Long Term Financial Strategy Asset Management Planning www.mansfield.gov.uk Kate Allsop Executive Mayor
Overall Programme Aim To develop an understanding of the full context within which the Long Term Financial Strategy is delivered. This will further ensure that the content of the Long Term Financial Strategy is supported and embedded across the District Council. www.mansfield.gov.uk Kate Allsop Executive Mayor
Asset Management & Investment Learning Outcomes Understand the principles of sound asset management, specifically 5 Q methodology. Apply this knowledge to create a balanced property portfolio. Ensure delivery of Mansfield’s Investment Strategy is considered when making any key financial decision. www.mansfield.gov.uk Kate Allsop Executive Mayor
MDC, along with many other local authorities, has not been immune from budget pressures and with the financial outlook unlikely to change in the short to medium term, the council needs to find new and innovative ways of creating additional revenue. www.mansfield.gov.uk Kate Allsop Executive Mayor
Context Create a balanced sustainable portfolio Optimise the financial return, both revenue and capital growth. To Identify Savings and/or New Income Streams. www.mansfield.gov.uk Kate Allsop Executive Mayor
Balanced Sustainable Portfolio • Property Sector • UK Property Market • Trends • Property Cycles • Investment Yields • Risk and Reward www.mansfield.gov.uk Kate Allsop Executive Mayor
Content The 5Q Model Background Investment Strategy www.mansfield.gov.uk Kate Allsop Executive Mayor
Fundamentals of Asset Management 5Q Matrix Model 1. Financial 2. Location 3. Building 4. Lease 5. Tenant www.mansfield.gov.uk Kate Allsop Executive Mayor
- Return on Investment (Initial Yield) - Tenure - Vacant Space based on Income/ Occupancy Financial Rate (Multi-let) - Management Per Asset - Asset Value/ Purchase Price - Location (a) Location - Location (b) Quality of Location Relevant to Property Sector www.mansfield.gov.uk Kate Allsop Executive Mayor
- EPC Rating - Property Condition Building - PPW Liability (Estimated Costs) - Future Let ability/ Alternative Use - Unexpired Lease Term - Break Option Lease - Rent Review Structure Tenant - Tenant Covenant Strength www.mansfield.gov.uk Kate Allsop Executive Mayor
5Q Methodology • Consequences of not following the methodology • Risks • Rewards • Potential financial impact www.mansfield.gov.uk Kate Allsop Executive Mayor
Background Property Portfolio Organically Evolved Acquired Properties including Regeneration Projects Limited Investment – Maintenance Rent Roll £5M+ Return Income per annum Commercial Lettable Units Investment strategy to streamline portfolio Commenced New Acquisition Programme www.mansfield.gov.uk Kate Allsop Executive Mayor
Modern Portfolio Acquired: Edinburgh – Travelodge (March 2014) Doncaster Lakeside – Travelodge (June 2015) Clapham – Residential /Offices (Jan 2017) Manchester (Gorton) – Pure Gym (Jan 2015) Glasgow (Baillieston) – VW Group (Feb 2017) New Revenue Income Stream £1.6M per Annum £23.9M Capital Investment (2014 – 2017) www.mansfield.gov.uk Kate Allsop Executive Mayor
Learmonth Travelodge, Edinburgh Cost - £8.23M Rent - £546k pa Rent Review June 2018 to £615K Yield – 7.47% Acquired in March 2014 www.mansfield.gov.uk Kate Allsop Executive Mayor
Pure Gym, Gorton, Manchester Cost: £1.58M Rent: £144k pa Rent Review Sept 2018 £163K Yield: 10.3% Acquired in January 2015 www.mansfield.gov.uk Kate Allsop Executive Mayor
Lakeside Travelodge, Doncaster Cost: £4.8M Rent: £331k pa Yield: 6.87% Acquired in June 2015 Update: Rent increased to £358k pa from Dec 2016 www.mansfield.gov.uk Kate Allsop Executive Mayor
50-52 Bedford Rd, Clapham, London Cost: £5.95M Original Rent: £304k pa Rent review annually – now £330K pa Yield: 5.3%+ Acquisition completed January 2017 www.mansfield.gov.uk Kate Allsop Executive Mayor
Glasgow – VW Group Cost: £2.98M Rent: £156k pa and Rising to £172k pa Oct 2019 Yield: 5.25%+ Acquired Feb 2017 www.mansfield.gov.uk Kate Allsop Executive Mayor
www.mansfield.gov.uk Kate Allsop Executive Mayor
www.mansfield.gov.uk Kate Allsop Executive Mayor
www.mansfield.gov.uk Kate Allsop Executive Mayor
www.mansfield.gov.uk Kate Allsop Executive Mayor
www.mansfield.gov.uk Kate Allsop Executive Mayor
5Q Disposals – Phase 1 – 100% Complete www.mansfield.gov.uk Kate Allsop Executive Mayor
Disposal Considerations… Achieve ‘Best Consideration’ According to Sec.123 LGA Budget Implications Timing of Disposals/Acquisitions Impact on Revenue Stream – Loss of Rent In-ability to Sell Assets at Asset/Capital Value Identify Best Method of Disposal Demand/ Market Appetite Special Purchaser Interest Phased Approach – Not to ‘Flood’ the Market Prepare Property for Sale Resource Management Legal and Property Services www.mansfield.gov.uk Kate Allsop Executive Mayor
Transformation Investment Strategy To invest in commercial property to generate a sustainable income stream, preserve value and add opportunity for capital growth To maintain a low risk profile To generate a gross income yield in excess of 4.5% across the portfolio To manage risk across the portfolio by diversification To prudently invest additional capital of £55M over 4 years Appointment of Lambert Smith Hampton Investment Management www.mansfield.gov.uk Kate Allsop Executive Mayor
New Acquisitions Wickes – Loughton Cost: £6.5M Rent: £335k pa Yield: 5.15% Acquired Oct 2018 www.mansfield.gov.uk Kate Allsop Executive Mayor
Direction of Travel Going Forward… Improved Return from Investments Secure/Sustainable Return Fewer Assets Less Management www.mansfield.gov.uk Kate Allsop Executive Mayor
Review of Physical Assets • Depots • Civic Centre accommodation • Parks and open spaces • Residential development opportunities www.mansfield.gov.uk Kate Allsop Executive Mayor
Summary To do ‘More with Less’ by: Review of underperforming assets Limited Potential for Rental or Capital Growth Disproportionately High Resource Costs. Create a resilient commercial investment portfolio Fewer assets Generate a secure rental income stream with good prospect for long term growth (in rent and capital value) Minimises exposure to risk Minimises management costs/resources www.mansfield.gov.uk Kate Allsop Executive Mayor
Recap Learning Outcomes Understand the principles of sound asset management, specifically 5 Q methodology. Apply this knowledge to create a balanced property portfolio. Ensure delivery of Mansfield’s Investment Strategy is considered when making any key financial decision. www.mansfield.gov.uk Kate Allsop Executive Mayor
Any Questions? www.mansfield.gov.uk Kate Allsop Executive Mayor
Recommend
More recommend
