Brighton and Hove City Council are starring down the barrel of a gun when it comes to their UK property portfolio, like many local councils in the UK they have turned to the UK property market for profits to fund shortfalls with vital services.
Brighton and Hove City Council currently have a property portfolio thought to be valued in the region of 1.3 billion GBP, but the portfolio is top heavy and is over reliant on a small number of high-value shops, and unless this is corrected soon, they could be heading for deep water, their own property experts warn.
Brighton and Hove City Council’s investments are too focused on just 15 key city centre retail sites, industry experts Cluttons have advised.
To limit their exposure Brighton and Hove have been told to aquire more property elsewhere in the UK, properties that are not high street properties at risk from rising business rates or online shopping.
The portfolio is 60 per cent retail and 15 per cent office, compared to a traditional portfolio of 40 per cent retail, 40 per cent offices and 20 per cent industrial.
The council’s strategy was also called into question as it seen by many experts with the industry they have invested to heavily in “low quality properties”.
Cluttons told the panel: “The council’s portfolio is very high risk and so investors would require a much higher return in compensation. The council could be sitting on a timebomb.”
A council spokeswoman said there were “complex legal and governance arrangements” to be resolved before councillors could decide whether to set-up a property company or invest outside of the authority’s boundaries.
She added: “Our property portfolio is currently performing well. Its current performance shows that it is performing above comparative benchmarks in the market.
“We’re very aware of the need to diversify and ensure the long-term sustainability of our property portfolio. Our property asset investment strategy, aimed at rebalancing the commercial portfolio over the next five to 10 years, will address this.”
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