Agenda item

Border to Coast Update including Real Estate Proposal


Border to Coast’s representatives provided an update which focussed on a detailed presentation in respect of the Partnership’s real estate capabilities and included the following elements:


  • Update on UK proposition.
  • Update on Global proposition.
  • Business Case for Teesside.
  • High-Level Timeline.
  • Conclusion.


A copy of the presentation slides were included at item 7 of the agenda pack for the meeting.


It was highlighted that phase one of BCP’s ambition to create an institutional quality, low-cost Real Estate capability for the Partner Funds and launch UK and Global Funds was complete.  Viability for both UK and Global propositions had been tested and independently validated.   Other soft benefits that were not quantifiable included:


  • Greater market access with dominant, durable assets.
  • Strategic alignment with BCP and the Teesside Pension Fund (TPF) through the consultation process.
  • Institutional investment management team to run it and help TPF invest the property allocation as part of the wider strategic asset allocation.
  • The business case supported the pooling of all assets.
  • Resilience over the long term.
  • If the assets were transferred from Middlesbrough Council’s balance sheet to BCP this would take an element of risk away from the Council.


It was emphasised that this was a long term funding solution and savings would only be realised once money passed into the main fund.  The earliest date identified for savings was 2033.  The bid offer price spread was very similar to other funds at plus 6% minus 1%. 


In relation to costs for potentially re-organising the portfolio, it was stated that all four funds’ current portfolios were similarly aligned, with similar types of assets that were low risk and focussed on income.  Typically, all the assets were fit for purpose and would deliver the kind of returns expected.  However, it was also acknowledged that some of the properties would be too small for a £3.5 billion fund and there would need to be some rotation over time.  Experience suggested that selling assets as two or three-property portfolios would provide a premium return which would cover the cost of reinvestment.


It was clarified that the 7 basis points that would be paid for an External Manager to run the portfolio for a fairly short amount of time was the average cost over 15 years.  The assumption made was that they would be paid 18 basis points, which was what the TPF was currently paying for management of £259 million assets.    Eighteen basis points on potentially £3.5 billion of assets would be a much higher revenue.  It was also highlighted that BCP was a non-profit organisation and therefore did not aim to generate the same revenues, salaries or bonuses as the private sector.


The main difference highlighted by the BCP proposition and the current TPF arrangement with CBRE, was resilience.  The oversight provided by TPF managing CBRE would be internalised at BCP, and that long term resilient management of the Fund would make it more efficient.  The other benefit would be the range of the underlying assets that TPF would be able to access. 


ORDERED that the report was received and noted.

Supporting documents: