Protesters force South West council to evict their business tenants
Financially challenged Somerset Council has capitulated after a concerted campaign by pro-Palestine protesters force it to abandon one of its business tenants.
The move follows attacks on the council's headquarters, the County Hall that has been daubed and sprayed with red paint by activists. They are calling on the authority to remove a business tenant - Elbit Systems UK limited - housed in one of its investment properties at 600 Aztec West, Almondsbury near Bristol.
On three separate occasions the activists have repeated their act of throwing paint over the front of the County Council’s offices in Taunton after the building had been cleaned.
[Image credit - Somerset County Gazette]
Social media posts by one action group say:
“Local residents disrupt Somerset Council’s meeting to demand the immediate eviction of Elbit Systems [from] The council’s property at Aztec West 600 [that] is used as the UK headquarters of Israel’s largest weapons firm.”
Social media posts provided by the council stated that:
"On 23 April 2024, Somerset Council voted on a motion in respect of a commercial investment property it owns at 600 Aztec West.
"That motion included a statement that 'the tenant Elbit UK [is] a major UK based provider of weapons to the Israeli Defence Forces, used in the current Gaza catastrophe’.
As a result, the council it seems has capitulated to the demand of the protesters and has voted to investigate the possibility of either legally evicting its tenants or selling the building.
However, following the council’s vote, Elbit Systems UK issued a statement claiming that it provides equipment to the British army, not directly to Israel and that "nothing from the Aztec site goes to the IDF", branding any direct links with Israel as "grossly misleading", though it seems that Elbit Systems UK is a subsidiary of a military technology company based in Israel.
The council, following Ebit’s statement issuing its own statement apologising for its earlier claims saying that:
"Elbit Systems UK Limited have contacted us to say this [supplying arms to Israel] is factually incorrect and they do not supply weapons or military equipment to the Israeli Defence Forces or the Israeli Ministry of Defence.
The council said:
"The Council would like to apologise and withdraw the statement that Elbit Systems UK Limited supplies military equipment to the Israeli Defence Forces or the Israeli Ministry of Defence."
The recently amalgamated four district councils of Mendip, Sedgemoor, Somerset West & Taunton and South Somerset had invested nearly £300m between them into commercial property, many of them outside of the county, with the aim of using the rental income to pay for public services.
However, council officers have had to admit that following the Covid pandemic’s dramatic fall in commercial property values, and the more recent hike in interest rates, the returns from their property investments were now less than the original borrowing. It means there is no net income left to fund their services as planned.
The Liberal Democrat led near bankrupt Somerset Council is now being “encouraged” by the government to sell off its commercial property portfolio to fund its essential services, despite it being expected to make huge capital losses on these assets.
To help the council deal with its £100m funding gap for 2024/25, the government, in February this year, granted it £76.9m to help balance its budget.
The council has agreed to the government’s recommendation to dispose of its commercial property portfolio and has already started to market them through property agents. However, its original near £300mn investment is now valued at nearer £200mn as of March 2024.
The Taunton based council’s commercial property adventures took it to the edge of bankruptcy and after the Elbit Systems debacle they are faced with the issue of either evicting their tenant or selling the property.
In addition to the embarrassment of having to apologise to its tenant for the accusations made, it is having to pay out thousands of pounds it does not have in clean up bills after their landmark County Hall offices were daubed with red paint multiple times.
This sorry saga highlights the issue that many councils throughout the country have faced after venturing into commercial property investing. These investments, in theory, could have provided an income stream which the councils could have used to fund public services. In reality the strategy has turned sour for many of the councils that decided to go down this route.
A few years ago, money was available to councils from government sources at ultra-low interest rates and commercial rents were providing sustainable income cash-flows – to many councils this was a golden opportunity. What they failed to anticipate was a global pandemic which collapsed commercial property values, a Russian invasion of Ukraine which brought about a cost-of-living crisis, and a spike in inflation which resulted in an interest rate hike.
Somerset’s investments stretch out across the UK, from £5.5mn in Halifax, £6.6mn in Ayr, Scotland, £9.3mn in Perry Barr, Birmingham, £6mn in Stockton on Tees, £6m in One Quinton Business Park, Birmingham, £12mn in North Shields, £4.5mn in Glasgow, £7mn in Cardiff, to £23mn in the Steellite, building in Stoke-on-Trent
The council recently confirmed that it had instructed Jones Lang Lassell (JLL) to sell its investment in the Marks & Spencer occupied building in Yeovil for which it paid £7.7mn. It is now on the market for £2.8m.
Deputy leader of the Liberal Democrat led Somerset council, councillor Liz Leyshon, has said it: “will seek to secure the best value for taxpayers,” but she added “we can only sell property in line with current market values”.
The council also bought the Steelite International Limited building in Stoke-on-Trent for nearly £23mn three years ago. Now, the council has put the building on the market for sale at an asking price of £14mn – the huge loss just adds more grief to the council’s woes.
Cllr Leyshone also said: “The financial emergency facing councils across the country is well documented and in Somerset we have needed to take many difficult decisions to bridge a funding gap of £100m for 2024/25.
“In response to our requests for exceptional financial support, the Government approved a capitalisation direction and encouraged us to sell [our] commercial properties and use the receipts to fund essential services, like adults and children’s social care.
“The situation has now changed, and we continue to call on the Government to take urgent action to fix the system of funding local government which is fundamentally broken
The council’s statement that it will investigate whether it can legally evict its tenant leaves an interesting question to be answered: how can the council evict when the firm - Elbit Systems UK limited - is on a commercial lease, of unknown length, which may well be covered by the security granted under the Landlord & Tenant Act 1954 Part 2.
Unless the lease has been excluded from the terms of this legislation by the agreement of both the landlord and the tenant at the commencement of the tenancy, the council is unlikely to be in a position to regain possession and therefore may have to sell, most likely with another large loss.
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