A retail park has seen a big drop in value over the three years since it was bought by a Devon council.

Torbay Council paid £21.1million for Wren Park in Torquay, including purchase costs.

But the property was valued at the end of March this year at £11.5million, down from £18.1million a year earlier.

Wren Park, off Browns Bridge Road in Torquay, is next to The Willows retail centre and is occupied by Boots, Outfit and Next.

The store chain Home Bargains has been linked to a unit left empty after the closure of Mothercare.

The purchase of the centre announced by the council in February 2017 was made under a strategy to invest in commercial property to bring in extra income for services after years of Government funding cuts.

The council’s audit committee heard that there was ongoing uncertainty over the value of assets due to the pandemic, and that auditors had challenged the legality of the council’s investment strategy.

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Auditors Grant Thornton reported the authority had so far spent £235million of its £300million investment fund, and its investment properties were valued at a total of £208.9million at the end of March.

A note with the accounts said the valuations should be treated with a “higher degree of caution” due to uncertainty caused by the economic impact of the coronavirus pandemic.

The council’s investment fund launched under the previous mayor administration was increased from £200million to £300million in July last year after the partnership of Liberal Democrats and Independents took control.

But no new purchases are planned after the rules governing the use of council borrowing from the Government-funded Public Works Loan Board were changed in March.

Wren Park retail centre in Torquay

The income from the council’s investment fund properties was budgeted at £4.8million this year to go towards spending on services.

But councillors have been warned that investment income could drop by up to £1million due to the pandemic, with the shortfall to be made up from a reserve fund.

Next year the investment properties are estimated to bring in a surplus of £4.6million, allowing for a contingency of £500,000 due to economic uncertainty.

A meeting of the council’s audit committee on Monday heard the authority had accepted a recommendation from Grant Thornton to review the wording of its Investment Fund Strategy to make sure it complied with legal advice.

The council will also review the effectiveness of its monitoring of the performance of its investment properties to ensure they are delivering the required income, and to take into account any change in circumstances and risk profile of assets.

Last year, the council paid £34.6million, including purchase costs, for a food distribution warehouse 150 miles away at Didcot in Oxfordshire.

Council figures show last year it paid totals of £6.3million to build a Travelodge at Chippenham in Wiltshire, £15.2million for an Amazon warehouse at Exeter, £11.1million for the Odeon Cinema at Taunton, and £1.8million for the Crown Records building at Exeter.

Earlier investments included office blocks, a pasty factory at Bodmin in Cornwall, a distribution warehouse in Kent, and a Tesco store at Ferndown in Dorset.

A report by the auditor said it had advised the council in the 2018/19 financial year to seek legal advice on whether it was “appropriate” for it to buy properties outside its geographical area, and whether it could be done directly or must be done by a subsidiary company.

The council went ahead with the purchases and its legal advice was that it was lawful as long as the council’s Investment and Regeneration Fund Strategy was updated “with specific wording relating to diversification”.

The report said the strategy was updated in October 2020, but the auditors held the view that “it does not sufficiently cover both of the substantive points raised in the legal advice and thus needs further refinement.”

The auditor recommended the council further refined the wording of the strategy “to ensure it meets the legal advice obtained by the auditor”.

Cllr Karen Kennedy said changing the strategy after the purchases had been made was like “the stable door being bolted after the horse has left”.

Chief finance officer Martin Phillips told the committee that the strategy had been amended “for absolute clarity” and the appropriate reporting was made to council members at the time.

The council’s investments have been funded by discounted borrowing from the Government’s Public Works Loan Board.

But the rules changed in March 2020 when the Treasury started a consultation on use of loans.

Councils were effectively barred from ‘debt for yield’ – borrowing to buy properties to raise income from a surplus.

Councils across the country have invested in property to raise income to off-set Government cuts, with £6.6billion spent in the three years to 2020, according to the National Audit Office. But concerns have been raised about the use of public funds and the exposure of councils to the risk of a property crash.

Torbay Council has set up a separate £100million Torbay Economic Growth Fund to support regeneration projects. It has used borrowing to invest in schemes including the purchase of Fleet Walk shopping centre in Torquay for £15million announced in October last year.





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