Council 16/12/2014 for Information Agenda Item 17

COUNCIL 16/12/2014 FOR INFORMATION AGENDA ITEM 17

BOROUGH OF POOLE

COUNCIL EFFICIENCY AND EFFECTIVENESS OVERVIEW AND SCRUTINY COMMITTEE

20 NOVEMBER 2014

REVIEW OF THE CORPORATE PROPERTY AND ASSET MANAGEMENT STRATEGY (CPAMS) AND INTRODUCTION OF A CORPORATE PROPERTYINVESTMENTSTRATEGY(CPIS)

PART OF THE PUBLISHED FORWARD PLAN - YES

STATUS – STRATEGIC POLICY

1.0PURPOSE

1.1To review the Corporate Property and Asset Management Action Plan. The revised Action Plan is at Appendix A.

1.2To accept and adopt the proposed Corporate Property Investment Strategy. (Appendix B). The Action Plan and Investment Portfolio analysis for the CPIS is at Appendix C (confidential)

2.0RECOMMENDATION

2.1That Council Efficiency and Effectiveness Overview and Scrutiny Committee note the progress to date and accept the performance review of the Corporate Property and Asset Management Strategy Action Plan is completed for 2014.

2.2That the Council Efficiency and Effectiveness Overview and Scrutiny Committee recommends to Cabinet that the decision in paragraph 2.3 below are taken by Council.

2.3That Council agree to adopt the draft Corporate Property Investment Strategy.

3.0BACKGROUND

3.1On 17th December 2013 Council endorsed and adopted the Corporate Property and Asset Management Strategy (CPAMS). The CPAMS sets out how the council’s assets are to be utilised to deliver the aims and objectives of the Council.

The CPAMS included a performance review and a timetable for its execution.

The Action Plan also indicated that the development of the Investment Property Strategy should be in place in the following Financial Year.

3.2 PERFORMANCE REVIEW

The timetable for the review of the CPAMS is as follows

By Whom / When and Status
Property Steering Group / Half Yearly - Annual review commenced on 18th July and completed on 24th September 2014
Officer Peer Group / Half yearly – Annual review completed on 21 October 2014 (SMT)
Council Efficiency and Effectiveness Overview and Scrutiny Committee / Annually – 20 November 2014

3.3The approach adopted as set out in the CPAMS is to review performance against a set of simple RAG status indicators.

3.4At Appendix A the Action Plan which accompanied the Strategy is provided in an updated format. The majority of Actions are Green meaning they are progressing in accordance with the project plan expectations. Some Actions are now completed.

Five actions are at Amber stage – this means that the project has risks or issues that if not resolved may jeopardise the project. The issues are documented and risks identified with the asset management activity which is required to resolve the issue/ risk.

None of the Actions are considered Red at this time meaning that the issues or risks are preventing delivery.

3.5To put this performance review into context the following are examples of tangible improvements and developments have been delivered for the people of Poole as a result of thisfocussed, comprehensive and effective asset management activity.

First and foremost is the focus on project delivery dictated by statutory responsibility. Accordingly, the assets and asset management activity required fortransferring maintained schools to academy or foundationstatus is the top priority.

• Surplus land and residential properties to support the delivery programme of affordable housing provision. The main development has been at the Former Hamworthy First School where 21 units of Affordable Housing have been delivered and with developments at Terrace Row, Anjou Close there are a further 19 in the pipeline with land for a further 8 units being prepared for transfer in readiness for development.

• Former Adult Social Care offices at Lodge Hill – supporting the delivery of a new school, a community pool and affordable housing provision (circa 50 units)

• Land at Marshes End –capital value realisation and facilitate employment use development.

• Land at Cabot Lane – proposed sale to facilitate the effective use of the Hatch Pond Depot site

• Use of site of a former care home to deliver care strategically across the Borough in response to the impact of the Care Act

• Reduction in leased office accommodation to facilitate the delivery of an office accommodation strategy. Successful lease termination at St John’s House and Crown Offices.

