East Gate Subsidies to Help Generate Profits for Standard Life
East Gate, the leisure/retail/commercial development in Llanelli in which Carmarthenshire County Council was a partner with Henry Davidson Developments, has been sold to Ignis UK Property Fund for £14 million.
The county council’s share of the proceeds is £0, zero.
Press officer Ron Cant explained that the council’s aim had been to secure the redevelopment of the run-down site, a search that had taken years until Henry Davidson came along, ready to be persuaded to take on the £15 million project.
Final planning approval was given in February 2011, and work was quickly under way. Jonathan Fearn, the council’s head of corporate property, was quoted in the Llanelli Star[i] as saying that, by November 2012, financial support by the council for the scheme amounted to £3.4 million.
Ongoing commitments include rent of £100,000 a year for the car park, and rent currently £250,000 a year, for the 20-year agreement to take the 1,989 square metres of office space in the Landmark Building, which works out at nearly £126 a square metre.
This is a big premium over typical Swansea Bay rents for modern offices. Examples today include £91.51 a square metre for 371 square metres in Dafen, £91.62 per square metre for 461 square metres in Swansea, and £98.44 a square metre for 64 square metres in Gorseinon. The council is now advertising to sub-let the office space at £12.50 a square foot, which is £134.55 a square metre, an even greater premium above the typical local rate.
Apparently the council committed to renting the offices, large enough for about 200 staff, to ensure that the development went ahead, and that Llanelli would become another hub for international brand names like Costa Coffee, Nando’s and Odeon. The Scarlets rugby region is there too, with a shop and café, the fitting of which was paid for, indirectly, by the people of Carmarthenshire. Henry Davidson Developments lent the Scarlets £280,000 for the fitting out of the premises, and the loan was repaid with £280,000 from the £850,000 proceeds of selling part of the Scarlets’ car park to the pub chain Marstons. The proceeds should have been shared between the county council – the landowner – and the Scarlets, but after the Scarlets claimed for the costs of fees and expenses, including the repayment of the £280,000 for kitting out a shop nowhere near the stadium in Trostre, the council received only £200,000.[ii] In the end, the argument that East Gate needed the Scarlets’ shop to increase footfall, and thus to help attract tenants to vacant units, was given greater weight than the fairness argument for an equal distribution of the land sale price.
Scarlets Regional Ltd, which already owed £2.616 million to the county council, has not yet filed accounts for 2012-13, and is late doing so. The accounts should have been filed by March 31st 2014, which was a month after the company’s auditor resigned on February 27th 2014.
Meanwhile, Ignis UK Property Fund, proud new owner of East Gate, is itself part of a change of ownership. Ignis UK Property is part of Ignis Asset Management, which has been owned ultimately by Jersey-based Phoenix Group Holdings. In a deal in March 2014, Phoenix agreed to sell Ignis Asset Management for £390 million to Standard Life Investments, part of Edinburgh-based Standard Life plc.
Profits from the East Gate development should in future go to shareholders in Standard Life. They will not flow to the people of Carmarthenshire. As in the asymmetrical Scarlets arrangement, the council, representing the residents, is subsidising the private sector — but there is no matching requirement for a share of profits to be returned to the community.
Pat Dodd Racher
[i] ‘Council defends £5m office rental decision’, by Alana Lewis, www.llanellistar.co.uk, November 28th 2012.
[ii] ‘Call for investigation into £850,000 land deal between Scarlets rugby region and Carmarthenshire council’, by Martin Shipton, Western Mail, April 23rd 2014.
Another great example of Carmarthenshire County Council using public funds to feed the rich. As well as the direct contribution from the the council, other public funds have been used including EU money for urban regeneration and other services such as site preparation and the compulsory purchase and demolition of numerous properties to clear the site. The true cost to the public purse, ie the residents of Carmarthen via Council funds or our UK taxes, via Europe or the Assembly, is nearer to £10 million and may be much more.
In the fantasy economics of the present recession Ignis will have put the Eastgate on its books as an excellent investment and any profits will go to those investors and fund managers rich enough to avoid tax already.
The Council will lose any control over the site other than the commitment to pay the high rents for the rest of the agreed 20 year period. These rents alone will give the fund a good investment return, compared to current interest rates and Ignis is large enough to dictate the use or not of the Eastgate as it has no pressing need to
increase the occupancy. It could simply sit on the asset, mothballing the other units and just take the council’s money until the economic situation improves enough to attract good paying commercial rentals.
Considering the demographics locally, overall this is another stunning, sad example of using public money meant to improve local poverty to fund the wealthy. Yet another of Carmarthenshire’s Special Effects.
It has become accepted ‘common sense’ that the interests of residents, their local authorities, and multinational businesses converge, also that a prime function of public funds is to make businesses more profitable! Costs borne by the public, profits funnelled to shareholders (and top executives). Sounds upside down and inside out to me, but all the time that Carmarthenshire’s executive board accepts this ‘common sense’, there will be no change. Strange how in every age, some concepts acquire such power that, to so many, they appear beyond question.
The clue is in the name of the company. Another case of the funny handshake brigade robbing the people of Llanelli. The parasites taking the cream and sharing it out with fellow members of ahem lodges in other parts of the country. Scratch the surface and you will find the links. We should change the motto for Llanelli from Ymlaen Llanelli to Lawr y Toiledau Llanelli