Careful risk management is helping council property investment company CIFCO Ltd “weather the current storm” with full repayments made for the last quarter and plans in place to support tenants over the weeks and months ahead.
CIFCO made its full repayment to the councils in March, having collected over 70% of the March quarters rent, bringing the total net return to the Councils for 2019/20 to £1.634m up from £1.4m last year.
We are expecting the June quarter to be more challenging, however still expect rents received to exceed any borrowing costs that need to be covered by the councils.
With each of our investments through CIFCO we have taken professional market and legal advice and undertaken a full scrutiny test to mitigate our risks, and ensure our portfolio is balanced between tenants, sectors and locations. It’s thanks to this approach that CIFCO can weather the current storm of COVID-19 and we are confident the portfolio will continue to deliver important income for the councils in future.
In the event of any tenants struggling to pay rent, we would work with them to agree payments over a longer term to mitigate income loss in the short term and ensure the strength of the portfolio over the longer term. COVID-19 is affecting everyone’s finances and CIFCO isn’t immune, but we are confident that the portfolio will continue to deliver important income for the councils in the future.
The councils have also given feedback as part of a government consultation into proposals to stop use of the Public Works Loans Board as a funding source for future investments – there would, however, be other sources of funding open to local authorities to use. The councils have made a case challenging some of the government’s assumptions and championing financially prudent councils who can demonstrate that they have applied the correct levels of governance and diligence in their approach to commercial property investment.
In the meantime, CIFCO’s performance for 2019/20 and proposed business plan for 2020/21 are due to be heard by councillors at Full Council in July and further information will be publicly available then.