The investment arm of two district councils has come under fire for snapping up three more properties – top quality offices and two warehouses – for almost £10.5million during a pandemic.
Earlier this month CIFCO Capital Ltd, wholly owned by Babergh and Mid Suffolk District Councils, purchased two warehouse buildings worth a combined £2.5m in Cosgrove Way, Luton, and a £7.9m office block in Epsom, Surrey.
It means the firm has now spent £70m of the £100m it borrowed from the Public Works Loan Board – funded by taxpayers – on commercial property.
CIFCO plans to spent the remaining £30m by October 2021.
These latest investments have been revealed just days after Babergh leader John Ward warned that the financial impact of coronavirus on councils was “likely to be felt for years to come”.
MORE: From a M&S store to Caffe Nero – Where councils have spent £60m of your money on property so farHowever, he said CIFCO is “weathering the storm” and praised its “careful selection” of properties in balancing risk, adding: “The income we receive from the CIFCO portfolio can already be seen within our districts, enabling us to invest in local regeneration and in meeting the needs of our residents.”
Yet the decision to spend almost £8million on the Horizon House office block – let by long-term tenants Epsom and St Helier NHS Trust – at a time when many employees are working from home has raised eyebrows.
“The big anxiety is where administrative staff are going to be in weeks and months to come and what the split is going to be, between working in offices and from home,” said John Matthissen, Green and Lib Dem spokesman for assets and investments at Mid Suffolk.
“We’d prefer to be propping up the NHS offices than we would something in the financial services sector, but once you’ve said that, that’s as much good as one can say about it.
“We are disappointed and just don’t think the public of Mid Suffolk should be exposed to what is inevitably a speculative investment.”
The Horizon House office block, located next to another of CIFCO’s office properties, Renaissance House, underwent a £3m refurbishment in 2017 which revamped it to a “top specification”.
MORE: Babergh and Mid Suffolk outline coronavirus impact on finances
Suzie Morley, Mid Suffolk’s leader, said CIFCO will bring in much-needed income to help the district recover post-Covid.
“Like all local authorities, we are under unprecedented financial pressure to deliver services to our residents,” she said.
“The aim of our investment through CIFCO is to deliver a source of income for the long term rather than eventually being forced to make reductions to our services.”
Money made in rental income from CIFCO’s 18 properties is paid to the two councils after repayments are made on loans.
Since its launch in 2017, around £3m has been raised in this way.
Babergh and Mid Suffolk councils are not unique in this method - since 2016, councils across the country have poured £7.6billion into everything from retail parks to solar power to counteract squeezed budgets.
In August, this newspaper revealed that CIFCO had been making a multi-million pound loss before Covid.
According to the company’s 2019/20 accounts, losses in retained earnings (money left over after debt and income is repaid to the councils) had reached £8m as of March 31, 2020.
Council chiefs say CIFCO is not immune to Covid-19 pressures, but added that so far, it has collected above-average rents compared to the industry average.
The company said it had received around 70% of rents across the portfolio from April to June.
CIFCO’s 18 properties range from an M&S and Caffe Nero to industrial estates and a hair salon, and are based all across the UK - with just one of them located in Suffolk.
The company has faced criticism in recent years for investing in properties outside of the district, with the furthest locations including Southampton, Epsom, Nottingham and Milton Keynes.
Emily Atack, managing director, previously said investing in different areas helps to diversify the risk - adding that most of the purchases have been in the eastern region.
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