EAST Hampshire District Council (EHDC) has increased its property portfolio by buying a retail store in Alton, currently leased by Iceland.

The district council paid £1.63m for the High Street store, which was previously home to Woolworths.

The supermarket premises is the council’s sixth property purchase since 2013 as part of a plan to increase its annual income.

The previous five properties include those housing Barclays Bank, in Petersfield; the Co-op, in Four Marks; the services on the A3 at Liphook; Sheridan House, in Winchester; and New Barn in Petersfield.

Together they generate more than £850,000 in rent a year, which is said to be around £700,000 more than could be gained through interest on cash savings.

Having been rejuvenated since being bought back by founder Malcolm Walker in 2012, the Iceland supermarket chain is seen as providing another secure revenue stream for the local authority coffers.

With interest rates remaining low and cash investments offering a poor return, like others across the country, EHDC has turned to buying high-value commercial properties in order to recoup rent.

Published last September, New Local Government Network research revealed that “councils are emerging as one of the country’s biggest property investors”.

The report from the localism think tank begins: “Cash-strapped local authorities are becoming sophisticated financial investors, using historically low interest rates to make themselves financially independent of national government.”

While EHDC is unlikely to be described as “cash-strapped” it has taken the decision to invest in property, rather than keep taxpayers money in the bank, in line with its commitment to become Government grant free.

Commenting on this latest purchase, Richard Millard, EHDC’s deputy to leader Ferris Cowper and portfolio holder for contracts, said: “Investing in property brings better returns for our money than keeping it in the bank.

“As Government grants continue to dwindle councils must find new forms of income. Investing in prime commercial properties in good locations generates valuable rental income for us. This money is ploughed back into keeping council service standards high and keeping residents’ council tax low.”

And he added: “The Iceland store in Alton is a fantastic, town centre property with an excellent tenant and was the right price.”

While the level of rent chargeable on the site is commercially sensitive and viewed as a matter between the tenant and EHDC, “it will outstrip the returns possible from traditional cash investments”.

While social media has been buzzing with comment, some of it supportive, others questioning whether EHDC has a mandate to risk investing taxpayers money in property, and expressing concern over what will happen should be property values fall, EHDC has responded by saying that it is “important that the council continues to find new ways to generate income to maintain services and keep council tax low, and that’s why this money has been allocated for commercial property investment”.

EHDC has also confirmed that the agreements currently in place for the upper floor of the building will not change as a result of the change of ownership.

Commenting in his capacity as EHDC portfolio holder for Alton, Dean Phillips endorsed the decision to select investment in commercial property, which can be expected to yield in the region of six per cent, as opposed to tying up money in cash reserves which would be hard pressed at present to achieve 0.5 per cent.

The Alton Iceland building investment, he felt, was “the right decision for the right time”.