Council investing in our city to bring in steady income

Plymouth City Council has purchased a prime retail warehouse park in the city as part of a long-term investment strategy to promote the local economy and generate income.

The Council has used historically low borrowing rates to acquire the freehold interest of Friary Retail Park on Exeter Street. The property extends to circa 81,000 sq ft and is located beside a strategic gateway to Plymouth’s city centre.

The investment will provide the Council with a long term income stream, secured against quality tenants who are unrepresented in the traditional shopping centre.  These include Dunelm, Smyths Toys and Hobbycraft.

Council leader Ian Bowyer said: “We are capitalising on our in-house property expertise and access to historically low borrowing costs to invest in commercial property in Plymouth. This will boost the local economy, support jobs and generate long term sustainable income to improve the wider financial position of the Council.

“After all costs, we estimate that the property will deliver an annual income from rents of over £500,000 a year and this will grow over time.  That’s half a million worth of savings we don’t have to make elsewhere and it will help us protect vital frontline services.”

Councillor Bowyer said: “Lots of councils are doing this. As we all get used to diminishing funding from Central Government, we need to be entrepreneurial and look at other sources of revenue. We are already landlords of a significant amount of commercial property and have a good track record in maximising returns from our property estate.

“Taking over this park will also give some long term certainty for the existing tenants, which is good for their business, good for their staff as well as good for the wider city.”

This year over £1 billion has been spent on commercial property investments by local authorities elsewhere. This reflects the growing trend of councils taking advantage of the low cost of debt to acquire commercial property to generate a secure and steady income stream for the future.  Those active have included Portsmouth City Council, Surrey County Council and Leeds City Council.

The freehold interest has been sold by AXA Insurance UK plc and AXA PPP Healthcare Limited to the Council.  The Council were represented by Savills and Monk & Partners whilst AXA  were represented by Edgerley Simpson Howe LLP.

The Council currently has an existing investment portfolio worth around £80 million. Every year an average of £6.7 million worth of rent comes into the authority from these properties which range from small shops and retail parks to industrial estates.

Councillor Bowyer added: “These rents help us to balance our budget, help us keep Council Tax bills down and enable us to continue to provide and protect key services to our residents.”