M&S announced yesterday that it is paying Edinburgh City Council pounds 122m for the Gyle shopping centre at the western edge of the city. Though the council has yet to decide how it will spend the money, it is possible that the proceeds will be used to finance a cut in council tax bills equivalent to a pounds 17 reduction for Band D households. The council is due to discuss the matter next month.
Keith Geddes, the council leader, said: "It remains our priority to make sure that this money is spent carefully to benefit the city and its residents for years to come and, vitally, to minimise the effect on our future revenue."
The sale could signal a new move by councils to sell shopping centres and other assets to fund the development of local amenities or cut council tax bills.
By law, councils are required to pay 25 per cent of all sale proceeds to reduce borrowings. The figure will rise to 50 per cent from 31 March. This is one reason why Edinburgh was keen to complete the deal promptly.
The council admitted that a council-tax windfall was possible but said that education and transport were two areas which have already been identified as priorities. Another option being considered is to invest some of the Gyle proceeds in another shopping centre, to sow the seeds of a future windfall.
Council spokeswoman Marjorie Kenny said there were also opportunities to help subsidise the many festivals that Edinburgh supports. She said the council could use part of the money to create a trust fund which would help support events such as the Edinburgh Festival and the Science Festival. She said the council would be keen to avoid developing amenities that would saddle it with high future running costs.
Marks & Spencer said it was buying the Gyle centre to gain greater control over the future expansion of its store which is the centre's anchor tenant. It said the move did not signal a fresh venture into property development.
Though M&S did buy the Braehead centre in Glasgow, where it also has a store, it later sold out to the property group Capital Shopping Centres.
Gyle shopping centre was completed in October 1993 and attracts around 300,000 visitors every week. There are 65 tenants, with M&S and a Safeway supermarket the largest stores. In December, Edinburgh council had selected the Universities Superannuation Scheme as its preferred bidder. However, the major tenants, M&S and Safeway, had a right to match the offer.