• Collation and interpretation of stock condition surveys to determine priority investment decision making

• Purchase of the former Poole and Bournemouth College site, primarily for potential development of a secondary school.

Specifically, the council has directed its asset management activity and investment portfolio to deliver its aims and objectives. This directly involves properties which form part of the Investment Portfolio of properties.

• Rockley Park – restructure of lease to release circa £2m of capital and facilitate development at Rockley Park in support of the Tourism industry

• Elizabeth House and Dorset House – delivery of care to the elderly and aligning future development with the strategy for delivery of care across the Borough following the introduction of the Care Act.

• Heathlands Care Home – asset at lease end utilised for delivery of a Junior School development.

• Upton Park Farm – renegotiation of Agricultural Tenancy Agreement in support of delivery of a Suitable Alternative Natural Greenspace to support town centre regeneration

3.6The CPAMS does not work in isolation but has strong links to the development of the Housing Strategy, Office Accommodation Strategy, the Strategy for Concessions and the emerging Poole Economic Development Strategy and Beach and Seafront Strategy and Core Strategy; allof these strategies have key links to asset and property investment decisions.

3.7The CPAMSpoints to the need for an Investment Property Strategy as well as understanding the backlog maintenance liabilities through detailed condition surveys of all assets.Condition Survey work has been undertaken and the analysis of that data to inform investment choices is progressing well.

3.8A coherent strategy which identifies strategic investment opportunities, manages the portfolio in terms of tenancy profile as well as growth potential is a framework within which the authority can proceed towards investment in real estate in a structured manner. However, activity of this nature is not new to this authority as it has been continually seeking out investment opportunities with some success.

4.0THE PROPOSED CORPORATE PROPERTY INVESTMENT STRATEGY AND ACTION PLAN

4.1The attached Corporate Property Investment Strategy document is intended to reflect the ambition of the authority to meet one of its key principles of the CPAMS which is:-

“We will encourage innovative and entrepreneurial activities which provide a commercial foundation to developing and embedding an investment strategy.”

4.2As already mentioned in 3.5 above, work to develop the CPIS has not prevented the council putting this principle in place and exploring opportunities.

4.3The council owns an investment portfolio which is relatively small comprising 88 properties with three assets making up the lion’s share of the total income of circa £2.2m p.a.The CPIS outlines how the council can invest in strategic real estate investment opportunities for the benefit of its financial health and/ or improved service delivery.

5.0PURPOSE OF THE STRATEGY AND ACTION PLAN

5.1The primary objective of holding or acquiring investment property is either income generation or capital appreciation, but for a local authority there can be other imperatives such as:-

• Investment property may have the capability to unlock other development potential e.g. utilising the land of the former Heathlands Care Home for a Junior School development or the purchase of the land at Constitution Hill Road to provide an option for the provision of secondary school places.

• To create value through “One Public Sector Estate” principles e.g. the purchase of the Police Station at Gravel Hill and use of Lodge Hill site for a contractors compound and eventual social housing development including the reprovision of a school and a community pool.

• To improve the multiplier effects for the town e.g. the renegotiation of the lease at Rockley Park.

• The Local Authority also stands to gain indirectly through increased Business Rates and Council Tax yield through the support of development opportunities.

5.2The Strategy sets out the council’s principles in regard to its attitude to risk and the rationale for holding, disposing or acquiring a property asset within its investment portfolio

5.3A local authority is in the fortunate position of being able to borrow money at cheaper rates than for the market generally. The CPIS aims to encourage investment for its own sake in order to improve the financial health of the organisation on a purely speculative basis. The strategy identifies the risk profile that best suits the council and criteria that any acquisition should meet in order to maintain the agreed level of risk.

