Revealed: council's millions spent on property acquisitions
PUBLISHED: 07:17 04 December 2018 | UPDATED: 13:33 05 December 2018
Redbridge Council has quietly splashed out £25 million on commercial properties, including the sites of two nightclubs, an investigation has found.
The local authority has also bought a care home and a former pupil referral unit, and in March this year it snapped up an office block in Chelmsford for £4.9m.
The decisions are made behind closed doors, the council said, because of “commercial sensitivity”.
But research by the Bureau of Investigative Journalism has shown the amount spent by councils “gambling” on investment properties of this type has risen sharply in 2017/18 as a way of bolstering flagging revenue.
A spokesperson for the council said: “Like most local authorities, we are using our land and property portfolio to meet increasing service demands, as well as to generate revenue to replace substantial reductions in central government funding.
“The council will have to raise all of its funding locally by 2021 so a strong asset base will become increasingly important to the delivery of services in the future.”
A Freedom of Information request to the council revealed the extent of the purchases made between 2016 and 2018. The properties the council bought were:
Saxon House, Chelmsford, Essex: Bought for £4.9m on March 29, 2018
This recently refurbished office block is occupied by an M&S and two engineering firms and is also a venue for photographic exhibitions. It was bought by the council from Myriad Homes Ltd.
How much income the property generates for Redbridge not known, but in January this year firms renting space on the premises could expect to pay £100 per person, per month.
A council spokesperson said it had been chosen based on the strength of the local property market, and on “the overall return on investment”.
They would not be drawn on who had acted as consultants for the purchase, or how much agents were paid, citing commercial sensitivity.
St Georgio Hotel, Faces nightclub building and shops, Gants Hill: Bought for £9.1m on October 17, 2017
Last October the council bought the building occupied by Faces nightclub and adjacent shops, also as properties.
Together with the St Georgio Hotel they set Redbridge back £9.1m paid to Nora Hotels Ltd. The consultants were Glenny LLP, which according to online spending data received a one-off payment of £5,935 in August 2017.
The hotel is now being turned into temporary accommodation for homeless families in the borough. Work is under way on the site and it is expected to be useable from spring 2019.
Former PRU land, Redbridge College: Bought for £510,000 on June 30, 2016
In June 2016 the council spent £510,000 on the former base of the Constance Bridgeman Centre, a pupil referral unit that had moved from prefabricated buildings in Little Heath to a different wing of Redbridge College.
The council had planned to use it to support the expansion of Newbridge School to provide more spaces for more pupils with special educational needs (SEN).
This is currently being reviewed, however, as the number of youngsters with SEN in the borough is rising and there are other schools in the area that could provide extra spaces.
The If Bar, Ilford Hill: Bought for £5m on September 8, 2016
This former nightclub had fallen into disrepair after it closed its doors in 2014.
An ex-promoter, who asked not to be named, said: “At its peak it was an amazing club. Then the owner vanished off the face of the earth. People were still living upstairs as it was becoming derelict; it was damp and there were rats running around the building.”
The building was originally a lavish town house, better remembered as a pub called the Rat and Carrot, which later became the Red Lion Bar.
In March 2015 Mr Popat had applied to Redbridge for permission to demolish the premises but was subsequently blocked by the council. Redbridge would go on to buy it from a company called Spring Bloom Property.
The site is now set to be used by contractors working on the rebuild of Ilford station as part of the Crossrail programme. A spokesperson for Redbridge said the If Bar had been identified and bought as a “strategic opportunity”, adding: “Ultimately, we will be seeking to bring the site forward for development along with neighbouring land uses”.
Ryedale Court Nursing Home, Ilford Lane: Bought on September 11, 2017 for £5.1m
This formerly struggling nursing home in Ilford Lane was bought from the former provider, European Health Care Properties, which had run it since 2013.
Staff at the home had been informed it was to close in autumn 2016, a year after the quality of its dementia care was lambasted in a Care Quality Commission report.
The home is now also being re-developed for temporary accommodation and is also due to be ready by spring 2019.
At the time Redbridge was making these acquisitions, press and public were excluded from the relevant sections of meetings where they were discussed.
The Georgio and Ryedale were bought as part of the council’s longer-term Temporary Accommodation Acquisition Programme.
The programme, which was discussed at two cabinet meetings last autumn, refers to the council negotiating for and buying private properties “to help address some of the issues by increasing good standard, self-contained supply to meet temporary housing need as an alternative to bed & breakfast and expensive nightly let accommodation”.
In October councillors agreed to increase the programme’s budget for 2017/18 from £10m to £15.2m to account for all of the acquisitions.
A YouGov survey of 1,737 British adults, conducted last week and shared exclusively with the Bureau, found that 80 per cent of respondents believed “properties or land being bought” by local authorities should have to be made public, while 82 per cent said “how it is funded” should also have to be made public.
In response, Redbridge said it was acquiring property within “a very competitive environment” and disclosing the details “would almost certainly undermine the council’s negotiating position” at the time.
A council spokesperson said that the funds underpinning the buys were made public through the budget-setting process and individual decisions delegated to officers, adding: “This allows us to move quickly to take opportunities as they arise, but protects the council’s commercial position.”
Investment properties: The national picture
The number of local authorities in England buying investment properties - land or buildings bought to generate income - has doubled in the last two years, research by The Bureau of Investigative Journalism has found.
Councils have spent billions on commercial property and land - from supermarkets and hotels to shopping centres and business parks - in an attempt to bring in extra revenue to help balance their books in the face of government cuts.
Redbridge currently has £173m of outstanding loans with the government’s Public Works Loans Board, as well as £35m of long-term loans with UK banks. The council’s total useable reserves have dropped by 46.12 per cent since 2016.
The amount spent by English local authorities on investment properties has risen sharply, from £76.4 million in 2014/15 to £1.4 billion in 2017/18.
And the number of councils playing the property market with investment properties doubled in the last two years, from 35 councils in 2015/16 to 71 in 2017/18.
The practice has attracted controversy outside the sector, with Liberal Democrat leader Sir Vince Cable suggesting last year that councils were ‘gambling’ with public money.
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.”