Swindon council would consider buying warehouses for investment

Members of the council’s ruling Labour cabinet have approved the capital programme for spending for the next financial year, and as part of that they have also approved a new acquisition and investment strategy – which sets out the criteria for buying any property purely as an investment, rather than for use by the authority.

The council owns properties in Swindon and just one outside the borough – Lysander House, an office block at Cribbs Causeway shopping complex in Bristol currently valued at £6.7m

“Recognising the financial challenges faced by the council faces, we need to ensure that we are getting best value out of how we use our assets.

“Future service delivery requirements and the assets needed to support this activity will be reviewed to ensure the right assets are available. This will involve considering the benefit of retaining property and the rent it generates to support the delivery of services, compared to the potential capital receipt it could generate if sold, and the benefit this could realise.”

The strategy says that with the council’s budget being stretched very tight borrowing to buy a new investment property is unlikely, but should an exceptional property come on to the market that meets the strategy’s criteria, it might think again.

The criteria include that the building be within Swindon borough because the strategy says an investment in the borough “would deliver other social, economic and environmental benefits”.

The strategy says the council would consider an industrial building or “essential retail warehouse”.

The target price would be between £2 million to £10 million.

In the section about how much money it would want to get in rent, the strategy is cautious. It says: “Treat over-rented buildings with care. Target yield: To meet the criteria outlined the likely yield range will be seven per cent to eight per cent. Yields above this will be subject to careful risk scrutiny and will be within the Swindon boundaries. Yields below this will be considered on their merits."

That means the council would be expecting to receive between £12,000 - £14,000 to £60,000 - £70,000 a year, depending on the size of the initial investment.

The strategy also discusses disposal of properties and says: “Properties that are likely to need significant capital expenditure to maintain the current income stream should be considered for disposal where the business case for that expenditure does not generate a suitable level of return on the required investment."

“Properties would be considered for sale where the investment portfolio shows an unacceptable imbalance,” and “properties would be considered for sale where other significant social, economic or environmental benefits are realised in addition to the sale price”.