Surrey Heath Borough Council has seen the value of its Camberley retail investments plummet by as much as 68%.
The council bought The Mall Camberley, now known as The SQ Camberley, in 2016 and two adjacent retail premises in 2017 for a total of £104m.
But according to a document submitted to the Public Accounts Committee inquiry into the commercial investments of local authorities, the current value of these assets “could be as low as £33m”.
In the submission, councillor Sashi Mylvaganam and Camberley resident Peter Simpson said the financial statements for 2018-19 showed the value of the assets had fallen by £38m to £66m, representing a yield of circa 6.3%, according to the council’s asset manager Montagu Evans.
However, the pair added that auditor BDO suggested the yield should be 8% or 9%, which would further reduce the value of the asset by about £23m.
They claimed the fall in value of the assets had “left a big hole” in the council’s finances, reducing its “ability to sustain the level of spending in the services they wanted to protect”.
Mylvaganam and Simpson said their submission provided “evidence of the need for greater caution by local authorities before they consider acquiring commercial property”.
“While there should be no absolute bar on authorities entering this field, their lack of expertise in this complex area can lead to considerable and undesirable risks. It is not, after all, their core business,” the document said.
The Public Accounts Committee inquiry follows a National Audit Office report published in January which flagged a £2.5bn jump in council spending on land and property between 2015-16 and 2017-18, much of which was for commercial investment purposes.
In the latest session, the Ministry of Housing, Communities and Local Government was accused of being “complacent” by committee member Sir Geoffrey Clifton-Brown over the borrowing and investment practises of local authorities.
To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette
