Edinburgh City Council is under offer to buy its headquarters from Aviva for £91m in a move to save taxpayers nearly £38m in the long run.
The council was met yesterday to decide whether to go ahead with buying the 194,000 sq ft Waverley Court building from Aviva’s Norwich Union Life and Pension Fund (NULAP).
NULAP currently receives £5.1m a year in rent, but this is due to rise to £6m in November 2011 , £7m in 2016, and £8.3m in 2021.
The council will fund the purchase through the Public Works Loan Board, and will pay the loan back over 28 years at a borrowing rate of 4.75% at a total cost of £6m a year.
According to a report before the council yesterday, this could save taxpayers £37.7m over the next ten years.
77% of Edinburgh City Council’s staff work in leased property, which it sees as a potential weakness in its accommodation portfolio.
Donald McGougan, the council’s director of finance, said the council would consider using capital receipts, currently invested in funds in order to pay the council’s rent obligations, to provide equity for the loan.
Earlier this year NULAP approached the council, the committee report said, to see if the council wished to acquire the interest.
The building was marketed by King Sturge and it is understood that there was interest from several UK and foreign parties.
‘For a mortgage which is less than 1% of our annual budget we can save tens of millions of pounds,’ said council leader Jenny Dawe. ‘The savings that we make will be reinvested in better services for the people of Edinburgh.’
Waverley Court, at East Market Street in the city centre, was developed between 2001 and 2006 by the council as tenant, Network Rail as the landowner, NULAP as the funder and developer and Miller Construction as the contractor.
It was developed as a part of the council’s ‘Fit for the Future’ plan to consolidate its 20 offices into six offices and a new administrative headquarters.
Edinburgh City Council took a 20-year lease paying around £26/sq ft on the building, which is home to 1,800 staff, from November 2006.
Under the Local Government (Scotland) Act 1973, which limited the capital expenditure of local authorities, Edinburgh had been unable to buy the building, but since the introduction of the Prudential Code for Capital Finance in 2004 the option is now viable.
Aviva and King Sturge declined to comment.