Agenda and minutes

There were no disclosable pecuniary interests.

(a)  To agree the minutes from the meeting of Cabinet on 11^th April 2017.

(b)  Matters arising

The minutes of the meeting held on 11^th April 2017 were agreed and signed as a true record.

There were no matters arising.

RESOLVED that the Cabinet agrees to exclude the press and public under Sections 100(A)(4) of the Local Government Act 1972 relating to the private report in minute 8 below headed “Unit 1 Dutton Road, Aldermans Green Industrial Estate, Coventry – Investment Acquisition” on the grounds that the report involves the likely disclosure of information defined in Paragraph 3 of Schedule 12A of the Act, as it contains information relating to the financial affairs of a particular person (including the authority holding that information) and in all circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

Report of the Deputy Chief Executive (Place)

The Cabinet considered a report of the Director of Finance and Corporate Services, which set out the final revenue and capital outturn position for 2016/17 and reviewed treasury management activity and 2016/17 Prudential Indicators under the Prudential Code for Capital Finance.

The Cabinet noted that the Audit and Procurement Committee would also be considering the report at their meeting on 26^th June 2017.

The report indicated that the overall financial position included a revenue overspend of £0.7m, which was required to be funded by a contribution from the Council reserves.  At quarter 3 there had been a projected overspend of £4.8m and the report identified the underlying movements between quarter 3 and outturn which had resulted in an overall underlying net underspend of £4.1m in the final quarter and led to the overall overspend of £0.7m.

The Cabinet were advised that, consistent with the approval of the programme of staffing reductions approved by them in November 2015, £6.7m of costs had been incurred as a result of early retirement and voluntary redundancy decisions.

There had been a Capital Programme expenditure of £71m, which was £52m less than envisaged at the start of the year.  The quarter 3 monitoring report to Cabinet on 21^st February 2017 approved a revised capital budget of £81m for 2016/17.  Since then, there had been a net programme increase of £1.3 giving a final budget for the year of £82.3m.  Since February, a total of £12.5m net rescheduled spending had arisen on directorate capital programmes.  The report provided a scheme by scheme analysis of the rescheduling and accelerated spend.

The report sought retrospective approval for a change to the Capital Programme, reflecting final scheme costs on the completed Whitley Infrastructure, Friargate Bridgedeck and South West Coventry Junction Improvement schemes delivered by Costain.

There was also a reduction in the level of Council revenue reserves from £57m to £51m and an increase in balances held relating to capital grants and capital receipts to fund future projects from £12m to £30m.  Table 2 of the report provided a summary of reserve movements during the year.

In relation to Treasury Management Activity, the report indicated that political uncertainty had been the main driver of the economic landscape during 2016/17.  Uncertainty over the outcome of the US Presidential election and the UK’s future relationship with the EU resulted in significant market volatility during the year.  UK Inflation continued to be subdued in the first half of 2016/17, however, a sharp fall in the Sterling exchange following the EU referendum had an impact on import prices which resulted in inflation rising from 0.3% in April 2016 to 2.3% in March 2017.  Despite this uncertainty, the UK GDP grew steadily during the year and the unemployment rate dropped to 4.7% in February, its lowest level in 11 years.  The fall out from the EU Referendum also caused the Bank of England Base rate to be cut to 0.25% from 0.5%.  Current forecasts expected the base rate to stay at 0.25%  ...  view the full minutes text for item 4.

Report of the Deputy Chief Executive (Place)

The Cabinet considered a report of the Deputy Chief Executive (Place) which set out proposals for the acquisition of an income producing industrial property investment.

A corresponding private report detailing confidential aspects of the proposals was also submitted to the meeting for consideration.

The Council was currently looking at ways of increasing revenue to support the provision of services it seeks to deliver.

An opportunity had been presented to the Council to acquire an income producing investment within one of the City’s established industrial estates.

The investment currently produced an income, the level of which was considered commercially sensitive and was therefore outlined in the corresponding private report.

Personal Hygiene Services Limited (“PHS”), who occupies the premises and pays the rent, was part of a national company with a turnover of £280M in 2015/16. They had approximately 7 years left on their current lease.

The Council already owned the land upon which the building was constructed but granted a lease dated 13th September 1989 for a term of 99 years with effect from 20th May 1989 in respect of the industrial site at Dutton Road, Aldermans Green Industrial Estate, Coventry.  The long leasehold interest, which received the rent from PHS, was currently owned by Real Estate Investors PLC (REI).  REI currently paid the Council an annual ground rent for the land.

Real Estate Investors had indicated a willingness to sell its leasehold interest to the Council, subject to the existing lease to PHS and therefore the right to receive the annual rent for a negotiated price.  Stamp Duty Land Tax would be payable by the Council in addition to the purchase price.

The initial net return on the investment was assessed at circa 8.8% after assumed purchasing costs. This would be reduced to a return of 8.0% based on the net rental increase for the Council as it already received a ground rent from the property.

The level of return generated was based on the level of risk associated with the length of lease and the security of the income. The negotiated price had been validated by external property experts as providing ‘best value’ for the Council.

It was intended that the property would be held by the Council as an investment asset and managed by the Council’s Commercial Property Management. 

RESOLVED that the Cabinet:-

1.  Approve the terms for the acquisition of the leasehold interest in 1 Dutton Road, subject to the current tenancy for the price outlined in the corresponding report plus Stamp Duty Land Tax.

2.  Delegate authority to the Deputy Chief Executive (Place) (Legal Services) to complete the necessary legal documentation.

3.  Delegate authority to the Deputy Chief Executive (Place) in consultation with the Cabinet Member for Jobs and Regeneration, for any subsequent variation in terms.

4.  Recommends that the Council approve the adjustment of the Capital Programme to reflect the capital expenditure incurred in the acquisition of the long leasehold interest in Unit 1, Dutton Road.

Report of the Deputy Chief Executive (Place)

The Cabinet considered a report of the Deputy Chief Executive (Place) that listed an outstanding issue and summarised the current position of the item.

RESOLVED that the Cabinet approves the date for future consideration of the outstanding issue item listed in the report.

There were no other items of public business.

Report of the Deputy Chief Executive (Place)

(Listing Officer: P Beesley, tel: 024 7683 1377)

Further to Minute 5 above, the Cabinet considered a private report of the Deputy Chief Executive (Place) that set out confidential aspects of proposals for the acquisition of an income producing industrial property investment.

RESOLVED that the Cabinet:

1.  Approve the terms for the acquisition of the leasehold interest in 1 Dutton Road subject to the current tenancy for the sum indicated within the report plus Stamp Duty Land Tax.

2.  Delegate authority to the Deputy Chief Executive (Place) (Legal Services) to complete the necessary legal documentation.

3.  Delegate authority to the Deputy Chief Executive (Place) in consultation with the Cabinet Member for Jobs and Regeneration, for any subsequent variation in terms.

4.  Recommend that the Council approve the adjustment of the Capital Programme to reflect the capital expenditure incurred in the acquisition of the long leasehold interest in Unit 1 Dutton Road.

There were no other items of private business.