Council investment firm eyes plans to borrow further £50m for property purchase
PUBLISHED: 11:57 17 January 2019
A council-owned investment company which has come under fire for acquiring retail sites outside of Suffolk could be set to borrow another £50million to pump into more property.
CIFCO Capital Ltd was formed by Babergh and Mid Suffolk District Councils as a means of investing in properties such as warehouses and industrial estates, office blocks and retail.
The two councils both invested £25m by the end of 2018, which is expected to generate around £2.8m a year income for the councils that would protect frontline services from being cut.
First draft budget proposals unveiled by the two authorities have revealed plans to borrow another £25m each for CIFCO to invest.
Concerns had previously been raised that investing in retail firms, such as the building occupied by Caffe Nero and Wagamama in Peterborough and the Marks and Spencer store in Brentwood, was risky given the volatile nature of the industry.
Critics pointed to the likes of BHS, Debenhams and House of Fraser as signs of the risk.
But investment bosses said that having a broad commercial property portfolio brought in income that was financing investment and regeneration projects such as the Hamilton Road quarter in Sudbury and the former Aldi store in Stowmarket, and a mix of retail and commercial helped spread the risk.
Emily Atack, assistant director of assets and investments at the two councils, said: “When they [investment board] are making the decision they are very much looking at that balance, and it is right for the portfolio to have retail as part of a balanced portfolio.
“We are looking at properties that are in the right place that are strong properties in their own right.
“To mitigate the risk we need to have a balanced portfolio.”
The councils said they recognised concerns that all but one acquisition to date had been made outside of Suffolk, and said the rural nature of the county meant opportunities were limited compared to larger urban areas.
Chief executive of the two authorities, Arthur Charvonia, added that all investments carried a certain degree of risk, but not investing at all would leave the council financially worse off and having to cut key services.
But the opposition Green group at Mid Suffolk said it was a riskier proposition than investing in residential property.
Councillor Andrew Stringer said: “Investing in new local housing, we would have less risk, more certain income, and no need for an increase in council tax.
“A Green-led council would be borrowing less but investing more, financing local housing that would deliver not only those much needed homes but also income for the council.
“By building homes for sale, the same money could fund successive developments where they are needed, and contribute to meeting our housing land target.”
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