The row over whether or not Hastings Borough Council (HBC) should be in the business of buying and renting out commercial property has burst in to the open again this week.
The issue was a big talking point at the borough council elections back in May when Conservative group leader Rob Lee described the policy as a ‘ticking time bomb’.
This week Mr Lee has gone on the offensive again, this time over the ruling Labour group’s decision to develop a former car showroom site on Bexhill Road for German supermarket chain Aldi.
Mr Lee says: “I’ve spoken before about the council’s risky property purchases around the borough in order to create revenue to fund spending. The schemes they have embarked on range from the unwise to the reckless but the latest project is their most bizarre yet.
“HBC is going to borrow millions of pounds over a 50 year period to build a supermarket for an international chain. The plan is to rent out the space to the retailer but this will not cover the cost of borrowing to develop the site.
“The scheme also involves building two much smaller retail units on the site and only if all the units are full does the council begin to make any money back to cover more than the loan repayments and pull in a small surplus. The yield from the ‘investment’ will be less than one per cent a year.”
Mr Lee questions why the multinational supermarket chain does not build the new store themselves and asks what will happen to the site if the retailer decides to move on when any break clause in their lease comes up: “The council would then be left with an empty property that would be hard to fill while still paying off the large loan taken out to pay for the now unused building.”
Mr Lee describes the plan as: “…yet another example of the kind of risk filled enterprise that HBC seems to engage in with seemingly little concern over the long-term implications.”
He points out that all the properties so far acquired by HBC have been bought with borrowed money and says the council’s annual interest payments on borrowings so far total £750,000.
“The amount the Labour administration at HBC intend to borrow on your behalf at this stage is £40,000,000 that is well over £1,000 for every household in the town,” he says.
However HBC leader Peter Chowney defends the acquisition programme saying that it has brought the council £1m per year in profit: “The Tories have opposed every one of the acquisitions but they have no suggestions at all for where the money would otherwise come from.”
Mr Chowney told Hastings In Focus that two of the properties on the site are pre-let to Aldi and also to Gregg’s, the third unit is designed to be a coffee shop, “I doubt there will be too much problem letting a new catering unit next door to a major supermarket,” he says.
According to Mr Chowney the developer of the site is guaranteeing rent for two years on the unit if it’s not let, “I really don’t think there’s much of a risk there,” he says.
As far as return on investment is concerned Mr Chowney says the council’s other commercial purchases have been returning between five and six per cent, but the planned Bexhill Road development will come in at around four and a half per cent: “It’s a bit lower than usual, but well within the parameters we set in our commercial property acquisition policy. The purchase is financed by borrowing so when you take that into account the net yield goes down to just under one per cent, which is again a tad lower than we’d like but this is new build, so you’d expect it to be a bit lower initially. Of course, that’s just for the first year. With annual rent reviews, that yield will increase year-on-year.”
Hear what Conservative group leader Rob Lee and Hastings Borough Council Leader, Labour’s Peter Chowney had to say before the borough elections in May by clicking on the links below…