Spelthorne and North Somerset reveal appetite for commercial property remains strong
0Two local authorities have made major investments in commercial properties within their municipal boundaries.
Spelthorne Borough Council has used £11.6m of Public Works Loan Board (PWLB) borrowing to purchase an office block in Staines-upon-Thames.
Meanwhile, North Somerset Council has reached a deal to lease, and eventually acquire, a shopping centre in the heart of Weston-Super-Mare.
Spelthorne, which previously made the largest commercial property investment by a local authority on record, has bought Communications House, a five storey block in the centre of Staines.
Prior to purchase the building was refurbished to grade A status and currently houses a range of tenants.
The council would not reveal the yield on the property, citing commercial confidentiality.
Meanwhile, North Somerset has reached a deal with institutional investor Legal & General over the Sovereign Shopping Centre.
The centre has been purchased on behalf of Legal & General’s LPI (Limited Price Inflation) Income Property Fund (the fund) for £21m.
The fund will lease the centre to the council for a term of 35 years, at which point the ownership will revert in full to the local authority.
The starting rent from the council to the fund will be £717,696 a year, rising with inflation and capped at 4%.
David Pasley, North Somerset’s executive member with responsibility for asset management, said: “This is a bold and innovative decision that will allow us to generate a significant annual income.
“In the face of diminishing government funding and cutbacks, we have to take big steps to replace the funding we depend upon to continue essential public services.
“As the traditional high street continues to change, the council is making a major commitment of confidence in our local economy, community and business sectors.”
He said the council would explore initiatives such as encouraging local independent shops to take place and seeing whether non-retail businesses could operate from units in the mall.
The centre extends to 11,000m², comprising 32 retail units, four kiosks and a food court.
The deal also includes a further 1,000m² across six retail units located on the High Street.
In addition, the centre includes an 876 space multi-storey car park, forming a large part of the town’s parking provision.
Pete Gladwell, head of public sector partnerships at L&G, said: “By partnering with a progressive and proactive council, we can enable the regeneration of necessary retail provision for the area, deliver them sizeable revenue surpluses, and act as a catalyst for their plans for wider regeneration, boosting local jobs, homes, and driving economic growth.”
Spelthorne’s borrowing was part of a total of £250m borrowed by councils from the PWLB during July.
Worcestershire County Council and Slough Borough Council both took £50m each during the month.
Worcestershire said it would use its cash to refinance and support its capital programme.
