Borrowing around £50 million over the last five years has underpinned Hastings Borough Council’s commercial property acquisition programme.
Many local people still don’t realise that their council owns the site in Sedlescombe Road North where Pets at Home and Dunelm are based and also owns the T.K. Max site on Bexhill Road. The council has also recently bought Lacuna House in the town centre and is funding the building of the new Aldi store, also in Bexhill Road, which when complete will be rented back to the German supermarket giant.
The stewardship of the council’s property portfolio and its acquisition programme has come in for a deal of criticism especially at at time when there are warnings that many councils are over extending themselves to buy property at the top of the market.
HBC has funded its buying spree by taking low interest loans from the Public Works Loan Board which it is committed to for 40 years which last year led the leader of the Conservative group on the council Rob Lee to warn that HBC was facing a ‘a ticking time bomb of over extended borrowing’.
Mr Lee is not alone in his concern that some of HBC’s recent purchases carry a significant financial risk, many of the sites the council has acquired recently are reliant on the health of retail and that sector of the nation’s economy is seriously under pressure as more shopping is done online and even some of the biggest names in retail struggle to make a profit. There is also concern that the yield – or profit – HBC is achieving on its property investments is far too low.
It’s concerns surrounding that return on the council’s investment which has seen Mr Lee on the attack again, this time over York Buildings in the heart of Hastings town centre.
The striking building with its black glazed bricks is home to Millets which occupies the ground floor. The whole building is owned by HBC but the floors above the shop are empty and derelict.
Plans have been put forward for the council to turn them into flats to create much needed additional homes. The proposed flats would be rented out at the low housing authority rate to create affordable housing.
Mr Lee says: “What follows though is good example of what goes wrong when a local council gets involved with market forces it doesn’t fully understand.
“The original proposals to restore and create the flats on the upper floors were very expensive with the total refurbishment costing £757,000 or £126,000 per flat, despite the whole building being only worth around £500,000.
“My deputy, Councillor Andy Patmore put forward a sensible suggestion that the top floors should be sold off at auction with a covenant that the refurbishment of the flats takes place within two years. This would have provided a useful cash injection for the council which could have been reinvested and it would also have taken away the liability of the dilapidated building but the suggestion was dismissed out of hand.
“Now, just a few months later the plans have come back, the only real change is an adjustment to the cost which has now climbed to a staggering £846,000 for the refurbishment or £141,000 per flat. That’s an increase of 12 per cent.
“The enormous cost of this scheme will predictably be met entirely by taking out further loans to be paid back over 40 years. The council does hope to take in some income through renting out the flats but the margins are tiny. They anticipate making only £1,971 profit a year which equates to less than 0.25 per cent profit a year on the costs of the refurbishment and as usual the council have not allowed for void periods or repairs to the building over the 40-year life of the loan.
“The intention among among Labour councillors was that the flats were to rented out at low, affordable rates. However, under closer inspection, the anticipated rental income from these flats indicates that the rents will be far higher than the Local Housing Allowance would be for flats of this size.
“The project is too expensive and does not provide affordable housing to those who need it most and it should be stopped at once.”
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