New tenants soon for Harrogate’s Viper Rooms and nearby bar?

Harrogate’s struggling Royal Baths could soon have two new tenants.

North Yorkshire County Council bought the site as an investment asset for £9 million in 2018 but it has not generated the returns hoped for.

When the council bought the site, the units were occupied by J D Wetherspoon, The Potting Shed bar, the Viper Rooms nightclub and Royal Baths Chinese Restaurant.

But the Potting Shed has been closed for years and the sudden demise of the Viper Rooms in December left half the units unoccupied.

Days after the Viper Rooms closed, the council said the site had attracted “significant interest from potential tenants”. But three months on it remains empty.

In an update today, Gary Fielding, the county council’s corporate director for strategic resources, said:

“A unit which did house the Viper Rooms is continuing to attract significant interest, and an agent has been appointed to co-ordinate discussions with potential tenants.

“A lease has been signed for the final unit and a dialogue with the tenant is continuing to establish when the new venture will be launched.”

The new North Yorkshire Council will assume control of the Grade II listed Royal Baths on April 1 when the county council, along with seven district councils including Harrogate Borough Council, ceases to exist.

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Harrogate’s Royal Baths: the council’s under-performing ‘trophy investment’

An investigation by the Stray Ferret has revealed that Harrogate’s Royal Baths have massively under-performed as a commercial investment since they were bought by North Yorkshire County Council in 2018.

The council bought the Grade II listed building for £9 million in 2018 as part of a wider strategy to become more entrepreneurial to plug its declining budget from central government.

But the Baths have only generated about a third of the income expected, raising questions about the wisdom of the decision to buy it, as well as whether the council has the necessary business acumen to invest taxpayers’ money in such schemes.

The council was accused of making a “trophy investment” last month when one councillor said he was “absolutely’ speechless” by the £9 million sum paid for the Baths.

It has now emerged that rental income is way down on what was predicted in a confidential report to councillors before they agreed to buy it.

Prepared to pay £10m

The report, which has now been made public, reveals the council was prepared to pay up to £10 million for the Baths, which included four commercial units.

At the time, they were J D Wetherspoon, The Potting Shed bar, the Viper Rooms nightclub and Royal Baths Chinese Restaurant. The Potting Shed subsequently closed.

The report forecast the Baths would generate annual income of £500,940.

But gross income received in the three years since then was just £613,000 — way down on the £1.5 million expected. The council has also incurred maintenance and other costs of £222,000 on the Baths to the end of March 2021, further reducing the income figure to £391,000.

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Philip Broadbank

Philip Broadbank

Councillor Philip Broadbank, a Liberal Democrat who represents Harrogate Starbeck on the county council, said

“The price for the Royal Baths investment seems to be high and the rate of return has been very disappointing and needs to improve.

“The Royal Baths complex is in a central position in Harrogate town centre but margins need to improve quickly for council taxpayers to see some financial benefits. It is vital that all the units are let and fully operational and officers need to ensure that happens soon to help the local economy.

“The periods of closure have been significant and challenging and the poor rates of return need to be substantially improved if taxpayers are to have confidence that the investment policies are to work satisfactorily financially.”

‘It will end in tears’

The council has not been helped by lockdowns, which have affected all three surviving businesses. The Royal Baths Chinese Restaurant remains closed but plans to re-open this year.

Stuart Parsons

Stuart Parsons

Nevertheless, Councillor Stuart Parsons, who represents Richmond and is the Independents group leader at the county council, said the financial performance of the Baths was worrying and predicted the council’s attempts to generate income in new ways would “end in tears”. He said:

“There’s always that belief in local government that they have expertise and can deliver anything but they are experts at delivering services rather than property projects.”

He said the council had been “absolutely strapped for cash by central government for 11 years” and was being encouraged by ministers to find new sources of income to “shore up shortfalls”. But he added:

“We have seen a number of councils fail because they have taken on projects like renewable energy and are unable to deliver them.

“They will try their hardest in North Yorkshire but they don’t have the necessary expertise to drive things forward. This will be one of the black marks against the Conservative government. It will end in tears.

“Councils should not be trading. They should be providing services, not building houses or power plants. If they had kept the £9m it could have been used to help people in desperate need in social care.”

Cllr Parsons added it was concerning that major spending decisions involving taxpayers’ money were being made on the basis of such inaccurate forecasts.

“If they are basing their finances on estimates that are unsound then something seriously needs to change.”

North Yorkshire County Council offices in Northallerton.

Councillor Gareth Dadd, deputy leader of the Conservatives on the county council, has been one of the key supporters of the Baths investment.

The Stray Ferret sent him some questions but he did not reply.

‘Better than treasury returns’

A council spokesman said it received legal advice and a surveyor’s report and undertook comparative market analysis to support the business case and necessary due diligence before buying the lease on the Baths from M&G Property Portfolio.

He added the investment “continues to stand up against the alternative investment opportunities where cash returns amounted to an average return of 0.19% p.a. at Quarter 2 21/22”.

Gross income received to the end of 20/21 was £613,000 and standard treasury returns would have generated £152,000, the spokesman added, and therefore the investment “has realised £461,000 of additional benefit to the council and its taxpayer when compared to our standard treasury returns”.

He added covid and lockdowns had had a significant impact since the Baths were bought in 2018.

“Our tenants, in the hospitality sector, have been significantly impacted by the pandemic with extended periods of enforced closure during 2020 and 2021. We are working with them to reach reasonable terms on recovery of arrears where possible.

“National regulations in force until late March 2022 prevent us from evicting tenants that have fallen into arrears as a result of covid.

“All retail and hospitality suffered significant periods of closure and financial challenge throughout the pandemic. The Harrogate Royal Baths is a local asset and we remain confident that Harrogate and the Royal Baths itself will recover from the pandemic and continue to contribute to the Harrogate and North Yorkshire local economy.

Besides the four commercial units, the purchase of the Baths also included two further units held on long-leases by Harrogate Borough Council at a peppercorn rent occupied by the tourist information centre and the Turkish Baths, as well as two car parks similarly let on long leases at nominal rents.

The council set up the Brierley Group of firms, ranging from house builders to lawyers, in 2017 to bring together council-owned companies and find new ways of making money. However, last year it reported a loss of £639,000.

Further losses are forecast for the current financial year.

The council warned last month it faces “enormous financial pressures” and needed to find £19 million in savings.