Medway Council is set to dispose of £34.9m worth of assets from its property portfolio in a bid to reduce debt, following capitalisation direction last year.
According to an authority report, 30 non-operational properties have been identified for disposal over the next five years from the council’s £521m property portfolio. Assets earmarked for sale include the Rainham District Shopping Centre, Gillingham Business Park, Gillingham Golf Club and Capstone Farm.
This move comes as Medway Council was granted £14.7m of Exceptional Financial Support (EFS) from the government for the financial year 2024/25 after the authority reported a budget gap of nearly £40m and the prospect of a section 114 issuance.
Medway Council told Room151 that no “explicit decisions” have yet been made regarding the use of capital receipts raised from the asset sales, “however they will be used to reduce debt either by funding the ‘EFS’ directly or to fund capital expenditure which would otherwise be funded from borrowing”.
Councils secure EFS by borrowing from the Public Works Loan Board, though this borrowing comes with an additional 1% premium on the body’s interest rate.
Proceeds from the sale of these assets will also be used to reduce volatility on Medway’s budget, the report added.
Currently, Medway Council is facing a projected budget shortfall of £45m for 2025/26, with a cumulative £140.8m funding gap over the medium term.
The sale of these assets will result in a loss of £1.6m in net rental income, but the report suggested that “this will be more than compensated for by the saving in debt interest”.
“Assets included in the initial list are non-operational and in most cases are currently not generating sufficient returns to cover the cost of borrowing,” a spokesperson from Medway Council said.
The report stated that a second phase of the asset disposal review, which is currently under way, will focus on operational properties. This phase is expected to generate “lower levels of capital receipts and revenue savings” than the first tranche, it added.
Medway Council told Room151 that no decisions have yet been finalised as to the sale of further assets.
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