Two major investments have been announced by Cambridgeshire County Council as it moves to further diversify its commercial portfolio, making healthy returns to invest in essential frontline services.
Members agreed to invest £51.4m in a 986 year lease of the Tesco site in Cheddar’s Lane, just off Newmarket Road in Cambridge – in a deal which will generate enough revenue to employ 56 social workers, pay for more than 149,000 hours of home care or support 80 older people with dementia each year.
And in a further acquisition, completed just days ago, the council has followed up the Tesco site lease purchase by buyinga ten acre industrial estate in Peterborough, an £11.5m investment which will generate an annual return enough to fund the entire countywide trading standards operation.
The total 2.8 hectare central Cambridge site is home to a 2002 purpose built supermarket building, and includes parking for 530 cars. The current lease to Tesco has 10.5 years to run, with index linked annual rent increases – which will give the council a 4.5% return on its investment –with expected rises to almost 6% per year by the end of the ten years. This lease is guaranteed by Tesco PLC, which is 22nd largest company in the UK, and is a full repairing lease meaning the council has no liability to maintain or repair the building.
Tesco has the right to renew its lease in ten year blocks up to 2059. The central Cambridge location and length of the lease make it an investment which is much sought after by investors.
In Peterborough, the Kingsbridge Centre in Sturrock Way, Peterborough is home to the UK headquarters of both E-Leather Ltd, a global award winning materials technology company, and Finnings (UK) Ltd, the world’s largest distributor of Caterpillar products - with lease agreements up to the next 15 years.
The return on investment for the site is currently 6%.
“This purchase is a clear part of the council’s investment strategy, which sees us seeking to invest in areas of the county and market sectors which support the aims of the council – but also give us a good rate of return in line with our investment objectives,” said Cllr Josh Schumann, Chairman of the Council’s Commercial and Investment Committee. “To mitigate risks we are always seeking to diversifying our portfolio – and are delighted that in the last month we have been able to add these two really sound investments in either different sectors or different parts of the county, bringing to a total of four excellent investments made over the past twelve months.”
“In Cambridge we are investing in a highly successful supermarket, providing a considerable amount of local employment opportunities in an area which neighbours some deprived areas of Cambs – so we are happy to have brought it in to our investment portfolio,“ said Cllr Steve Count, Leader of the Council. “If the tenant decides at any of the ten year breakpoints not to continue the lease, we know it is a site that would be much sought after for another commercial tenant or even for redevelopment.
“And in Peterborough, we are benefitting from a different type of investment in an industrial estate in a highly sought after position with excellent transport links – and two highly successful business tenants who bring high value jobs to the area. This represents a good rate of return in line with our investment objectives and will in turn will help us to continue to provide high quality services to the people of Cambridgeshire” he added.
Cllr Josh Schumann, chairman of the Commercial and Investment Committee gives more details about the County Council’s commercial strategy.