City council agrees to create property investment arm
Birmingham City Council has agreed plans to create a new property investment body with the aim of generating additional capital receipts for the local authority.
The new body, which will be a wholly-owned company (WOC) within the council’s control, will enable the council to acquire, lease and dispose of property assets to generate revenue for the authority.
The council is implementing the special purpose vehicle as part of a wider strategy to commercialise certain operations to capitalise on assets.
In approving the new body, the city’s cabinet has also authorised the transfer to the WOC of the Crowne Plaza and Hilton Metropole hotels at the NEC. Both properties are currently on the market.
Cllr Majid Mahmood, cabinet member for Value for Money and Efficiency, said that as a city, Birmingham would be in a far stronger position for having a special purpose vehicle that allowed it to split assets and retain the future capital receipts.
He said it did not take a commercial property expert to realise that the location of the hotels right next to the NEC and Resorts World complex, to say nothing of Birmingham Airport and the massive infrastructure investment set to be delivered as part of HS2, made them very attractive propositions to investors.
“In the long-term, a commercial investment approach will provide the council with a sustainable and generating revenue stream,” he said.
The confidential aspect of the cabinet report set out the business case for disposing of property assets to the wholly-owned company. The intention is that net proceeds from the disposal of assets will contribute to the council’s aims of achieving tough budget targets.
The public report stated: “The development of a commercial investment strategy (is) anticipated to generate the council a sustainable and increasing revenue stream and will require the council to utilise prudential borrowing to fund further investments.”
The capital receipts expected from the sale of hotels were factored into the council’s 2017 financial plan and Cllr Mahmood said that if these failed to materialise then the council would be left with a “significant shortfall” in its budget plans.
