Leeds City Council has spent more than £75 million on private property investments over the past five years, it has been revealed, writes Richard Beecham.
According to a freedom of information request from the Bureau of Investigative Journalism, Leeds City Council spent £76,253,673 on six private investment assets since 2014.
The deputy leader of Leeds City Council has insisted the investments were to offset government cuts, and were making a surplus for the authority. Councillor James Lewis said:
“Obviously buying out properties and leasing them out at a commercial rate and making a surplus gives councils unrestricted revenue funding on an annual basis.
“Given the swingeing government cuts to our revenue support grant, it goes some way to replacing the government grant that was taken off us – and being able to keep front line services running helps everyone in the city.”
The most expensive purchase was an office block at 3 Sovereign Square, which was bought by the council for £43,993,350 back in November 2016.
The council bought two other sets of offices: at 2 and 3 Apex View, which were bought for £8,003,323 from Aviva Life and Pensions; and 2180 Century Way for £7.02m from Thorpe Park Developments.
The council also spent £6.25m and £962,000 respectively on a warehouse and nearby land in Pontefract Lane from Muse Developments.
Harper Street multi-storey car park, near Leeds Market, was also purchased from NCP in 2014 for £10.025m.
The purchases were funded with a mixture of loans from the market and the government-backed public works loans board. Coun Lewis admitted the authority was paying interest on the loans, but added assets were still generating an overall surplus.
On whether the investments were a gamble, Coun Lewis responded:
“In terms of Leeds, we have best knowledge of the market and of what is going on, so it is a secure investment.
“We look at the financial position of tenants as well, to make sure we have strong tenants coming in.”
He also confirmed that there were only plans to buy investment property within the Leeds district, and that there were no plans to sell off any of the six assets.
He added: “We are only investing in a city where we know the market best, and we are getting those regeneration benefits as well. We have always said from the start that the focus is Leeds, and there is no intention to enter the market anywhere else.”
A spokesperson for the Local Government Association (LGA), said:
“The money local government has to pay for local services is running out fast and there is a real and growing uncertainty about how local services are going to be funded beyond 2020.
“With councils facing an overall funding gap that will reach £7.8 billion by 2025, they have had to look for new ways to generate revenue. Councils have been encouraged to find ways of protecting services by generating income from alternative sources.
“Councils face a choice of either accepting funding reductions or having to cut services as a result, or making investments that can secure those services in the long term. In doing so, they have to follow strict rules and assessments to ensure they invest wisely and manage the risk of their investments appropriately.
“In many cases, councils have not only been making investment decisions that can help them replace funding shortfalls, but also contribute to their local economy and environment.”