they know what they are doing.”
In the report given to full council on Thursday, it estimates the £80.25m loan, which includes £5.25million in buying fees, will give them a return of £4.3million from rent a year.
After paying back the annual loan interest bill of £3.25million and other costs it expects to make £711,493 a year profit from the move.
But while councillor David Norman MBE, cabinet member for performance and resources, said they would not necessarily spend all of the money, according to its own calculations it would have to do so to fill the £2.6m gap in its accounts by 2020.
What Gloucester City Council intends to buy with its £80m
Overall the portfolio will have a target balanced portfolio yield of 5.75%Individual lot sizes of up to £20m will be considered
Larger lot sizes will be favoured
The council is investing to hold. It is not looking to actively trade commercial property
It’s spreading the risk by buying properties across the range of different property asset classes, namely retail, leisure, office, industrial and potentially residential
In order to not over expose the council to one particular geography, properties outside of the council’s area will be favoured initially
It is not aiming to regenerate Gloucester with this money but simply make decent returns on its investment
As the portfolio gets larger, a mix of locations will be sought to create a balanced portfolio
Good, commercially strong locations to protect capital value and ensure ongoing occupier demand. E.g. for retail good out-of-town retail clusters/parks; for offices close to transport infrastructure and catchment for employees; for industrial close to major road / rail hubs
No ‘Sin’ assets – anything which could be deemed as likely to bring the Council into disrepute or potential conflict, e.g. gambling, alcohol, political or religious buildings
As the portfolio gets larger, a mix of tenants will be sought to create a balanced portfolio
A maximum exposure of 15 per cent to one tenant will be sought once the full investment budget is exhausted
But financial experts have urged caution with the move as the uncertainly over the market in coming years due to Brexit.
Defending the proposal, councillor David Organ (Con, Tuffley) said it was better than doing nothing.
“I have been in property most of my life and in development terms this is very little. It does not by us very much,” he said.
“We need to have a look at what is available and what opportunities there are.
“They are absolutely right about the risks. But what we must not do is just look at the negatives but look at the positives too.
“The questions is do we do nothing and set on our hands or do we look at all the options that area available to us?”
However councillor Tom Coole (Lab, Matson) likened the move to gambling with public money.
“This is very alarming to me. What happens when this bubble bursts? The tax-payer will have to pick up the bill,” he said.
“I mean, what’s next? Will we put our money into shares? Will councillor Norman go down to Paddy Power and spend our money there?
“There’s a better way to do this. We need better funding from the Government.”
A property investment board is also to be set up to manage the decisions which will include two council officers and two elected councillors.
But only acquisitions of more than £15million will come before the council to be agreed on.
The council will also hire a property agent to make the best possible negotiations during buying attempts.
----------------------------------------------------------
We shouldn't kid ourselves that this wasn't flagged up nearly a month go, though:
Gloucester City Council borrowing £80million to buy properties - but experts warn risk of losing tax-payer money during Brexit
This needs recording for posterity...
'One of the most reckless things I've ever seen this council do' - Gloucester's opposition in uproar at colossal £80m property loan
The council is to plough ahead with borrowing £80million from the bank to invest in property.
The move is despite fears the “gamble” could potentially bankrupt the authority – and force tax-payers to foot the bill.
The authority is to embark on an ambitious programme of investment across the UK with the aim of making more than half a million pounds in profit from rent, if it can pay off £3.25m loan interest a year.
Despite refusal to back the plan from labour and the Lib Dems, the ruling Conservative party pushed through the move.
The authority hopes the plan can help fill a £2.6million black hole in the council’s accounts by 2022 as it claims it cannot cut council services anymore.
But Liberal Democrat leader councillor Jeremy Hilton (Kingsholm) said this “speculation” could potentially bankrupt the council if it did not go to plan.
“This is one of the most reckless things I have seen this council do. If you get this wrong you could bankrupt us.
“I think they forget not so long ago selling our housing stock to Gloucester City Homes for £65million to clear a debt because it couldn’t borrow anymore.
“Now they want to borrow £15m more than that.
“This is really really dangerous. This is going to cost hundreds and thousands in interest.
“If there is a drop in the yield expected this will put us in the red and risk tax payer’s money. This is a risky gamble and I am not confident they know what they are doing.”
In the report given to full council on Thursday, it estimates the £80.25m loan, which includes £5.25million in buying fees, will give them a return of £4.3million from rent a year.
After paying back the annual loan interest bill of £3.25million and other costs it expects to make £711,493 a year profit from the move.
But while councillor David Norman MBE, cabinet member for performance and resources, said they would not necessarily spend all of the money, according to its own calculations it would have to do so to fill the £2.6m gap in its accounts by 2020.
What Gloucester City Council intends to buy with its £80m
Overall the portfolio will have a target balanced portfolio yield of 5.75%Individual lot sizes of up to £20m will be considered
Larger lot sizes will be favoured
The council is investing to hold. It is not looking to actively trade commercial property
It’s spreading the risk by buying properties across the range of different property asset classes, namely retail, leisure, office, industrial and potentially residential
In order to not over expose the council to one particular geography, properties outside of the council’s area will be favoured initially
It is not aiming to regenerate Gloucester with this money but simply make decent returns on its investment
As the portfolio gets larger, a mix of locations will be sought to create a balanced portfolio
Good, commercially strong locations to protect capital value and ensure ongoing occupier demand. E.g. for retail good out-of-town retail clusters/parks; for offices close to transport infrastructure and catchment for employees; for industrial close to major road / rail hubs
No ‘Sin’ assets – anything which could be deemed as likely to bring the Council into disrepute or potential conflict, e.g. gambling, alcohol, political or religious buildings
As the portfolio gets larger, a mix of tenants will be sought to create a balanced portfolio
A maximum exposure of 15 per cent to one tenant will be sought once the full investment budget is exhausted
But financial experts have urged caution with the move as the uncertainly over the market in coming years due to Brexit.
Defending the proposal, councillor David Organ (Con, Tuffley) said it was better than doing nothing.
“I have been in property most of my life and in development terms this is very little. It does not by us very much,” he said.
“We need to have a look at what is available and what opportunities there are.
“They are absolutely right about the risks. But what we must not do is just look at the negatives but look at the positives too.
“The questions is do we do nothing and set on our hands or do we look at all the options that area available to us?”
However councillor Tom Coole (Lab, Matson) likened the move to gambling with public money.
“This is very alarming to me. What happens when this bubble bursts? The tax-payer will have to pick up the bill,” he said.
“I mean, what’s next? Will we put our money into shares? Will councillor Norman go down to Paddy Power and spend our money there?
“There’s a better way to do this. We need better funding from the Government.”
A property investment board is also to be set up to manage the decisions which will include two council officers and two elected councillors.
But only acquisitions of more than £15million will come before the council to be agreed on.
The council will also hire a property agent to make the best possible negotiations during buying attempts.
----------------------------------------------------------
We shouldn't kid ourselves that this wasn't flagged up nearly a month go, though:
Gloucester City Council borrowing £80million to buy properties - but experts warn risk of losing tax-payer money during Brexit