SSDC announces new property deal
South Somerset District Council have announced yet another property deal. This one will cost £7.05m. The council tell us they have bought it as “considerably below the market value.”
What have they bought? SSDC tell us “68,327 sq ft D1 Christchurch Business Park for £7,050,000 reflecting a net initial yield of 7.07%. The property is currently let at a rent of £531,299 to Kondor Limited, which is a marketing and distribution partner of Samsung. It was identified by the council as an attractive investment with potential for capital growth due to the supply and demand imbalance in the Solent industrial market.”
A good return which will no doubt support the growth of the Dorset coast. Taxpayers and residents of Bournemouth, Christchurch and Poole Council will no doubt be delighted. Especially that another council, SSDC, from 50 miles away is investing in their economy.
Presumably there is no need for investment in the South Somerset economy and we have no immediate need for job creation or economic stimulus here in Somerset. That appears to be SSDC’s assessment and so fair enough. But I do wonder if there are any residents or business owners in South Somerset who might take a different view?
This series of investments is to plug the gap in SSDC finances left by the loss of central government funding. That is contrast to the Transformation Programme which we were told by an SSDC spokesperson “does not intend to replace lost government income. Transformation has enabled the Council to become more efficient, improving and modernising services to the customer.”
Whilst the council continue to pursue building up a large property portfolio there are a number of questions that simply will not go away. They are as follows:
- With Investment Properties now in excess of £30m, they are larger than the council’s net assets. And yet none of these deals has been reviewed by full council. Instead a select inner sanctum of officers and portfolio holders signs off each one.
- Any scrutiny can only happen after the deal is signed off. The Scrutiny Committee is hardly an independent view. Against best practise, it is chaired by a LibDem and as the ruling party, the majority of members on the committee are also LibDems. The Scrutiny Committee is effectively the adminstration giving themselves a pat on the back. Some would argue that is not the role of a Scrutiny Committee.
- Whilst the council appears to have some expertise in property portfolio management, it appears to have no general understanding of how to managed a blaanced investment portfolio. SSDC is now hopelessly over exposed to the property market. As long as the property portfolio rises, there will be few complaints. But with no balance in the portfolio through investments in non property assets, what exactly will the council do if there is a downturn in property values?