A Manchester council has spent more than Â£16m buying up commercial property in Preston
A Manchester council spent more than Â£16 million buying two adjacent retail units leased to Currys PC World in Ribbleton.
Details of the purchase in Blackpool Road, made by Trafford Council last December, emerged during research into local authority investments by The Bureau of Investigative Journalism, which has been analysed by the Lancashire Post.
The cost of buying the 3,700 sqm units from Standard Life totalled £16.35m and was reportedly 5.4 per cent – or £882,900 – higher than a valuation just months earlier.
The news that the buyer is a nearby authority comes after the Local Government Chronicle reported how “the practice of councils purchasing property outside their boundaries has attracted particular controversy from outside the sector, with Liberal Democrat leader Sir Vince Cable suggesting councils were ‘gambling’ with public money.”
The number of English councils investing in land or buildings to generate income has doubled in the last two years, with authorities spending billions on commercial property, from supermarkets and hotels to shopping centres and business parks in an attempt to bring in extra revenue in the face of government cuts.
Trafford Council has made cuts of more than £110 million since 2010, but made none this year.
That, said Trafford councillor Sean Anstee earlier this year, was because the council “chose to take pro-growth, commercial and investment decisions”, which he admitted were “sometimes opposed but are now proving their worth by putting the council in a financial position to invest in the priorities residents and businesses have shared with us.”
Trafford Council makes a profit of £280,000-a-year on the Preston units, a spokesman said, with the cash borrowed at a low rate from the Public Works Loans Board, a national government body.
There are no limits to how much councils can borrow and they do not have to prove they can afford it.
While Preston has not made any such investments of its own since 2014, according to figures released under freedom of information laws, South Ribble Council bought seven units on the Momentum Business Park, Bamber Bridge, for almost £590,000.
Finance boss Coun Susan Snape said previously: “The council has had to think of new ways of continuing to deliver the high quality of services residents quite rightly expect.”
The Local Government Association said councils have had little choice but to look for “alternative” sources of funding given government cuts, with the gap between the money councils receive and what they need estimated to rise to £7.8bn by 2025.
The Ministry of Housing, Communities, and Local Government said: “Councils are responsible for managing their own finances and making the right decisions for the communites they serve – including making appropriate investments.”
Trafford Council’s complete statement, attributed to a ‘spokesperson’, said: “The council bought the properties in order to provide a steady income stream for the council, which can then be invested in front line services.
“We can confirm that both units are being used by Currys PC World. They were bought in line with Trafford Council’s agreed investment strategy, which supports the acquisition of assets outside of the borough.
“The money for the investment was borrowed from the government, via the Public Works Loan Board. Trafford Council makes a profit of £280k a year after borrowing and management related costs.
“The properties were identified by real estate and investment specialists CBRE, who are the council’s investment advisers.
“The papers for the meetings and the minutes are commercially confidential due to the nature of the matters being discussed and are therefore not available.
“Once the acquisitions were complete, details of acquisitions and income were included in Trafford Council budget reports.”