Lancaster City Council buys Wilko building for £3.4m
The purchase of 17-21 Penny Street in Lancaster is the first in a number of investments the council is looking to make to help fund services.
The council's General Fund Capital Programme, agreed by councillors in February, earmarks £16m a year for property investment acquisitions over the next four years, totalling a potential £64m in borrowing.
This could include retail, industrial and commercial units, hotels, food and drink units, and new green initiatives.
The council's director of finance Paul Thompson also revealed that the city council tried to buy the former BHS building in Market Street, but "didn't get there".
He said the investment plans are part of the council's Funding the Future strategy for building financial resilience.
Its "four pillars" approach puts "Community Leadership, Shaping the Place, A Business-Like Approach and Valuing Distinctiveness" to the fore where "unnecessary costs are driven out, efficiency is driven up and significant new income streams and surpluses are created through the combination of commercial and investment approaches."
The council completed the purchase 17-21 Penny Street in February, but this does not form part of the £16m investment pot for 2020/21.
The property is let to Wilko Retail Limited for 20 years from January 2009, expiring in January 2029.
Council leader Dr Erica Lewis said the strategy is about community wealth building with a financial return that would help to plug the gap created by central government budget cuts.
She said that the council has permission to spend up to £16m on property investments in the financial year 2020/21, but would need to go back to full council each year to raise the borrowing cap again.
"It's not a blank cheque," she said, "and we don't have to spend the full £16m."
Mr Thompson said the strategy will undergo a rigorous process of checks and balances, governance and due diligence with specific criteria.
He said: "We have an income target of £400,000 a year after all costs, which is around a two per cent return.
"There are staff and consultants who are looking at potential acquisitions, so it all depends on what comes forward. It's too early in the process to say what might come up.
"It's council tax payers money, and the governance aspect is key, but we have to do this.
"It's a risk, but so is doing nothing."
Lancaster City Coun Anne Whitehead, cabinet member with responsibility for finance, said: "We're not looking to invest in just retail properties.
"We're not going to buy up the city centre.
"We're looking at industrial units, food and beverage, commercial units, and green initiatives.
"We still do have reserves and we're in a relatively good financial position, but we want to take a more active role in supporting the economy."
Mr Thompson added: "There's a rigorous process when going through these things.
"Other councils are doing similar things, and borrowing more to do them. We're relatively conservative in our goals.
We did try to buy the BHS building at one point, but we didn't get there. All this gives us more control of the high street in the long run."
Dr Lewis said: "It's about trying to meet the needs of the district.
"That kind of thinking is how we play an active role in shaping the economy of the district.
"There's an underlying structural deficit, and this needs to be addressed quickly to avoid making more difficult decisions about services."
Lancaster City Council's central government funding has reduced by 60 per cent since 2010.
Coun Whitehead said: "In order to continue to invest in services for residents, we need to find ways of filling that funding gap.
"That means investing in things that will generate wealth in the community, as well as generate our own income.
"And also investing in ways that will help other people invest, for example opening new businesses, that in turn improves our business rates.
"Part of it is also meeting our climate emergency targets, such as the solar farm, and some of it is property investment.
"We're looking at commercial units and shops, what is the rate of return and how does it meet our climate emergency goals.
"We're also looking at property we already have, making best use of it, and supporting others, such as digital and tech companies."