Asset Management Planning www.mansfield.gov.uk Kate Allsop - - PowerPoint PPT Presentation

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Kate Allsop Executive Mayor

Long Term Financial Strategy Asset Management Planning

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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.

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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.

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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.

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Context

• Create a balanced sustainable portfolio
• Optimise the financial return, both revenue

and capital growth.

• To Identify Savings and/or New Income

Streams.

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Balanced Sustainable Portfolio

• Property Sector
• UK Property Market
• Trends
• Property Cycles
• Investment Yields
• Risk and Reward

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Content

• The 5Q Model
• Background
• Investment Strategy

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Fundamentals of Asset Management 5Q Matrix Model

• 1. Financial
• 2. Location
• 3. Building
• 4. Lease
• 5. Tenant

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Financial

• Return on Investment (Initial Yield)
• Tenure
• Vacant Space based on Income/ Occupancy

Rate (Multi-let)

• Management Per Asset
• Asset Value/ Purchase Price

Location

• Location (a)
• Location (b) Quality of Location

Relevant to Property Sector

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Building

• EPC Rating
• Property Condition
• PPW Liability (Estimated Costs)
• Future Let ability/ Alternative Use

Lease

• Unexpired Lease Term
• Break Option
• Rent Review Structure

Tenant

• Tenant Covenant Strength

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5Q Methodology

• Consequences of not following the

methodology

• Risks
• Rewards
• Potential financial impact

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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

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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)

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Learmonth Travelodge, Edinburgh

• Cost - £8.23M
• Rent - £546k pa
• Rent Review June 2018

to £615K

• Yield – 7.47%
• Acquired in March 2014

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Pure Gym, Gorton, Manchester

• Cost: £1.58M
• Rent: £144k pa
• Rent Review Sept 2018

£163K

• Yield: 10.3%
• Acquired in January 2015

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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

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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

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Glasgow – VW Group

• Cost: £2.98M
• Rent: £156k pa and

Rising to £172k pa Oct 2019

• Yield: 5.25%+
• Acquired Feb 2017

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Kate Allsop Executive Mayor

www.mansfield.gov.uk

Kate Allsop Executive Mayor

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Kate Allsop Executive Mayor

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Kate Allsop Executive Mayor

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Kate Allsop Executive Mayor

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5Q Disposals – Phase 1 – 100% Complete

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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

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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

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New Acquisitions

• Cost: £6.5M
• Rent: £335k pa
• Yield: 5.15%
• Acquired Oct 2018

Wickes – Loughton

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Direction of Travel Going Forward…

• Improved Return from

Investments

• Secure/Sustainable Return
• Fewer Assets
• Less Management

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Review of Physical Assets

• Depots
• Civic Centre accommodation
• Parks and open spaces
• Residential development opportunities

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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

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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?