Isle of Wight council has invested £19.5m … in Manchester and Kent

After the Isle of Wight Council’s financial officer placed a question mark on whether investments like this were possible, news has emerged that they’ve just invested £19.5m in industrial units in Manchester and Kent.

Stuart Hutchinson

Investment proposals branded a ‘dead duck’ by an opposition councillor are now ‘up and flying’, according to deputy council leader, Cllr Stuart Hutchinson (pictured).

The Isle of Wight Council has invested £19.5 million in trading units on industrial estates in Manchester and Kent. The investments should net the council an income of half-a-million pounds each year, once borrowing costs are met.

Returns not as great as anticipated
The authority’s plan to borrow £100 million at low interest rates and invest it in low-risk industrial, office and retail properties was originally planned to generate £5 million a year to help protect vital public services.

At a cabinet meeting in February, finance cabinet member Cllr Hutchinson admitted returns had not been as great as originally planned.

More income and fewer cuts
However, at a meeting of the Scrutiny Committee last night (Tuesday), Cllr Hutchinson said the council was just about to complete on two commercial investments — one in Salford, Manchester, and one in Aylestone, Kent.

Cllr Hutchinson said:

“We are working to generate as much income as we can so we have fewer cuts.”

Hutchinson: “Two ducks up and flying”
The council examined seven investments, four of which were dismissed for not being safe enough or providing a sufficient rate of return. The council bid on a further one, which was lost.

Cllr Hutchinson said:

“I do recall Cllr Brodie saying the fund was a dead duck, but actually we now have two ducks up and flying.”


This article is from the BBC’s LDRS (Local Democracy Reporter Service) scheme, which OnTheWight is taking part in. Some additions by OnTheWight.

Image: © With kind permission of Allan Marsh

Any views or opinions presented in the comments below are solely those of the author and do not represent those of OnTheWight.

Leave your Reply

10 Comments on "Isle of Wight council has invested £19.5m … in Manchester and Kent"

  Subscribe  
newest oldest most voted
Email updates?
Geoff Brodie

I (gratefully) described it as a ‘dead duck’ as the Finance Director had said there were new government limitations on such schemes. Clearly he was ill-informed. However, the scheme is still a major risk to Council taxpayers money.

sculler

A planned yield of 5% an actual current yield of 2.5%. Not as great as planned is a bit of an understatement. 20 year return on capital with interest rates only likely to increase and Knock on effects on property values. The duck may not only be dead but may poison the water.

boatman

What a pity the IW Council does not see fit to invest in Island initiatives and earn a return from investment in regeneration. The investments in Kent and Manchester benefit those communities but what about some investment here, on the Island…..?

electrickery

Maybe it’s the risk factor. After all, who would be managing those investments if they were on the Island? Exactly – you see the risk?

bm1729

Geoff Brodie is right. Missing aspects are that the projected return is by no means risk-free, that the Council has no adequate risk-management advice, and that possible losses appear to be uninsured. The motto seems to be “If you’re not in, you can’t win.”

electrickery

Complacency, arrogance, self-delusion and fundamental ignorance. This Council is already bankrupt in all but name. And we elected them.
I wonder who will carry the can when this project, too, goes belly-up?

eddo

It would be very interesting to have knowledge of the existing yield on this investment and the number of years expected with tenants in situ, break clause date and possible voids I trust that at least the units are indeed prelet

Colin
There was an article posted here not long ago showing the government guidelines for local authority investment for money from this central fund. It stated that there should be a local element of any investment to benefit the area served by the council. I was not aware that Manchester and Kent were classed as local to IW. This is a disaster waiting to happen nationally with other… Read more »
Rockhopper

Big difference between projected and actual income! I should like to know where this income is/will be used!

chartman

They should have spent the 19.5 mil on buying up local housing and lease it back to the housing associations. That would have generated an easy/low risk 5% !
Investing in commercial is a risky business with many tenants looking for downward rents….Or they go bust and properties end up empty for a long time. Maplin’s, Toy’s R Us et al