CIFCO explained
CIFCO Capital LTD was established in June 2017 with the sole purpose of investing in commercial property to generate a stable source of regular income for its ultimate owners – Babergh and Mid-Suffolk District Councils (BMSDC). This income is spent on providing services within each local authority area. CIFCO is designed to be just one of a range of independent sources of income for BMSDC in an era of decreased central government funding.
CIFCO is funded by loans from BMSDC. CIFCO earns rental income from its commercial property portfolio and uses this to pay interest and capital on its loans. These loan payments are a source of income for each Council, after deducting their own cost of funds.
CIFCO has a council-approved investment strategy designed to build a well-diversified commercial property portfolio that will generate stable income from a broad range of tenants in a range of business sectors. This diversity in geography, tenants and properties is critical to minimising the risk inherent in relying on a commercial property portfolio for income.
CIFCO is managed by a board of directors and engages advisers for key services. The board is composed of two councillor directors (one from each council), the Assistant Director of Assets and Investments for BMSDC, and three independent non-executive directors with significant commercial expertise. One of the non-executive directors is also appointed as chairman of the board. CIFCO also contracts with the following service providers:
- Jones Lang LaSalle - Fund Manager and Acquisitions Adviser
- Birketts LLP - Legal Adviser
- Zurich UK - Corporate Insurer
- MS Amlin - Portfolio Insurer
- Aquilla Insurance Brokers Ltd - Insurance Broker
- Lloyds Bank PLC - Corporate Banking
- Ensors - Accountancy and Audit
- Grant Thornton - Tax and Strategic Finance Advice
- Workman LLP - Property Management
- Knight Frank - Independent Portfolio Valuers
CIFCO has been set up from the outset to deliver stable regular income while minimising risk. It does this by having a robust corporate governance structure, bringing in outside expertise to advise and act in CIFCO’s best interests and having an investment strategy with well diversified portfolio targets.
CIFCO was initially provided with £50 million of capital to invest. As a result of the performance of CIFCO to date, both Councils approved a further tranche of £50 million in capital for CIFCO, meaning that each council has invested £50 million each. The total £100 million has now been invested and it is not expected that the Councils will invest further capital in CIFCO. However, CIFCO will then continue to generate a stable income for the two Councils to spend on local services while continuously optimising the portfolio.
CIFCO’s finances are publicly available. Its audited accounts are available on the website, together with Council reports, as well as other information, summaries and comments from the CIFCO board. CIFCO endeavours to be as transparent as possible but cannot release everything into the public domain, partly for commercial sensitivity reasons and also because of GDPR. For example, a full list of CIFCO tenants and their respective lease/rent commitments cannot be released. There has been a good level of interest in the operation of CIFCO since its inception and a frequently asked questions section has been put together to help to answer queries.
