Newcastle council says Northern Rock tower deal will make money

Apr 25 2009 The Journal

RENT earned by the city council on the former Northern Rock Tower will be double the loan taken out to buy it.

City treasurer Paul Woods said the council’s purchase of the Regent Centre tower would bring in cash.

Council bosses have come under fire for borrowing what is thought to be £22m to buy the nine-storey office block and rent it out to green support services firm eaga.

Although the Northern Rock board has yet to approve the sale, the tower is earmarked to house staff working for a company set up by the council with eaga, in a move which will create up to 500 jobs and secure 2,000 more.

The council will take out a maturity loan over 40 years from the Public Works Loan Board with a predicted interest rate of less than 4.5%.

For the first year Mr Woods said the city council will use savings which are currently earning very low levels of interest to put into a repayment fund.

After that the council will put cash earned by renting the office space to eaga into the repayment fund.

Eaga will take out a 25-year lease on the building, subletting one floor of it back to the city council for the next five years.

Mr Woods said he thought the amount paid in rent would be around double the amount needed by the council for the repayments.