Wilko: uncertain future for South Somerset Asset
In 2018 South Somerset District Council (SSDC) started what would become a £140m+ spending spree on property. The theory was that by investing in property for an income return, the council could protect services. Unfortunately it did not occur to the council to invest in a diverse range of assets. They simply invested in different types of property.
For the most part the assets they purchased were bought at the top of the market. Not least because as other councils rushed to buy commercial property, prices soared. Now with the UK on the edge of recession, property prices are falling. Subsequently some councils who joined the property rush have been left on the brink of financial collapse. Thurrock and Croydon councils have already had to issue the council equivalent of insolvency notices. Woking is looking as if it may have to follow suit.
The future for retail outlets continues to be uncertain.
Against this background, the uncertain future facing Wilko revealed last week could have consequences for SSDC. These days the assets once owned by SSDC have been passed to the new unitary Somerset Council. They are left holding the baby of a lot of poorly judged property investments. Not just purchased by SSDC, but by Sedgemoor, Somerset West & Taunton and Mendip too.
Wilko, Yeovil was one of the first property investments made by SSDC back in 2018. They paid £4.23m for the freehold which in part they said, was to support Wilko and ensure they stayed in town. The store had a tenancy until 2025.
At the time Wilko said they had no intention of leaving Yeovil in part because of the millions that SSDC were committing to Yeovil Refresh.
However the collapse in trading performance revealed last week may take matters out of their hands. On Thursday Wilko announced that it had filed a “notice of intention” to appoint administrators after failing to find enough emergency investment. One option the group had been looking at was a company voluntary arrangement, under which some of its landlords would have received no rent for three years. It is not known at this point if Somerset Council were party to that discussion.
If the group does enter administration, it is likely that a number of stores will be closed down. That puts the future of the Yeovil store at risk. Bade news for local jobs and other smaller retailers in the town centre who rely on stores like Wilko to attract customers to the town centre.
But its also potentially bad news for the Council’s property portfolio. If the group does enter administration and close the Yeovil branch, the freehold site will become a none performing asset. £4.23m of property not generating an income.
Whatever action Wilko takes in the week ahead, Somerset Council will be looking on nervously.
What did the council tax payers expect from the incompetent and ignorant councillors who comprised the investment committee at South Somerset? They had no idea what they were doing, not to mention the involvement of Clare Pestell who was advising the Council. The councillors responsible should be disbarred.
The SSDC Lib/dem administration has got so many investments wrong as I forecast they would at the time, another vulnerable investment is the M&S building in Yeovil, also the battery park where they forgot VAT would be levied, didn’t realise they would have to pay for a ransom strip only to find the site wasn’t large enough forcing another purchase of land from a very poor negotiating position, then it was struck by lightning, no one thought of putting a lightning conductor to a building that would attract lightning. Then there’s the Marlborough housing development that lost so much money they won’t tell us anything about it. Millions of public money lost through Lib/dem incompetence, but they say move on, nothing to see here.