Value of council's investment properties plummets due to pandemic
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The coronavirus pandemic has wiped £26million of the value of two investment properties bought by North Somerset Council for more than £62million in 2018.
Leader Don Davies said he had spoken out against buying the Sovereign Shopping Centre for £21million and the £38million purchase of the North Worle District Centre when he was an opposition councillor, but both deals went ahead.
Following the devastation inflicted on the retail sector by Covid-19, the properties are now worth £4.1million and £30.7million respectively.
Asked if he regretted the investments, Councillor Davies said: “I questioned the purchase of them. I don’t think it was a good investment. I don’t think it was properly thought through.
“I can’t do anything about it. The last thing anyone would expect us to do is sell them off in a buyers’ market. We’d take a bigger hit if there was a fire sale.”
He pointed to the council’s 'significant' plans for the Sovereign Shopping Centre – influence it would not have if the building was in private hands.
Last week the executive approved the business case for a £1.7million investment to revamp the shopping centre, attract small businesses and bring customers to local restaurants and cafes.
Under the proposals, empty shops will be turned into workspaces, the underused food court will become a bike hub, and the rooftop car park will be a public event space.
The Sovereign Shopping Centre and the North Worle District Centre were intended to bring in £1.3million a year to support the council’s stretched services.
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Their values have recovered slightly since 'impaired' valuations in March 2020, just a few weeks into the pandemic, which reflected the economic climate at the time.
Papers for the executive’s meeting on February 11 said: “After servicing costs, fees and accounting adjustments, these assets were budgeted to generate an annual net return to the revenue budget of £900,000.
“Whilst North Worle continues to provide income returns in line with plans, the lockdown restrictions have impacted on the returns receivable from the Sovereign Shopping Centre.”
A council spokesperson said: “Valuations are carried out at the end of March each year and reflect the economic climate at that particular point in time.
“It is normal and to be expected that asset valuations will go up and down over time to a degree, however March 2020 was the start of an exceptional emergency with the onset of Covid-19. The economic and social uncertainty that arose is reflected in the lowered valuations.
“The capital valuation is not the same as the revenue income from the sites, which on a day-to-day basis is more critical to the council than the capital valuation.
“North Worle District Centre continues to provide positive income returns to the council in line with expectations, supporting its operating budget. The Sovereign Shopping Centre faces greater challenges, not just due to the Covid emergency, but also because of the ongoing structural changes to the high street economy.
“It remains an important part of the council’s financial strategy and placemaking agenda and is key to delivering change in Weston town centre.”