Kentish Gazette Canterbury & District
Council: Shopping precinct purchase was not a gamble
The city council has unequivocally rejected government concerns it may be engaged in risky property speculation following its purchase of half of the Whitefriars shopping precinct.
Its assertion comes after officials in the Department for Local Government and Communities warned that borrowing and spending by local authorities on property was spiralling out of control, with some buying land hundreds of miles away from their districts.
Last year Canterbury City Council bought a 50% share of Whitefriars for £79 million – with £74 million of it borrowed.
The Sunday Times has reported Whitehall officials’ concerns that councils are over-stretching themselves and using taxpayers’ money to effectively gamble on property investments
But city council chief executive Colin Carmichael said: “Although we are a council that has invested in property through our purchase of half of Whitefriars, it is there that our relevance to the story in The Sunday Times ends.
“We haven’t bet with taxpayers’ money, we haven’t invested miles from home, we were not involved in a bidding war with other councils and our investment in Whitefriars is not about making huge returns.
“While it is true that we expect to make a profit from the purchase, the investment was much more about allowing us to play a key role in the continued success of the shopping centre and help steer its future development.”
The council agreed the Whitefriars deal in July of last year, buying its stake from the Canadian Pension Fund.
It borrowed the money at an interest rate of 2.6% with repayments of £4.05 million per year over 25 years. Revenue from Whitefriars is intended to plug the shortfall in funding from central government projected over the coming years.
Mr Carmichael added: “We already own much of the freehold of Whitefriars and gain rental income from this. The purchase of a 50% stake is a logical step and helps maintain the high standards of quality at the shopping centre for businesses, residents and visitors.
“That said, with the reduction in funding being imposed upon councils by central government, we can well understand why local authorities would see the returns on offer from property investments as a way of helping to close the gap in their budget, but this has to be done in a wellplanned and thought through way.
“Councils have always been major property owners and there is virtually no evidence, over decades, of irresponsible purchases.”