Rotherham Council is progressing plans to kickstart a stalled commercial development in order to support inward investment and job creation, and at the same time generate income for the authority.
Rothbiz reported last year that the Council was proposing to acquire remaining land at the Beighton Link site where earlier phases are home to the likes of Pricecheck and Ideal Envelopes.
It would mean that developer JF Finnegan would build out the units utilising cash from the Sheffield city region JESSICA fund. The authority set aside £990,000 from its own £5m Growth Fund and wanted to establish a "rent guarantee fund" that ensured it would receive rent for the property even if it was not let to a tenant.
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The JESSICA fund supports job-creating commercial property schemes through grants and loans.
A recent update states: "It became apparent during discussions with the JESSICA Fund Manager that the JESSICA funding could only be provided as a capital loan to fund development costs. The Council required the funding to provide potential revenue in the form of rental income.
"A structure to allow the funding to be received as a capital loan has been developed as a solution. It is proposed that JF Finnegan create a rent guarantee fund through payment into an ESCROW account and the Council pay a higher purchase price. The higher purchase price will include both the property and a rent guarantee fund."
Solicitors have told the Council that the recommended alternative structure is lawful.
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The £5.2m scheme would involve two business units at Beighton Link, expected to total 49,000 sq ft.
Rotherham Council is expected to provide £4.7m and could receive an estimated £283,000 a year from renting the units, in addition to £66,000 from its share of business rates. Borrowing money from the Government's Public Works Loan Board would lead to estimated yearly costs of £203,440. The Council will also have to pay interest and administration fees on the JESSICA loan of £11,500 a year.
The figures point to the authority putting £134,060 a year forward as savings. Less that the annual saving of £269,500 factored in to the Council's budget plans from 2019/20.
Rotherham Council previously worked with landowner and developer Harworth Group to unlock a £2.7m loan from the JESSICA Fund, which led to the first R-evolution scheme on the Advanced Manufacturing Park (AMP), a 117,000 sq ft speculative industrial development, the success of which has lead to further phases.
The property at the AMP generated a net annual surplus of over £50,000 after taking account of all costs to the Council of owning the unit including capital financing charges.
1 comments:
If it is an 8 yr. pay-back deal then that's not too bad (and better late than never).
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