Council may have to buy office block for £1.5m more than it's worth

The Hythe office block at Wirral Waters
-Credit: (Image: Google Street View)

Wirral Council may have to buy a building for £1.5m more than it is worth at the end of the year.

The Hythe, a Wirral Waters office block, was completed at the end of 2021 and secured its first tenant in 2022. It was the first Grade A office building to be developed on the Wirral for over a decade and overlooks the Birkenhead docks.

However to get the project going, Peel L&P approached Wirral Council in 2018 to ask them to share the commercial risk of constructing the building. This is because at the time it would have been commercially unviable even with the help of a £3m grant from the Liverpool City Region Combined Authority.

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The council then entered into what is called a Put and Call option.

The agreement means that three years after the completion of the development, Peel could require the council to buy a 250 year leasehold for the site. However if the value of the building went above £4.985m before then, the council could make Peel sell the property for £4.985m.

The Hythe report is being considered by councillors on July 16 at an economy and regeneration committee meeting due to the “strong possibility that it will still be valued at a figure below the trigger value of £4.985m.” The council also said Peel has not yet taken a position on whether it will trigger its option to make the council buy the leasehold in December.

If Peel does trigger its option, the council will have to buy the Hythe for £4.985m which would be covered by borrowing. This would cost the council’s services a total of £350,000 a year for 50 years.

The council could look to either sell the property or continue to operate it over that time but running costs are currently unknown to the council and running it could incur further losses to council budgets.

The report said: “The best understanding that the council has is that the rent into the council, unless the ground floor is let, will be less than the money that it will have to pay for interest payments for any loan.”

If the council decided to sell it, it would get money from the sale but the cost of the borrowing to buy the building in the first place would still remain. Therefore the council is already looking at identifying potential occupants for any ground floor occupier.

Peel were asked if they plan to trigger their Put option. Richard Mawdsley, Director of Development for Wirral Waters, said the Hythe office “has exceeded expectations in both occupier demand levels and ‘take-up’ from growing organisations” and it was now 70% occupied.

Mr Mawdsley said the project was built on time and on budget, adding: “The ground floor remains available and while we do have significant interest from potential occupiers, the lack of public transport provision and poor local connectivity are major factors in Hythe not being fully occupied.

“Occupancy levels, along with wider economic factors, would be considered when evaluating the Put / Call Option with Wirral Council. Improving public transport to address ‘last-mile-connectivity’ and the delivery of wider streetscape and connectivity improvements – to encourage safer walking and better access to the area – remains a high priority for Wirral Waters.”

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