Spelthorne returns to PWLB for £48m acquisition
0The council behind the largest commercial property deal by a UK local authority has borrowed almost £50m for another major transaction.
Last year, Spelthorne Borough Council borrowed £377.5m from the Public Works Loan Board (PWLB) to finance the purchase of the BP campus in Sunbury-on-Thames.
Now Room151 can reveal that the council has returned to the PWLB for another £48m to fund the purchase of an 8,000 square meter office development at Heathrow Airport.
Terry Collier, deputy chief executive at the council, said that the council would continue to make property purchases to help boost the local economy and raise revenue for the council.
He said: “We are keeping active and looking at opportunities but they need to be appropriate.”
“In terms of our approach, in terms of office sites, we are looking for sites with tenants with a strong covenant, with reasonably long leases lined up or in place.”
Last month, at Room151’s treasury conference, Department for Communities and Local Government permanent secretary Melanie Dawes, said councils need to be careful about the risks involved in property acquisition.
In remarks that some saw as a reference to Spelthorne’s BP campus deal, she said: “People are entitled to know that the decisions being made are proportionate to the size of the council, the size of the income flows and the asset base and balance sheet.”
Speaking to Room151, Collier said: “I noted the permanent secretary’s comments. Overall I thought it was constructive and supportive of the idea of property investment’s role in place-shaping and income generation.
“With regard to proportionality, you need to look at in a rounded viewpoint. We would argue that it is about looking at the risks relating to a particular deal.”
“A large deal isn’t necessarily more risky than several smaller ones.
“What really matters is doing the proper due diligence, understanding the nature and risk of the deal, making sure you have the right professional advice. The bigger the deal the more important it is that you have the best professional advice.”
Separately at last month’s conference, Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, said a review of the prudential code on capital finance for local authorities is set to tighten up the guidance for property investments outside a council’s own area.
Collier said that he had no problem with this approach. “We regard Heathrow as very much part of our economic area,” he said. We have a high proportion of our working population—around 9%—which depends on it, which is higher than other boroughs in the area.”
He added: “From our perspective, the key thing is around understanding the risk. We would have concerns about going to a different part of the country and investing in a retail park.”
Spelthorne bought the World Business Centre 4 building at Heathrow for £47.25m.
IT provider Amadeus has taken up a 15-year lease on the property, but Collier said he was unable to reveal the amount of rental income that will be generated for the council.
