Spelthorne Borough Council earned nearly as much from its property assets as it did from its council tax income for 2018/19, according to its latest statement of accounts.
For its 2018/19 financial year, Spelthorne reported that it made a total gross income of £85.8m, nearly half (48%) of which came from its property portfolio.
Of the £41.5m in revenue the council made from property, £39.6m was rental income.
After costs had been deducted (including £20.4m on interest, £7.85m on debt repayments and £5.8m transferred into “sinking funds” to pay for future costs of assets), its net income for property stood at £7.4m. This is just shy of the £7.8m made from council tax receipts over the same period.
The council, which has splashed out nearly £1bn on commercial property in less than three years, said it expected to see its net revenue from property investments overtake council tax income for 2019/2020.
In the local authority’s revenue budget for 2019/2020, Spelthorne predicted it would make a net profit of £10.1m from its commercial property rental portfolio.
This is roughly £2.1m more than the £8m profit it expects to make from council tax receipts.
The authority made a decision in 2014 to acquire commercial property to fill a hole in its balance sheet after its revenue support grant was pulled, Spelthorne deputy chief executive Terry Collier told EG.
Its first purchase was made in 2016, with the council buying oil giant BP’s International Centre for Business and Technology campus for £350m.
“We had a whole host of financial pressures we needed to offset with a long-term income stream,” he said.
“That was the initial driver for acquisitions.”
Collier said the council’s acquisition strategy has “worked out well” but now its focus is “very much more on housing developments and economic regeneration in the borough”.
Two acquisitions, for which the council has borrowed £20m, are nearing completion, Collier said. He added: “We want to address the housing needs of our borough. We have an ambitious housing delivery programme, to deliver 600-1,000 units over the next five years. We are open-minded about delivery.”
The majority of funds Spelthorne plans to use for its future acquisitions will come from the Public Works Main Board, which is the principal funding stream for local authorities.
However, Collier said the council was open to partnering with the private sector, including developers, to deliver its schemes.
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