Purpose

To note the strategy for investment assets
located outside of the borough boundaries and endorse recommended
actions

Decision

RESOLVED that
 

i.      
The findings of the review of the out of Borough Investment
properties are noted.
 

ii.    
the recommendations to manage the portfolio to support the
Council’s long term financial position are approved.
 

iii.   
that any plans for out of borough asset disposal will come back to
Cabinet for approval.

Reasons for the decision

i.      
The Council adopted a Commercial Property Investment Strategy
(CPIS) in November 2016 as part of an agreed transformation
programme that set out to achieve recurring revenue savings of
around £12m. Within this, the aim of the CPIS was to secure
an additional £3m of revenue income to support core services
through the purchase of commercial assets. Sums of £20m per
year were initially included within the capital programme to
support this objective. Subsequently the Council agreed to make
available up to an additional £30m, recognising that this
would be needed to achieve the targeted additional income after
financing costs were factored in. It should be noted that local
authorities do not borrow for specific capital proposals and
therefore capital financing costs attributed to these purchases was
only for illustrative purposes.
 

ii.    
Six investment assets were purchased at an overall cost of
£86.6m. All potential purchases were assessed against
criteria including tenancy strength, length of lease, building age
and quality and location. The assets are commercial, across diverse
sectors and are located outside of the boundaries of Bracknell
Forest in locations across England. These assets were specifically
purchased to improve the council’s financial resilience and
are not used for operational or corporate functions of the council.
The assets are performance managed to ensure that they provide the
maximum return to the council. The target £3m additional
income (net of indicative capital financing costs) was first
achieved in 2019/20 and has been increasing since, due to scheduled
rent reviews, with over £28m income realised from this
strategy. All tenancies are full repairing leases, meaning that the
Council has not had to fund any capital repairs since the
properties were purchased.
 

iii.   
Since these properties were acquired, the Government has tightened
the capital financing rules for local authorities. Commercial
investment in property is now only permitted for local economic
development or regeneration purposes.
 

iv.   
The portfolio of six assets can therefore be held for revenue
streams or sold at the most appropriate and financially
advantageous time. The proceeds of sale cannot be reinvested to
expand this portfolio.
 

v.    
Overview of the Commercial Property Investment held outside the
boundaries of the borough.
 

·      
The six assets in the portfolio are geographically diverse as they
are located across southern and northern England. All assets are
commercial and include office, out of town retail and logistics
warehousing uses.

·      
The office and business sector has performed least well, primarily
impacted by post Covid flexible working patterns and the demand for
HQ office accommodation being driven by the “flight to
quality” including improved energy performance.

·      
The market performance of the assets owned for warehouse logistics
uses is improved.

·      
Retail sectors have suffered in recent years but out – of -
town retail often out – performs the high street retail
sector generally.
 

vi.   
As well as general market performance, there are a number of other
threats to the revenue from the portfolio centred on expiry of the
current leases to each of the tenants occupying each of the assets.
If the council were to take no action to secure future revenue
streams, then by 2031 the revenue would be greatly diminished.
 

vii.  
It is, therefore, imperative that the council has a strategy to
ensure that its revenue streams from its out of borough investment
assets are maintained and at the highest rental value possible by
setting asset management objectives for each asset and prioritising
actions to be taken in each financial year. This corresponds with
the council’s adopted Asset Management Strategy 2025-2030
where these assets are defined as “Resilience Enablers”
(referenced in section 6.4 non-operational assets: Driving income
and impact (see supporting information)).
 

viii.The strategy for
the commercial “out of borough” investment property
assets as “resilience enablers” is to:
 
i. Secure income streams and/ or capital growth
ii. Dispose of each
asset for optimum capital receipt.
 
The strategy also
confirms that the assets will be managed corporately in
collaboration with
the corporate finance function of the council with support and
analysis from external investment asset specialists.
 

ix.   
In 2025, the council engaged external investment asset specialists
to provide a strategic overview with recommendations for future
asset management activity to maintain and improve income streams
and further recommendations on the need for tenancy “re
– gearing” and future disposal.
 

x.    
Following this, in December 2025, Cabinet (16 December 2025)
decided to accept the recommendation that the optimal time for
disposal of one of the assets in the portfolio was now imperative
and that the council should plan for its immediate disposal.
 

xi.   
For each of the remaining five assets an asset management plan has
been developed in alignment with the external advisor’s
report. This suggests a range of options including re-gearing or
renewing some of the leases, and the consideration of asset
disposal at the right point of time, to maximise capital receipts
and ongoing revenue streams.
 

xii.  
Confidential Appendix A Asset Management Plans and Objectives
provides.
 
·      
An overview of the portfolio of commercial investment property
assets
·      
A summary of the asset management plans for each of the assets in
the portfolio.
·      
The asset management activity that will be undertaken to execute
the asset management plans for each of the assets

Alternative options considered

1)   
The alternative options include.
 

i.      
Divest strategy. A strategy to dispose of all assets in the
portfolio. This would result in a realisation of capital and risk
forgoing value added through targeted asset management activity
across the portfolio.
 

ii.    
Hold strategy. without an asset management strategy in place would
result in the minimum asset management activity, reduced and eroded
income over time with a high risk of limited income by 2031.
 

2)   
The council has, as part of its overall asset management strategy,
set targets for other commercial and some residential asset
disposals to maintain levels of flexible use of capital receipts.
The current market conditions result either in applications to
purchase these assets being withdrawn or proceeding at
lower-than-expected values. The view is that these assets would
yield more capital if sold when market conditions improve and
therefore the recommendations for each of the assets in the out of
borough commercial portfolio could reduce the need to dispose of
other commercial and residential assets in less than favourable
market conditions.