Croydon looks set for another damaging bout of development disputes, as two interest groups fight out a tug-of-war over the multi-million-pound future of the Whitgift Centre shopping mall.
This morning, Hammerson, already the owners of the Centrale mall on one side of North End, was announced as the preferred redevelopment partner for the Whitgift Centre, by the owners of 75 per cent of the centre’s leasehold.
But the Whitgift Foundation – the centre’s freehold owner – was quick to reject the decision outright.
“The selection of Hammerson as the preferred development partner of the Whitgift shopping centre by the two Leaseholder’s [sic] is inexplicable and will not deliver the much needed widespread regeneration of Croydon,” a forthright statement issued in the name of Martin Corney, clerk to the Whitgift Foundation, said.
“The recent process, conducted on behalf of the two leaseholders by Jones Lang LaSalle, purported to choose their preferred developer for the regeneration of the town centre. However, the Whitgift Foundation, which was established more than 400 years ago and is totally committed to the well-being of Croydon, was excluded from the process despite being the freeholder of both the shopping centre and adjoining properties.
“The Whitgift Foundation has a binding agreement with Westfield who are prepared to commit a highly experienced team to focus on the regeneration of Croydon. We see an immediate and narrow window of opportunity which requires urgent action, focus and commitment and we continue to invite the leaseholders to be part of this solution and to work with us in Croydon’s best interests.”
With both sides claiming to be acting in the best interests of Croydon, you might overlook the matters of multi-million-pound high-finance and massive profits that are involved as well.
Most significant decision this decade
This is, with no need for embellishment, probably the most significant decision on the redevelopment of Croydon this decade. How it is resolved, if it is resolved at all, will determine the course of many other elements of redevelopment in Croydon.
The news had broken on the Reuters news agency wire just after midday:
12:33pm BST LONDON (Reuters) – Anglo-French developer Hammerson (HMSO.L) has beaten Westfield Group (WDC.AX) in a race to redevelop an ageing south London shopping centre, derailing the Australian giant’s plans to build its third mega mall in the capital.
Westfield, which opened a mall near the London Olympic park to great fanfare last autumn, said in November the 42-year old site in Croydon would become its third large London centre after an exclusive deal with the Whitgift Foundation, the freeholder and 25 per cent leaseholder.
Royal London Asset Management (RLAM) and Irish Bank Resolution Corp (IBRC) ANGIB.UL, who together own 75 per cent of the 1.2m sq ft mall’s lease, said at the time they had not been consulted on the plans and launched their own search for a developer.
They have now signed an exclusivity agreement with Hammerson, the two companies said on Monday.
As with all matters relating to hoped-for improvements and upgrading of central Croydon, that is far from the end of the matter.
Six months ago, the Whitgift Foundation nailed its colours to the mast when it announced Westfield as its chosen redevelopment partner, and an exclusivity agreement of its own. That the Foundation made its announcement in November without consulting its leasehold partners at the Whitgift Centre has caused a massive rift.
Sources have told Inside Croydon that the Whitgift Foundation may have received a donation from Westfield in 2011, and that one of its senior representatives visited Australia on a “business trip”, paid for by the development company. When this was put to Corney, he denied that any donation or visit had ever taken place.
The Foundation’s conduct, however, (“arrogant” and “amateur night” is how one senior Town Hall source has described the Foundation’s handling of the matter) has only served to draw up the battle lines over the Whitgift Centre.
Croydon Council would appear to be on the side of Hammerson, which in the past 12 months has invested £150 million in Croydon, through its purchase of Centrale and the on-going redevelopment of North End’s newer shopping mall.
Hammerson accompanied Croydon Council CEO Jon Rouse to an international property conference in Cannes last month as part of the official “Develop Croydon” delegation, where they spoke of their ambition to operate Centrale and Whitgift centres jointly, to create a “holistic approach to the regeneration and development of the town centre”.
Today, Croydon Council welcomed the announcement of Hammerson’s selection, and notably called for “a reconciliation of the ownership and commercial interests so that a scheme can proceed without delay”.
They are unlikely to get their wish.
There is a development blight in central Croydon. The paralysis over the redevelopment of St George’s Walk has already contributed to the loss from the town centre of the borough’s single biggest private sector employer, Nestle. Other blue-chip firms have also left Croydon.
Elsewhere, apparently “prestige” plans for multi-million mixed use development, such as Ruskin Square by East Croydon station, remain dust bowl building sites on which the owners have been unable to finance construction. Yuppie-style modern apartment blocks, like IYLO, stand like concrete tombstones to the ambition, and avarice, of the early 21st century development boom.
What Croydon does not need now is a long, drawn-out Mexican stand-off between the leaseholders and freeholders of the Whitgift Centre.
Leasehold-owners fear defaults over loan repayments
Undoubtedly, the Foundation realises that the centre’s Irish leasehold owners are under the cosh financially, with reports a month ago that they are in danger of defaulting on their own repayments, largely as a consequence of the fall in their rental income from the office block above the shopping centre. At the end of 2011, only 20 per cent of the office space was in use, after the Home Office moved its staff away from Croydon.
The Irish Bank Resolution Corp was formed in 2009 when the Dublin government had to step in to take over the failed Anglo-Irish Bank. It was Anglo-Irish who, in 2005, bought a 50 per cent stake of the Whitgift Centre’s freehold for £225 million. To do this, they took out loans amounting to more than £160 million.
A month ago, business news service Bloomberg obtained an investors’ report issued by IBRC which said that its rental income from offices in Croydon “has fallen to a level where our ability to service our interest is challenged.
“Should we fail to meet interest servicing commitment, the facility will be in default.”
Worse still for IBRC and its investors, they are now in a big-business version of negative equity. Last October, the Whitgift Centre was valued at around £143 million, or 36.5 per cent less than the purchase price, according to the IBRC report. “That means investors have lost all their equity,” Bloomberg reported.
Royal London Asset Management, the other major leaseholder, is not affected by IBRC’s predicament. But time may not be on any of the leasholders’ side.
In the battle for control of the future of Whitgift Centre’s 167 shops and 410,000 sq ft of offices, it may actually suit the Whitgift Foundation to stall, and allow the pressure of interest payments and the stagnant office market to turn the screw on the centre’s leaseholders.
It is at times like this that Croydon could do with its local political leaders stepping in to resolve the spat between the shopping centre’s owners.
Such statesmanlike leadership seems unlikely to come from council leader Mike Fisher. The role of Rouse, the council’s £248,000 a year CEO, in Nestle’s abandonment of Croydon has not yet been fully reported, but seems to make him an unlikely conciliator.
And Gavin Barwell, MP for Croydon Central? Well, he’s caught between a rock and a hard place, because he cannot be viewed by both sides as an “honest broker” due to his close connections with the Whitgift Foundation, where he is a governor, and chairman of the governors at £12,000-a-year Trinity independent school.
This afternoon, Barwell told Inside Croydon that he had played no part in the Foundation’s deliberations on this matter “because I am deemed to have a conflict of interest”.
But he, too, fears delay and another developers’ stand-off. “It is great news that two such prestigious developers are interested in investing in the town, but it is important that we don’t now have months of stalemate. The two parties need to sit down and reach a deal as soon as possible,” Barwell said.
“I am not interested in taking sides, I just want to see progress,” Barwell said.
- Inside Croydon: brought to you from the heart of the borough, free of charge, an independent voice standing for freedom of speech for the people of Croydon
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- UK shopping centres attract foreign bids (telegraph.co.uk)
- Croydon: connected, capable and confident. Unrecognisable? (insidecroydon.com)