CIFCO Capital
The government has reduced the amount of money it gives to local government.
Babergh and Mid Suffolk District Councils have established a company named CIFCO Capital. The purpose is to generate a second source of income, rather than cut council services.
The Councils borrow up to £100m. This is either on a short-term basis or from the Public Works Loan Board. They loan this money to CIFCO, at market rates, to invest in commercial properties. These properties help to secure the loans. If CIFCO were to default on its loans, property ownership would revert to the Councils.
CIFCO's Board has two councillor directors, one officer director and three non-executive directors. The directors have relevant sector expertise. Professional property agents, lawyers, fund managers and managing agents also provide advice.
The Councils review the business plan each year. The aim is to create a diverse portfolio. The amount of money invested in any single market, sector or tenant is small. And the focus is on secure, longer term leases for properties. These things reduce the amount of risk.
The Councils had decided to establish an initial fund limit for CIFCO of £50m. This was to establish a cost-effective company structure and balanced portfolio. Since 2017, CIFCO has generated net income (after borrowing costs) of £4.5m for the Councils.
Due to this success, the Councils have now agreed to increase the fund up to the full £100m. It is forecast that net income will be £8.9m over the next four years, as a result.
The Councils are also continuing regeneration-based investments. This includes leisure centre improvements, and retail, leisure and industrial estate developments. It also includes the programme of house building. This is a commitment for Babergh of £86m, and for Mid Suffolk of £81m, over the next 4 years.