South Somerset District Council recognises that we exist in a rapidly changing world and are working in a challenging financial environment, which is forecast to become even more demanding in the coming years. We want to meet these challenges and exceed them, survive and thrive in this environment, become a leading council that is financially self-sufficient and delivers high quality services to its customers and communities.
To do this, it is accepted that we need to change our culture, thinking, and ways of working and embrace and deliver commercialism throughout the Council at every level.
Our Commercial Strategy focuses on outlining our aims and objectives, how we will achieve them and how we will know that we have been successful.
Why are we being 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 on going annual income target of £2m for commercial investment income and great progress is being made. Some of the investment will be outside of the district.
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 do we achieve our objectives through our commercial strategy?
For SSDC, commercialism means the ability to think and act more business-like when considering the ways we manage, operate, deliver and resource our services and products in order to deliver best value for communities and customers.
Commercialism does not mean just making a profit. It includes:
- Considering the whole life cost of policy decisions, including market impact and benefits realisation.
- Improving efficiency of service delivery – reducing costs and streamlining processes
- Maximising value for money from contractual relationships
- Making robust decisions on a consistent basis with evidence and a sound business case
- Considering new and innovative ways of generating income
- Taking an investment based approach to the use of financial resources including assessing the return from the investment in terms of financial return, delivery of the council’s priorities and added value to our communities
This means making sound and clear decisions in using our resources, investing public funds to become more efficient and generate income for the Council to deliver better services whilst retaining a clear focus on our communities. This will affect different parts of the Council in different ways and to varying degrees, as some services will never be fully commercial.
Willis Way, Poole
South Somerset District Council has acquired the freehold interest in 54 Willis Way, Poole, the former headquarters of Fitness First, for £2,550,000. This reflects a net initial yield of 7.47% and a capital value of £140 per square foot.
The property comprises an 18,174 square foot high quality gym occupied by Fitness First for an eighteen year unexpired term, with a break in eight years.
With gyms badly hit by the Covid-19 pandemic, the property might not seem like an obvious pick for investment, however there is strong mitigation in this case;
The fitness industry has been growing rapidly in recent years with 4.5m people members of gyms in 2011, rising to 7m in 2019 (Statista). We would expect this trend to continue post-lockdown and we are aware of active requirements in the marketplace.
Sherwood Road, Bromsgrove
Purchased in December 2019 for £3.7m, a net initial yield of 6.58%. A 36,882 sq ft, four unit trade counter scheme tenanted by Screwfix, Howdens and Toolstation (all considered to be the strongest possible tenant by credit rating agency Dun & Bradstreet). The site is situated in the centre of the principle industrial estate in the town. The yield will revert to circa to 7.17% following the outstanding rent review.
King William House, Bristol
This acquisition was completed in March 2020 for £5.4m, reflecting a net initial yield of 7.5%. This is a 28,000 square foot multi-let office building in a prime location in central Bristol.
Alchemy, Welwyn Garden City
The instantly identifiable building offers 38,880 square feet of contemporary office accommodation and Grade A specification to its high profile tenants and is considered as one of the best in Welwyn Garden City.
With the assistance of Chartered Surveyors, Savills, and regional law firm, Moore Blatch, SSDC were able to complete the off-market purchase of Alchemy for £9,730,000, reflecting a net initial yield of 7%.
Centurion Mill, Sowton Industrial Estate, Exeter
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 Ralph' veterinary referral hospital, Marlow
The Ralph is named in memory of the rescue cat cared for by founder Shailen Jasani. The referral hospital opened its doors to the public in February 2019 and it is the only one of its kind located between the M4 and the M40 motorways. It offers a wide range of services and has an outstanding reputation as a compassionate and innovative provider of veterinary services. South Somerset District Council has acquired the site of The Ralph for £5,950,000 with a net initial yield of 7.09%.
This top performing branch of B&Q has become the latest investment for the Council. We have acquired the 27,000 square foot retail warehouse, with 8,000 square foot external garden and 4,000 square foot secure delivery yard, for £4.405m as part of our commercial strategy.
Reevesland Industrial Estate, Newport
The building is the UK distribution hub of worldwide toy and boardgame giant Hasbro and it was secured for £2,780,000, reflecting a net initial yield of 7%. The deal was made possible with assistance from leading global real estate consultants CBRE and regional law firm Moore Blatch.
Business Park, Christchurch
South Somerset District Council's investment in a business park in Christchurch was secured for £7.05M, considerably below the market value. The Dorset property is currently let to Kondor Limited, which is a marketing and distribution partner of Samsung.
Bell House, Milton Keynes
SSDC has acquired Bell House in Milton Keynes for £2.925M. The property comprises 10,695 square feet of Grade A office accommodation constructed in 2007 over four floors. It is let to four tenants, including regional solicitors Howes Percival LLP, and situated in a modern business park environment half a mile from Milton Keynes Central station.
GoCompare Headquarters, Newport
Imperial House in Newport, which is the headquarters of comparison giant GoCompare, has been acquired by South Somerset District Council for £4.66M. The acquisition comprises a 26,672 square foot Grade A office that has been occupied by the hugely successful company since 2006.
Linden House, Bristol
Linden House, in the affluent Bristol suburb of Clifton, has been purchased by South Somerset District Council for £2.75m. Comprising of 9,331 square feet of office accommodation, Linden House is located within 200m of the commercial heart of Clifton. It is currently tenanted by Galliford Try plc, one of the UK’s principle house-builders, who have been in occupation since 2007.
Units 1 & 2 Dunball Industrial Estate, Bridgwater
Units 1 & 2 at Dunball Industrial Estate in Bridgwater have been purchased by South Somerset District Council for £2.82m, well below the marketed value of £3.025m. The building provides 36,050 square feet of flexible industrial accommodation and has been tenanted by Trelleborg Sealing Solutions since its construction in 1983.
Energy Storage Facility, Taunton
Somerset will be at the cutting edge of renewable energy storage thanks to a significant investment in this facility. The Council, in partnership with Somerset-based Opium Power Limited, is creating a new 25MW Battery Storage facility that will provide essential power management assistance to the National Grid. It will be one of the largest and most-advanced in the UK.
Fareham Battery Energy Storage Scheme
Our joint venture company SSDC OPL purchased Fareham Energy Reserve Ltd in 2020 following the undertaking of a full review of the due diligence and business plan for development and future revenue by SSDC, prior to providing the company a loan at commercial interest rates, to approve SSDC OPL to proceed.
The company purchased, Fareham Energy Reserve Ltd, holds the lease, planning permission and grid licence to develop and operate a 40 MW Battery Energy Storage Site.
This investment also continues to provide strong annual revenue to SSDC and performs well as an anchor store in the town. Again, there are no indications from Wilko that there is any intention to leave Yeovil. With the recent sale of Glovers Walk and regeneration of this area of town on the horizon, we expect that this will remain the case for the foreseeable future.
Residential Development, Marlborough
SSDC purchased a former NHS nursing home in Marlborough for conversion into apartments and some new houses in the grounds. Practical completion for this development of 15 flats and 3 houses was achieved in October 2019. It is likely that sales will take around 12 months to conclude once we can fully market the residential units, due to the impact on the market of COVID-19.
Marks and Spencer, Yeovil
This investment continues to provide strong annual revenue to SSDC. M&S has just announced a 7% increase in profits this year, whilst it continues its own Transformation programme between 2018 and 2022. Despite store closures in other area, there are no indications from M&S that there is any intention to leave Yeovil which is a strong commitment to the strength of Yeovil's town centre.
How do we decide where to invest?
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.
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.