A district council has been accused of putting public money at risk in a 35-year deal to lease a shopping centre from a commercial development company.
North Somerset Council is the latest local authority to strike a deal with a private sector partner involving retail property.
It has agreed to pay an initial £717,696 a year to Legal & General Real Assets which bought the Sovereign Shopping Centre in Weston-super-Mare for £21m.
The annual fee will rise in line with inflation, with a 4% year-on-year cap, and the council will keep any surplus generated by income from tenants at the centre which it will be able to invest in services.
The council told LocalGov it has made no upfront payments and due diligence was undertaken by the professional consultants who 'took a very prudent approach to the future financial position of the centre.'
According to global investment managers BNP Paribas Real Estate, UK local authorities accounted for nearly 70% of all shopping centre investment in the first quarter of this year, spending a record £255.15m in the three-month period.
Conservative-run North Somerset Council says its deal is part of an 'exciting new commercial investment strategy' that will produce more than £1m a year income to help regenerate the town centre and mitigate government funding cuts totalling £90m since 2010.
But the council's Independent leader of the opposition Donald Davies told LocalGov: 'This is putting very large amounts of public money at risk.
'The income stream is very unclear and the only thing we can be sure of is that the cost to the council will increase every year for the next 35 years.
'It may be a wonderful deal but I don't think the council is capable of making that judgment in a very competitive commercial world.'
Photo: © Rob Newman
