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www.mansfield.gov.uk Kate Allsop
Executive Mayor
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
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
www.mansfield.gov.uk Kate Allsop
Executive Mayor
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
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
Cost: £6.5M
Rent: £335k pa
Yield: 5.15%
Acquired Oct 2018
Wickes – Loughton
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?