North Somerset Council has completed the purchase of the North Worle District Centre in Weston-super-Mare, the first acquisition in its commercial investment strategy to help fund frontline services and drive forward economic growth in the area.
The council approved the acquisition at its meeting on 20 February, but has been unable to release details until completion of the purchase.
“We will soon have no funding from central government for local services so, like other councils up and down the country, we need to find alternative ways of raising money,” said Council Leader Cllr Nigel Ashton. “This investment is a fantastic opportunity for the council to generate a substantial income stream over a long period of time to help fund frontline services.
“And, as the new owners of the site, we will also have the opportunity to influence and regenerate the site in the future, contributing to North Somerset’s economic growth.”
The 11.8-acre site next to Junction 21 of the M5 includes a supermarket (Sainsbury’s), petrol station, retail warehouse (TK Maxx), five other retail units, a public house and a 504-space surface car park.
The site, which is let under a single 35-year lease to Sainsbury’s, has been purchased for £37.95m using a bank loan. It will immediately generate a financial return to the council over and above the costs of borrowing. The council estimates this will be at least £225,000 in the first year, rising to over £400,000 in subsequent years.
The purchase is the first the council has made since councillors approved the creation of a Property Investment Fund to be funded through unsupported borrowing in July last year.
Following this the council appointed Montagu Evans LLP as its specialist property investment and asset management advisers who have brought forward a number of potential opportunities for the council to consider including the North Worle site.
“We are delighted to have been involved with the acquisition of this prime, well secured investment property on behalf of North Somerset Council,” said Mark Girling, Head of Investment at Montagu Evans.
“The property, sitting on nearly 12 acres and forming the district centre of a densely populated and fast-growing suburb, is a hugely successful trading asset with 100 per cent of the rental income being secured on a single overriding lease to Sainsbury’s. The net initial yield of about six per cent provides a margin over borrowing costs and there is the prospect of value-added regeneration initiatives over time.”
