NEARLY £50million has been spent by South Somerset council buying up property to fund its front-line services in the future.
South Somerset District Council has been buying up a range of commercial investments, some as far afield as Newport and Milton Keynes.
The return on these investments is being used to fund front-line services as central government grants to local authorities continue to be cut.
The council’s latest investment is the Hasbro warehouse in Newport, which it recently picked up for £2.78million.
The tenth commercial property picked up by the council, the Hasbro unit took spending to £48.995million.
An overall sum of £75million had been allocated to carry out the investment strategy, which was created to fund several regeneration projects along with other public services.
Finance is provided through reserves and internal borrowing - a process through which the local authority can borrow from itself and charge itself interest.
Here’s where the council has been investing your money over the last few years:
- Marks & Spencer, Yeovil (£7.65M): The council’s investment in this property is linked to the company having a long-term lease. Despite Marks & Spencer moving more towards food and home delivery, it has not announced any plans to close its Yeovil store.
- Wilko, Yeovil (£4.23M): The store is covered by a covenant, with Wilko holding the tenancy until 2025. Robert Orrett, the council’s commercial property, land and development manager, told the council in June there were “no indications from Wilko that there is any intention to leave Yeovil”, partially in light the sale of Glovers Walk and the Yeovil Refresh regeneration proposals.
- Residential development of former care home, Marlborough (£4.29M): The council has not divulged the precise location of this former care home, which is being redeveloped into 15 apartments and three new houses. But it said it “should generate a healthy receipt” once construction is finally completed by the end of 2019.
- Battery storage facility, nr Taunton (£9.84M): This facility allows the council to store power and sell it back to the National Grid at peak times. A recent valuation judged the site to be worth more than the costs of setting up the project, with Mr Orrett expecting its value to “have significantly increased” once it is actually up and running.
- Units 1 & 2, Dunball Industrial Estate, Bridgwater (£2.82M): This is the council’s first investment in the industrial property sector, which it described in June as “the best performing sector” in the commercial property market. It is expected to generate a healthy return on investment given its proximity to Junction 23 of the M5 and the ongoing construction of the Hinkley Point C nuclear power station.
- Linden House, Bristol (£2.75M): The council purchased this property in February to take advantage of the “historically low availability” of offices in the central Bristol area. The offices have been occupied by Galliford Try PLC, a major housing developer, since 2007.
- GoCompare offices, Newport (£4.66M): Also known as Imperial House, this was purchased due to its close proximity to Junction 28 of the M4 and was refurbished back in 2013. The council believes the abolition of Severn Bridge tolls will lead to greater trade between south Wales and Bristol, which will lead to more demand for office space and thereby “an upturn in rents locally”.
- Bell House, Milton Keynes (£2.925M): This comprises 10,695 sq ft of “grade A office accommodation” over four floors, and was purchased below the asking price following negotiations. The rent levels are expected to rise in the coming years as a result of the improving transport links in the area, including the new railway line linking Oxford and Cambridge.
- Kondor Ltd business unit, Christchurch (£7.05M): This is an industrial unit currently rented out by Kondor Limited, a marketing and distribution partner for Samsung. SSDC also claimed this lot was purchased "considerably below the market value". The Christchurch Business Park unit, which became the council's ninth property investment, was let at a rent of £531,299 when purchased.
- Hasbro warehouse, Newport (£2.78M): The council’s most recent acquisition is the UK distribution hub for board game giant Hasbro, famous for the likes of Monopoly and My Little Pony. Located on the Reevesland Industrial Estate, it will provide a healthy initial yield – and with Hasbro owning the remainder of the estate, the company is likely to remain in this location in the long run, making this a very secure and reliable investment.
The council also has “a head-lease interest” in a new hotel and retail development – but it has declined to reveal the nature or location of this investment, as well as how much money was involved.
Councillor John Clark, portfolio holder for economic development, said: “The Hasbro warehouse is an excellent value property, providing much needed inexpensive storage space in a market where precious little industrial stock is available.
“We’re also pleased that there is room for rental growth, which will increase the capital value of the property and the rental income to the council in future.
“This investment is the latest success in achieving the commercial strategy for generating income to continue the provision of public services.
“We are pleased to report that our investments to date and projected gross and net returns are all on target.”
The council funds these investments through use of its existing reserves and internal borrowing – meaning it can effectively borrow from itself and charge itself interest, benefitting the taxpayer.
The investments mean the money being used is generating a higher rate of interest than being left in normal bank accounts, with no money being removed from front-line services in the process.
A detailed update on the council’s commercial strategy will be coming before the district executive committee in Yeovil on September 5.
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules hereLast Updated:
Report this comment Cancel