GoCompare headquarters acquired by South Somerset District Council
South Somerset District Council is pleased to announce that it has made another significant investment which will generate much needed income allowing it to continue to deliver for its communities.
Imperial House in Newport, which is the headquarters of comparison giant GoCompare, has been acquired by South Somerset District Council for £4.66M.
The deal, which reflects a net initial yield of 8.06%, was achieved with assistance from leading global real estate consultants, CBRE, and transatlantic law firm, Womble Bond Dickinson.
Here’s what you need to know:
Details of the deal
The acquisition comprises a 26,672 square foot Grade A office that has been occupied by the hugely successful GoCompare since 2006.
While SSDC will look to invest in South Somerset when possible, it is sometimes the case that the deals which will deliver the best returns on investment for residents are found elsewhere.
Limited historical capital growth has increased yields and decreased property prices in South Wales, meaning the council has been able to purchase a superior quality premises at excellent value.
Prime rents in nearby Bristol are currently more than double the passing rent at Imperial House and, with the recent removal of the Severn Bridge toll between the two cities, there is excellent potential for future rental and capital growth.
The council’s portfolio holder for property, Henry Hobhouse said: “Imperial House is a quality building, with excellent access to the M4 and an instantly recognisable tenant. We are delighted to add the property to our portfolio at an 8 per cent yield, which we believe provides value for money and potential for growth.
“We are proud to be investing – not spending – in order to maximise income to the council. Whilst most councils are still cutting services, investments such as this enable us to set a budget for the coming year that sees no cuts to services to our residents and the commitment of millions of pounds to supporting growth of business and jobs, regenerating our towns and supporting our high streets.”
Tom Morris, managing director of CBRE South West said: “The team at CBRE is delighted to have assisted SSDC in acquiring what is the highest quality out of town office in Newport. The tenant has invested heavily in what is their national HQ and the rental tone is well placed to benefit from future growth. Factors such as the removal of the Severn Bridge tolls, planned infrastructure work around Newport and increasing rents in neighbouring Cardiff and Bristol, are all set to impact positively on the city.”
The asset joins two tenanted retail units in Yeovil, Units 1 and 2 Dunball Industrial Estate in Bridgwater and the recently completed purchase of Linden House, Bristol in South Somerset’s portfolio.
Why is South Somerset District Council becoming more commercial?
The Council is currently operating in a complex financial climate, where between 2018 and 2022, it needs to deliver savings rising to £6 million per year. 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.
It has seen the Commercial Services and Income Generation team given an ongoing annual income target of £2m for commercial investment income and great progress is being made.
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.
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.
A huge and diverse range of opportunities have been considered and rejected in the past year from a car showroom in Newcastle to an industrial estate in Poole.
Reasons for rejection can include the asking price not matching our valuation, unacceptable risk to income, non-compliance with our commercial aims and objectives, and over-exposure to a particular market.
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.
How does the council pay for these deals?
To date investments have been funded from reserves and internal borrowing. It’s complex but, put simply, it means SSDC is borrowing 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 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.