Sedgemoor District Council has seen the value of property it has invested in fall by £917,000 over the past year.
The authority, like other local councils across the UK, has been buying commercial property in order to generate revenue to try and fund front-line services.
But the valuations of three of its largest investments – including a retail park in Street – have fallen.
It comes after the National Audit Office recently recommended changes to how local councils manage the risks associated with their investments.
Sedgemoor District Council has five commercial properties in its investment portfolio, which cost nearly £30.5million when they were originally purchased. It purchased the Street Retail Park in December 2018 at a cost of £8.264million, but the property is now valued at £7.77million, a loss in value of £476,000.
Furthermore, the council’s investment in a TKMaxx store in Worcester has declined from £8.526million to £8.15million since it was bought in April 2019, a fall of £376,000.
And a third investment, the Applegreen petrol station in Gloucester Road, Bristol, has fallen in value by £65,000 from £2.345million to £2.280million since it was purchased last summer. Two further investments – units on Sowton Industrial Estate in Exeter and at Aztec West near Bristol – have not changed in value since they were bought for £3.908million and £7.457million.
It means Sedgemoor District Council has seen the total value of its investments fall by £917,000.
The losses have this month been confirmed in a new council report considered by the council’s executive committee.
Alison Monteith, the council’s finance manager, writes in the report that the losses are not a cause of any immediate concern: “We invest in UK commercial and residential property with the intention of making a profit that will be spent on local public services.”
“The total cost of purchases include all expenses such as tax, legal and consultancy fees. When the property is subsequently valued, it is on the basis of investment yield.”
“It can sometimes take several years for the valuation to match or exceed the original purchase costs.”
“We assess the risk of loss before entering into and whilst holding property investments by carrying out a full due diligence exercise, including looking at the business plans and taking advice from external advisers.”
