New investment secured for £4.2M to continue to protect South Somerset’s future
A site which is home to one of the UK’s leading manufacturers of fireplaces, a distributor of electricity which has delivered innovative green technology and a Greggs bakery is the latest investment for South Somerset District Council.
The £4.2M investment in Centurion Mill has been completed as part of the Council’s commercial strategy. The aim is to invest in a diverse range of assets and generate income which will mitigate a reduction in central Government funding.
It will also ensure SSDC can protect the wide range of services our communities receive.
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Details of the deal
The property comprises two industrial buildings totalling 72,246 square feet on the well-established Sowton Industrial Estate, between the M5 and Exeter’s city centre. The investment will deliver a net initial yield of 7 per cent.
Having historically served various industrial and office purposes, Centurion Mill is now arranged as multi-let warehouse and trade-counter accommodation.
The property’s principal tenant is Stovax Heating Group Limited, who are headquartered on the estate and use this unit in combination with three units immediately to the north as their main distribution centre.
Other tenants include Greggs, the largest bakery chain in the UK with more than 1,850 outlets, and Devondale Electrical Distributors Ltd, an electrical wholesaler with growing regional presence who delivered innovative green energy projects for the RSPB and Living Coasts zoo.
The Council’s Portfolio Holder for economic development including commercial strategy John Clark said: “With a premium location, established tenants and great value-adding potential, this property provides an excellent opportunity for us. We are delighted to get such a strong investment in the competitive industrial market at a yield of 7%. We are confident in their intention of the tenants to continue occupation for the foreseeable future.”
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How does the council decide on where it invests?
Every decision that is made is being rigorously tested and checked. The Commercial Property Team is working to ensure that SSDC does not overpay for property due to the lack of supply, and is not exposed to undue risk, for example within the retail sector, where significant changes are currently occurring nationally.
SSDC is investing in a diverse range of locations and asset types to ensure that it spreads any risks attached to investments which reflects sound investment practice. This includes assessing whether an investment outside the district will deliver a better rate of return for our communities than a similar opportunity in South Somerset.
The new asset forms part of South Somerset’s growing portfolio, which includes High Street retail, in town and out of town offices, industrial, energy storage and a residential development site.
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How does the council pay for these deals?
The Council uses a range of funding sources including investments utilising its reserves (sums of money that are held so that there is a financial cushion to meet sudden unexpected costs) and internal borrowing, a process through which SSDC can borrow from itself and charging itself interest.
This means that money that was previously in bank accounts is generating a higher rate of return with the proceeds used to protect services and deliver important projects in South Somerset. It does not involve investing money that would have been spent on services. In the highly unlikely event that we do need to access funding quickly in an unplanned way, our careful approach to investment means we can still do this.
Why is South Somerset District Council becoming more commercial?
The Council is currently operating in a complex financial climate where it needs to deliver savings rising to £6 million per year until 2022. This is in addition to having to cut its costs substantially since 2010.
SSDC has sustained a 70 per cent reduction in its Government grant funding since 2010 and further reductions are likely in the future whilst demand for and costs of many services continues to rise. It became clear that SSDC needed to make the most out of its assets and look for new opportunities which could generate income to protect the wide range of services our communities receive and create opportunities to fund new projects.
This is about making prudent financial decisions which will create significant income to get the best results for South Somerset but still, where possible, supporting the local economy.
In the future, we will have countered the loss of grant funding from Central Government though sensible investment and we will continue to deliver vital services, parks and open spaces as well as exploring new opportunities to make South Somerset an outstanding place to live, play and work.
To read more about our commercial strategy, visit https://www.southsomerset.gov.uk/services/income-generation/commercial-services/