5.4Decisions regarding acquisition in particular need to be taken quickly and the organisation will need to be agile in order to respond to market opportunities. In order to act at pace with the market it might be necessary to rely on the delegated powers of the Chief Executive with detailed reporting to subsequent Council Meetings. Clearly, each investment decision is subjected to a viable business case developed on a case by case basis centred on the protocols identified in the strategy.

5.5The Action Plan indicates the next steps and aspirations of the authority in the next three to four years, starting with ensuring that all investment properties are managed from within Corporate Estates and an analysis and appraisal is undertaken, followed up by the appointment of a investment advisor who can analyse performance and seek out opportunities that meet the agreed performance criteria. In the long term the aspiration might evolve into exploring separate investment company vehicles and joint venture partnerships/developments in order to drive the maximum return for assets.

5.6The appointment of a surveyor familiar with investment appraisal techniques as well as being able to provide an acquisition agency to seek out investments which meet the council’s investment portfolio criteria is integral to the success of the strategy and management of the risk profile. The cost of this will be met through deployment of the income from assets in the Investment Portfolio and be regarded as a cost of holding the investment portfolio of assets.

6.0FINANCIAL IMPLICATIONS

6.1It is well documented that after its staff the next largest resource is land and property. Effective management is a necessity and the Corporate Property and Asset Management Strategy is centred on driving maximum benefit form assets to support the strategic aims and objectives of the council as expressed within its three themes.

6.2Effective asset management continues to be the organisation’s overall goal and with this initial performance review we are demonstrating the organisation’s development and growing maturity in asset management planning.

6.3The wider aspiration to become more enterprising in approach to investment, acquisition and disposal is not a new concept to local authorities in general with certain authorities having pioneered different delivery models. It is acknowledged that there are financial risks that need to be fully appreciated before embarking on making changes to the investment portfolio.

7.0LEGAL IMPLICATIONS

7.1The legal implications of a adopting a CPIS are not specific but in general it is noted that the Local Government Act 1999 places a duty on local authorities to seek continuous improvement in the way in which its functions are exercised. The adoption and performance management and development of the CPAMS has met the specific requirements of the Annual Governance Statement of 2011/2012

7.2Strong governance and agile decision making will be a pre – requisite to competing in the market to purchase the investment opportunities that meet the criteria and performance measures identified.

8.0RISK MANAGEMENT IMPLICATIONS

8.1A risk register is attached to the CPAMS (see updated action plan at Appendix A) The risk register has been updated simultaneously with the Action Plan updates

8.2The risks of investing in property have been documented within the CPIS, Performance management criteria of the investment portfolio, criteria for investment and the future performance of the investment portfolio are key to the delivery of the CPIS.

9.0EQUALITIES IMPLICATIONS

9.1The CPAMS flows from the Corporate Strategy. Its actions are in place to deliver the stated aims and objectives of the council and in so doing the equalities agenda is being met as equality runs through all the principal aims of the council.

10.0SUMMARY AND CONCLUSION

10.1The CPAMS is reaching its first anniversary since adoption and this report provides a performance review of its Action Plan. The review has in the first instance been reviewed byProperty Steering Group and peer groupsreviews and demonstrates how the council’s assets and asset management activity (which is detailed in Part II of the Strategy) are meeting the objectives of the council.

10.2 Maturity in asset management planning can be further achieved through the adoption of a CPIS and a decision to adopt this strategy is now sought from Members.

Report Author

Adam Richens, Head of Financial Services

Telephone: (01202) 633183

e-mail:

Contact Officer

Sarah Varley, Head of Estates

Telephone (01202) 261285

Email:

Background Papers: Council Agenda Item SA1: Corporate Property and Asset Management Strategy Update Report

Date: 17th December 2013

Appendix A RevisedCPAMS Action Plan

Appendix BCorporate Property Investment Strategy

Appendix C(Part III and Part IV) Action Plan and Portfolio Analysis or the Corporate Property Investment Strategy – confidential

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