A council which has embraced a “culture of commercialism” to help protect frontline services has defended its property investments after being accused of making “trophy investments”, such as buying Harrogate’s Royal Baths for £9m.
North Yorkshire County Council set up the Brierley Group of firms, ranging from housebuilders to lawyers, in 2017 to bring together council-owned companies and save money, but last year reported a loss of £639,000.
With a further substantial overall loss forecast for this financial year some members of the authority have questioned whether the council has the necessary business acumen to run the array of firms.
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A meeting of the Tory-led authority’s corporate and partnerships scrutiny committee heard while the pandemic was continuing to significantly affect some arms of the Brierley Group.
Officers have estimated revenue returns for its property investments, which also include a bank premises in Stafford and a shop premises in Lincolnshire, this financial year of £282,000, which equates to a return of 2.38 per cent.
The meeting heard the Royal Baths property comprises four commercial units, including a nightclub, bar and restaurant that had all closed for extended periods over the last two years, but also that “the longer term viability of some tenants is a concern”.
Thorough checks
Officers said Covid and the resulting lockdowns could not have been foreseen and officers were working closely with tenants to achieve a return to pre-Covid performance as soon as possible.
After learning of the rate of return, Conservative member for Escrick, Councillor Richard Musgrave, who represents Escrick, told the meeting he was “staggered” to learn the council had invested £9m in the Royal Baths.
He said: “I thought you might say a million for example for four units. I am absolutely speechless.
“The performance looks very very poor. Several of the tenants are struggling by the looks of things. It looks like a poor investment, it looks like a trophy investment.”
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The meeting heard the council had carried out thorough checks before accepting tenants.
Councillor Gareth Dadd, the authority’s deputy leader who also chairs the council’s Commercial Investment Board, said the Harrogate Baths investment had been approved by the council’s executive.
He said businesses sometimes had to take non-payment of rent “on the chin”.
Coun Dadd said: “It’s about the percentage rate of return of investment that we would expect and at the time it looked good. Even with Covid, which has clobbered the market, we are still the right side of the line in terms of leaving the money in the bank. Overall, yes it hasn’t performed as well as anybody would have hoped, but we are still making a margin on it.”
The meeting heard a proposal, first revealed three years ago, for the council to set up a solar farm to generate more funding had been shelved after the set-up costs and time for a return on the investment were found to be prohibitive.