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FAQs

Frequently Asked Questions
Questions Answers
Who owns CIFCO? CIFCO Capital Ltd (CIFCO) is a property investment company established in 2017 and 50% owned by Babergh District Council (BDC) and 50% owned by Mid Suffolk District Council (MSDC).
What is CIFCO's purpose? CIFCO has been set up to generate income from a portfolio of commercial properties and remit as much of that income as possible to its owners. The income from CIFCO is used to pay debt that has been borrowed by CIFCO's owners and the surplus is used to pay for council services.
What is the level of BMSDC Borrowings for CIFCO? Babergh and Mid Suffolk District Council (BMSDC)'s Treasury function runs all the financing for BMSDC on a holistic basis. Details of the CIFCO related borrowing is published annually in the Business Plan report.
What is the interest rate on the CIFCO loan? The current rate of interest on the CIFCO loan is 5% per annum.
What is the period of repayment of the loan? The current CIFCO loans mature between December 2067 and July 2070.
What are the portfolio details? View the Portfolio page.
What are the criteria for Director selection and what is the directors' experience? There are six directors for CIFCO. Three are independent, two are councillors and one is the Assistant Director for Assets and Investments at Babergh and Mid Suffolk District Councils. The independent directors were selected for their experience in commercial property investment and banking. The independent directors' contracts are typically for three years and may be renewed. The contracts expire on different dates for resilience purposes. View full details of the Board.
What Council members and senior officials are on the board? There is one councillor director from Mid Suffolk, and one from Babergh. The Assistant Director for Assets and Investments for Babergh and Mid Suffolk is also on the Board. View full details of the Board.
What is the current value of CIFCO holdings and what is the change since purchase? View the Portfolio page.
What is the date of valuation and details of valuers? The properties are valued annually as at 31 March. View details of the valuers.
What is the book value of the properties? View the Portfolio page.
What is the annual/quarterly net rental income and interest paid? View the Financials page.
What is the source of Council borrowing to invest in CIFCO? Prior to 26 November 2020, the Councils accessed funds from a range of sources including the Public Works Loan Board (PWLB). Following changes to PWLB rules, this funding source is no longer available for investment in CIFCO. Babergh and MSDC have different funding strategies.
Reason for difference between CIFCO income and amount paid to councils? Babergh and Mid Suffolk District Councils have different borrowing strategies and as a consequence have different costs of borrowing, which is why the net benefit to the two Councils differ.
What is the impairment in the accounts Impairment arises from two main sources in the accounts. The costs associated with the original purchase of each property which are typically in the region of 6.75% and impairment can also arise if properties are devalued for any reason.
What evidence relied on to set up CIFCO BMSDC relied on a number of advisors in deciding to set up CIFCO. They employed outside consultants to look into the legality, economics, taxation and risk issues associated with CIFCO. The decision to set up CIFCO was debated fully in Council meetings in November 2016.
Are the council's liabilities limited to the maximum paid up share capital of the company. The councils' liabilities are limited to the maximum paid up share capital of CIFCO Capital Ltd. However, the council is a lender to CIFCO and has risk exposure associated with the loan which is an asset not a liability.
Are there any indemnities and/or guarantees issued by the company, shareholders, BDC/MSDC to any lenders or any other person or entity by means of mortgages or other charges that appear on the charges register held at companies house? CIFCO is funded in part by loans from the two councils. These loans are secured by a charge over the properties owned by CIFCO.
Is there a remuneration committee to set rewards for directors and staff? CIFCO does not have any staff. Director compensation is set by the boards of the two holding companies that form part of the company shareholder governance structure.
Does CIFCO record any conflicts policy? CIFCO has a Conflicts of Interest Policy. Given the nature of the Board, it is likely that conflicts of interest will arise from time to time. CIFCO maintains a Conflicts Register as part of this policy. Directors are required to declare any potential conflict as soon as they are aware of it as well as at the start of each Board meeting. This is audited annually and updated as required.
What is the impact of losses on taxpayers? To date, CIFCO has not realised any losses. The Councils continue to receive income in excess of the costs of their borrowing. This income supports the Councils to deliver services.
What is the measure of risk within the balance sheet and stress testing performed As at the last business plan in July 2020, the Councils' debt repayments equated to approximately 25% of CIFCO's income, demonstrating that in the worst case scenario the portfolio would need to see a reduction in income of over 70% before the Council was unable to repay the debt from CIFCO income.
How is CIFCO's performance monitored and scrutinised? The CIFCO Business Plan and Performance is approved by both Full Councils on an annual basis. The Joint Overview and Scrutiny Committee also review the Business Plan and Performance on an annual basis. In addition, annual financial audits and internal audits are carried out, which look at the company governance and procedures.
Who approves the amount and drawdown of capital for CIFCO's use? The amount of capital available to CIFCO is authorised by Full Councils as part of the Councils' budget setting process and the annual business plan process. CIFCO applies to its holding companies to drawdown any capital required.
What central government legislation applies to these limited companies and officers? The Localism Act 2011 provided local authorities with the powers to undertake any function so long as any commercial function was undertaken within an appropriate company structure. Council owned companies are governed by Company Law in the same way as any private company.
How has CIFCO responded to rent reductions requested during the pandemic? During the COVID pandemic CIFCO has received requests for some form of rent relief. The Government has legislated (Coronavirus Act 2020) that tenants cannot be evicted for rent arrears during the COVID crisis. Each request is analysed based on the specific circumstances. CIFCO has agreed rent reductions in some cases - mostly when the tenant in question has actually gone into administration. CIFCO normally expects to receive some concession in return for this in the form of increasing lease length or some other modification to the lease that is value positive for the property.
What percentage of rent has been collected during the pandemic? Percentage rent collections are as follows: March 2020 - 72%; June 2020- 89%; Sept 2020- 90%
What impact has COVID had on the income to the Councils from CIFCO? CIFCO has met its full debt repayments to the Councils each quarter (March, June, September and December 2020) since the first lockdown.
How will continuing capital losses be funded? Capital losses do not require additional funding to be paid into CIFCO by the shareholders. The capital loss is shown within the accounts to demonstrate the potential loss that could be realised if the assets were sold prior to the costs of acquisition and revaluation being recovered.
Does CIFCO have any insurance against COVID? CIFCO's insurance policies do not cover loss of rent due to a pandemic.
What is the total purchase price of the portfolio including SDLT and fees This can be seen in the annual Company Accounts.
What are the investment criteria? These can be found in the Annual Performance report.

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