Isle of Wight council paid 24 per cent above asking price for property investment (updated)

According to an investigation into council finances by the Bureau of Investigative Journalism, the Isle of Wight council paid 24 per cent above the asking price for one of the properties they have borrowed £19m from the government to invest in.

monopoly-houses-ten-pound-notes-and-dice

The Isle of Wight Council has borrowed more than £19 million from the government to invest in property.

The figures have been revealed by the Bureau of Investigative Journalism as part of an investigation into council finances, which revealed some of the smallest councils in England have tied the future of their public services to the uncertainty of the property market.

Experts warn commercial property investments are volatile and if councils are financing them through borrowing, this could be even riskier.

Minimising risks
However, Deputy Leader and Cabinet member for Resources, Cllr Stuart Hutchinson, said he tried to minimise all risks when deciding which properties to invest in.

The council contracts with Portsmouth City Council for fund management and acquisition services.

Cllr Hutchinson:

“There is a risk in everything but we look for high value property, occupants with strong financial standing, and in strong growth areas with good transport networks.”

IWC paid 24 per cent above the asking price
The Isle of Wight Council purchased two properties — both industrial units — one in Salford for just over £10 million, and the other in Kent for £8.6 million.

For the Salford property, the council paid 24 per cent above the asking price.

Out of the fifteen units, one does not have a tenant.

Tenants in the properties
Sitting tenants include We Buy Any Car, budget fashion brand In the Style and a vending machine company.

Other tenants include NRS Healthcare, which supply mobility equipment and disability aids, and Mettler Toledo which make metal detectors.

Since 2017, the amount borrowed by the council has increased by £20 million.

The council has also increased its reserves by 8.59 per cent.

Cautiously overseeing decisions
Cllr Hutchinson oversaw all the decisions and said he did so ‘cautiously’.

He said:

“The government has given us the ability to borrow up to £100 million and use it to purchase key investments that fit out detailed parameters.”

Turned down IW investment
The council declined the chance to invest in a property on the Isle of Wight, saying it did not match its criteria.

Cllr Hutchinson added:

“These are commercial investments. If a particular investment matches our criteria, we will buy on Island.”

Although the data surrounding the investments is within publicly available audit reports, Cllr Hutchinson said they should not necessarily be more visible on the council’s Website.

He said:

“We do not keep it a secret but we do not go out of our way to publicise it.”

Lowthion: “Dreadful decision”
Isle of Wight Green Party’s parliamentary candidate, Vix Lowthion, said,

“Plenty of investment is needed by the council in areas on our Island and they actively choose to borrow money to put elsewhere.

“£19 million could have gone far here in terms of a community energy company, efficiency savings, land for development and even a new floating bridge (that works)! Bringing jobs and income. But instead they borrow, speculate and invest elsewhere.

“Dreadful decision.”

Article edit
9.09: Comment added from Vix Lowthion


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

Image: © Tax Rebate

Tuesday, 4th December, 2018 12:01am

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ShortURL: http://wig.ht/2lVk

Filed under: Island-wide, Isle of Wight News, LDRS, Top story

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

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9 Comments on "Isle of Wight council paid 24 per cent above asking price for property investment (updated)"

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YJC
The last sentence speaks volumes. “We do not keep it a secret but we do not go out of our way to publicise it.” Obviously not publicised because they knew the IW Council Taxpayers would not approve. If borrowing this 1.9 million (at what interest rate?) and investing in We Buy Any Car etc goes pear shaped the IW Council will be expecting IW Council Taxpayers to… Read more »
Fred Karno

I wonder if this Ship of Fools, aka the Isle of Wight Council, would be so keen to invest in this folly if they had to put their own houses up as security for these loans?

Colin
A number of things come to mind. Was there not a government directive issued stating that funds borrowed from this fund should be used within the area local to the council? How is this investment looking in the light of the Governor of the Bank of England forecasting that with a no-deal brexit commercial property prices are likely to plunge (30- 40% I believe) and even with… Read more »
iowdave

What professional advice did the council seek before making these investments? Was it decided by a bunch of amateurs with no financial experience? What is the projected return on investments?
Many questions need answers.
These elected representatives are trusted to act responsibly – but do they or do they merely vote on the say so of one officer?

Colin

@iowdave The article states that “The council contracts with Portsmouth City Council for fund management and acquisition services.”
I believe the final decision is made by Cllr Hutchinson, Mr. Metcalf and the 151 officer who we share with Portsmouth City Council. I expect Sally could confirm this, it was in an article a while ago, but I can’t find it.

Another perspective

Sounds about right

YJC

Apologies – meant £19 million not £1.9

mjh150

Why are the council investing off Island in property they don’t understand while we are losing jobs on the Island due to their lack of investment and planning

septua

I was under the impression that if the Council wishes to buy property, the District Valuer (a Government appointment) has to be consulted first to say whether a price is reasonable or not.