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.
He said: “This isn’t just a property deal, we’re in it to help secure a building which is going to create jobs. We don’t see it as a risk, we see it as an investment.
“Northern Rock was selling the building off and had done a deal for one-and-a-half floors. They could have sold it off floor by floor. By buying the whole building we’re enabling a company to go into it as a headquarters, which will allow growth in jobs.
“This council over decades has been involved in commercial deals to stimulate growth in the city. It’s not speculative – it’s doing it for a purpose.”
Eaga will create 300 new jobs at the tower, as well as transferring 400 staff to Gosforth from their office at the Watermark in Gateshead.
The city council will move 200 people from the Civic Centre and Scottish Life House into the tower. And the Family Health Service Authority will move 100 staff based at Bede House next to the Tyne Bridge, on to one-and-a-half floors of the block. The first 1,000 workers could be in as early as June.
Eaga’s new posts will be for people working on the digital switchover. The firm expects to keep its buildings in Scotswood and Jesmond.
At the end of September the city council will terminate its lease of the second floor of Eldon Court and move 70 staff into space freed up at the Civic Centre.
The city’s Labour leader Nick Forbes attacked the decision to buy up the block. He said: “It’s odd that the Lib Dems would choose to invest a lot of money in office accommodation when there’s office space already available in the city. If they wanted to find an alternative base for staff they could look at places like the Blakelaw Neighbourhood Centre or Springfield Centre. It seems very plush office space to use for council staff.”