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Property investment company CIFCO wins green light for further investment

Property investment CIFCO has been given the green light to continue making investments over the coming year on behalf of two district councils.

Councillors at Mid Suffolk District Council approved CIFCO’s annual business plan at its meeting last Thursday.

It followed approval from Babergh District Council, with which it works jointly, two days earlier.

Mid Suffolk District and Babergh District Council, Endeavour House.
Mid Suffolk District and Babergh District Council, Endeavour House.

CIFCO Capital Ltd was established jointly by Babergh and Mid Suffolk Councils in 2017 to generate income through property investment.

This is then ploughed back into council services within the districts to offset reductions in funding from central government.

Since its launch, almost £3m has been reinvested into council services.

Suzie Morley, leader of Mid Suffolk District Council. Picture by Paul Nixon.
Suzie Morley, leader of Mid Suffolk District Council. Picture by Paul Nixon.

Green party members on both councils criticised further investments as 'irresponsible and ''risky", especially in light of the coronavirus crisis.

A parliamentary committee has also been looking into the practice nationwide amid calls for the practice to be banned.

The committee has been considering whether local government officials have the commercial skills required for such transactions, which have rocketed over the past four years.

CIFCO will now focus on industrial and office space as targets for investment citing a diverse portfolio for enabling it to meet payments to the two councils during the last quarter, in full.

CIFCO chairman Sir Christopher Haworth, said: “The impact of Covid-19 has been felt up and down the country and while CIFCO is not immune, our investment strategy has resulted in better than industry average rent collection at the current time.

"Rents received exceed any borrowing costs that need to be covered by the councils and continue to provide a net income. Our business plan is setting the parameters for investment over the next 12 months meaning we can move swiftly, invest wisely and continue to bring in income for the councils to support service delivery and aid the districts’ recovery post-Covid.”

Councillors heardthe company’s accounts for 2019/20 showed a paper loss of £3.5m, made up of expected acquisition costs, including stamp duty and fees, and a revaluation of the portfolio in March – reflecting the uncertainty of the market during the coronavirus outbreak.

Last year it generated £1.633m of net income for the councils – equivalent to 10 per cent of the councils’ annual staff costs or a 13.5 per cent increase in council tax.

Mid Suffolk District council leader Cllr Suzie Morley, said: “As with any investment, there will be initial, one-off costs and over time property values will fluctuate – but these losses would only be realised if we wanted to sell in the current market.

"We have no plans to do this for as long as they are bringing in valuable, regular income to the council and helping us stave off reductions to our services for residents."

“Our long term goal is to hold a valuable portfolio, producing income and capital growth, as a legacy for future generations. In the meantime, CIFCO is generating income that can already be seen in our districts – enabling us to invest in local regeneration, including social housing and economic growth, and help our region’s recovery.”

Cllr John Ward, leader of Babergh District Council, said: “The company’s performance, despite the coronavirus crisis, shows the resilience of our portfolio – and this is a testament to the board, and also to the value of our overview and scrutiny process.

"It shows that the commitment to further investment that both councils made is the right way forward, allowing further diversification of the portfolio which is continuing to provide steady and much needed income for the benefit of both councils and our residents – ensuring we can continue to provide services without reductions or cuts.”

The company's purchase of a health centre in Nottingham last week, brings the total number of properties in the CIFCO portfolio up to 15, with the majority based in the East of England.

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