Council Splurge on Commercial Property Will End in Tears

  1. So Local Authorities Have Been Spending Big Time on Commercial Property?

    Yes, and often not in their own area to promote local growth. Check out the Estates Gazette report at https://www.egi.co.uk/news/rising-council-property-spend-worries-national-audit-office/

  2. How Much Have They Spent?

    It varies, but in the case of Spelthorne, it is nearly £1bln in the last 5 years

  3. HOW MUCH??

    £1,000,000,000, for one small local council in Surrey

  4. How is it funded?

    The Government lends them money at very cheap rates

  5. Why are They Doing It?

    Central funding has been drastically cut since 2011 and they are hoping to generate extra income to cover their obligations

  6. Is it part of a wider investment drive using modern portfolio theory to spread their money across many different types of assets such as stocks, bonds and so on, to minimise risk and maximise returns on some kind of efficient frontier?

    No, they seem to be focussing on just commercial property with no diversification into other investment categories.

  7. Have they appointed experienced investment managers?

    Not as far as we are aware.

  8. It’s been quite a bull-run in property prices. Have they bought near to the top of the market?

    Probably

  9. Shouldn’t they have focussed on buying residential property to rent to homeless people in their parish?

    This would have directly benefited the inhabitants of Spelthorne, whilst still providing an income.

  10. To Buy Properties, the Council Has to Pay More Than Anyone Else Thinks it is Worth

    Yes

  11. Do you think that all this is awfully wise?

    No

  12. Will it all end in tears if there is a setback in the commercial property market?

    Yes it will. The commercial property market can bite back extremely viciously and a newbie council could easily have half of their (borrowed) money wiped out.

  13. Will this writer Be Able To resist Writing “Told You So” When it Happens?

    Not a chance!!!

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