This is how much Scarborough Council is making from the purchase of the Travelodge hotel
Scarborough Council has revealed it is making more than £300,000 a year from a hotel investment in the town.
In 2018, the borough council purchased the 140-room Travelodge in St Nicholas Cliff for £14 million using funds from the Public Works Loan Board.
At the time it said it hoped the investment would help it recoup around £328,000 and, according to a new report released this week, that is exactly what has happened.
In the report, prepared ahead of next Thursday’s Audit Committee meeting, council director Richard Bradley lays out the return on the hotel.
He wrote: “After allowing for borrowing and repayment costs, this investment opportunity is now delivering a net income of £328,000 per annum.”
The hotel is let to Travelodge for a term of almost 30 years with five-yearly rent reviews.
Mr Bradley’s report also shows that the council explored two other investment opportunities in the last 12 months.
The first is described as a “warehouse distribution centre investment of 250,000 sq ft at Sherburn in Elmet”. However, after carrying out “due diligence” the council’s Property Selection Team recommended that the building not be purchased.
The second was a “leisure/retail investment property” in Leeds city centre.
The report adds: “The investment opportunity met the minimum criteria as set out in the [investment] strategy and extensive due diligence was carried out resulting in a comprehensive business case and risk assessment being done.
“An initial financial offer was made subject to Property Investment Governance Board (PIGB) approval.
“The PIGB were consulted at a meeting on the 28th October 2019 and it was agreed that the offer made should be reduced. This reduction was in response to a perceived reduction in covenant strength of one of the tenants after a detailed analysis of financial accounts.
“The reduced offer was subsequently declined and the vendor is now pursuing a sale with another party.”
The report concludes that investment opportunities for the authority are likely to increase after the general election provided more certainty on the future of Brexit, which had been having a “negative influence” on market activity.