Venue: County Hall, Glenfield
Contact: Miss. C. Tuohy (Tel. 0116 305 5483) Email: cat.tuohy@leics.gov.yk
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Minutes: The minutes of the meeting held on 13 October 2021 were taken as read, confirmed and signed. |
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Question Time. Minutes: The Chief Executive reported that no questions had been received under Standing Order 35. |
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Questions asked by members under Standing Order 7(3) and 7(5). Minutes: The Chief Executive reported that *** questions had been received under Standing Order 7(3) and 7(5). |
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To advise of any other items which the Chairman has decided to take as urgent elsewhere on the agenda. Minutes: There were no urgent items for consideration. |
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Declarations of interest in respect of items on the agenda. Minutes: The Chairman invited members who wished to do so to declare any interest in respect of items on the agenda for the meeting. No declarations were made. |
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Strategic Asset Allocation Update and Cash Deployment Plans. PDF 577 KB Representatives from DTZ Investors will be in attendence to deliver a presentation. Additional documents: Minutes: The Subcommittee considered a report by the
Director of Corporate Resources which provided members with information in respect
of cash deployment plans and an update on the strategic asset allocation. A
copy of the report is filed with these minutes marked ‘Agenda Item 7‘ The Subcommittee noted that as at 31 March 2022 the Fund held £116million in cash, 2.0% of
the Fund’s total assets as a result of the Fund’s positive cashflow nature and
previous investment returns. The Fund aimed to keep its cash holding as low as
possible, and keep the Fund fully invested in line with the Strategic Asset
Allocation, to that end the Fund would continue to deploy its funds to
underweight areas. Arising from queries raised the following
points were noted:-
i. The lag of committed funds being invested
varied between asset classes; for example, Private Equity commitments could
take up to four years to be fully invested.
Members were assured that where a manager did not deploy capital in the
specified investment period, capital would be returned to the Fund. Where the
Fund felt uncomfortable within the investment period there was little scope to act, unless the Manager breached its mandate restrictions
and/or contractual terms. Members noted it was for that reason it was key to
undertake due diligence on potential managers, especially in relation to
closed-ended funds.
ii. The mandate characteristics for LGPS
Central’s UK direct property mandate, for which DTZ was appointed, included a
restriction that the void rate should not exceed 10%. Given DTZ could not
prevent tenants from not renewing their lease, the restriction signalled that
the manager needed to act as quickly as possible to reduce the void rate, where
it occurred. [At this point representatives from DTZ
Investors and LGPS Central joined the meeting] The Subcommittee received a presentation by
representatives from DTZ. A copy of the presentation is also filed with these
minutes. Arising from question and answers the following points were noted:-
iii. DTZ Investors had set a Net Zero Carbon date
for its portfolio of 2040, and integrated responsible investment (RI)
principals throughout its culture and asset improvement plans. It would
continue to work with funds on delivering an effective RI programme.
iv. In response to a question on how tenants
engaged DTZ shared positive examples such as the Printworks in Manchester which
following its asset improvement plan won an international Green Apple Award for
businesses that demonstrated environmental best practice. In other cases, it
was recognised tenants could be slower engage, however once tenants understood
the value that could be gained, they welcomed and collaborated with DTZ as a
responsible landlord.
v. DTZ set out their different approaches to
asset improvement plans. For warehouse and industrial sites, DTZ would request
energy, water and waste data and then identify changes or improvements that
could be made, such as on-site renewables, transport plans and increasing
energy efficiency ratings. Other improvements aimed at positive social change
could involve the addition of green space and benches into an industrial
estate.
vi. DTZ explained the four base risks it
considered before acquisition of an asset namely, location, lease, credit, and
asset obsolescence. Members understood it was vital to understand assets prior
to acquisition and be mindful of what risk compounded another.
vii. DTZ focused on sustainable locations with a
view to hold property for the long term, where there was deep occupational
demand and/or high alternative use value, among other key characteristics.
Despite such properties being in high demand DTZ took a measured approach to
acquisition and would not pay excessively. viii. A member queried DTZ in relation to ... view the full minutes text for item 34. |
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Date of Next Meeting - 27 July 2022. Minutes:
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Exclusion of the press and public. The public are likely to be excluded during consideration of
the remaining items in accordance with Section 100(A)(4) of the Local
Government Act 1972 (Exempt Information): Minutes: RESOLVED That under Section 100(A) of the Local Government Act 1972 the
public be excluded from the meeting for the remaining items of business on
the grounds that they involve the likely disclosure of exempt information as
defined in Part 1 of Schedule 12(A) of the Act. |
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Property Portfolio Review and Proposed Investments. Minutes: The Subcommittee considered a report by the Director of
Corporate Resources which provided members with information in respect of the
property portfolio review and proposed investments and the paper and
presentation produced by the Fund’s investment advisors, Hymans Robertson,
which was followed by questions from members. A copy of the briefing note is filed with these minutes marked
‘11’. The note was not for publication by virtue of Paragraphs 3 and 10 of Part
1 of Schedule 12(A) of the Local Government Act 1972. Representatives from Hymans Robertson set out their review of
the Fund’s Property structure, and recommendations that had arisen. It was
noted that Hymans recommended a further review, on the Fund’s indirect global
allocation, be undertaken in 2023. Members welcomed the proposal to increase residential
property weighting in the Fund’s property allocation. [At this point representatives from DTZ
Investors and LGPS Central joined the meeting] The Subcommittee questioned DTZ on its risk appetite and
noted that they were least comfortable taking a locational risk. Members were
assured by their understanding on risk profile and their ability to see
opportunity, not just threat, such as introduction of a multi-let strategy in order to not be reliant on one or minimal retailers. DTZ were active responsible owners that looked through the
property life cycle with its approach to carbon efficiency, energy ratings as
well as flood and other risks. It considered all factors in conjunction with
the cost to reach net zero. DTZ targeted Building Research Establishment Environmental
Assessment Method (BREEAM) certification, however noted there would be nuances
dependant on the asset. In response to a question on the valuation of the Fund’s
Property assets, Members noted that LGPS Central had undertaken a procurement
exercise for a framework for partner funds to utilise in
order to seek an independent valuation. [At this point representatives from DTZ
Investors and LGPS Central left the room] RESOLVED: The Subcommittee
agree: a.
That a £120m commitment to the LGPS Central Direct
UK property fund, be approved, to be split over two years, £60m per financial
year. b.
That transfer of the management of the existing
Colliers UK direct legacy (£113m at 31st
December 2021) assets to DTZ be approved. c.
That movement of the Colliers UK indirect funds
(£18m) to the LaSalle mandate be approved. d.
That the Director of Corporate Resources,
following consultation with the Chairman of the Investment Subcommittee, be
authorised to agree new benchmarks and target objectives for the UK and global
mandate with LaSalle, as detailed in paragraphs 50, 51 and 52 of the report. e.
That subject to d. the Director of Corporate
Resources, following consultation with LaSalle, be authorised to determine the
appropriate time to switch reporting to new benchmarks and a transition plan
that balances the time taken to transition, and fees incurred, noting the
transition will need to be carefully managed over a number of
years. |