The business “brains” at Fisher’s Folly have gone out and splurged £53million of public money to buy the freehold of the “unloved” and rarely visited Colonnades retail and leisure park – just as industry experts are warning that 200 such centres around the country are in danger of going bust.
The purchase of the Colonnades, off the Purley Way, follows another council commercial investment, the buying of the freehold of the Croydon Park Hotel, near East Croydon Station.
The rationale behind the Colonnades purchase is much the same as for the hotel: the council is able to borrow millions of pounds from the government-run Public Works Loan Board at very low interest rates, and think that by owning the freehold and charging commercial rents, they can generate income towards the cost of providing services.
It is just that the Colonnades looks like a very bad buy.
Financial difficulties saw the City Limits leisure complex on the site forced to close in 2010.
The centre is so poorly visited that the Gypsy Moth, the Harvester-style pub and restaurant on the site, was shut at the end of 2017 due to poor business. Footfall is so poor, the 289 bus doesn’t go there any more, though groups of travellers have been known to park up in the Colonnades from time to time.
Why Croydon Council would want to go into the retail and leisure centre business, just at a time when it continues to subsidise Boozepark and is cheerleading for the development of the £1.4billion rival Westfield shopping mall just up the road, also defies business wisdom.
The timing looks to be wrong, too, under any rational analysis of the retail sector.
In a report on under-threat, smaller scale retail centres published today by the the National Retail Research Knowledge Exchange Centre, it says that Britain has “an excess of shopping centres with similar retail offerings”.
Nelson Blackley of the NRRKEC told the BBC, “We have too many of them, doing exactly the same – the same range of stores and products – and basically that’s not attractive. New data suggests over 200 shopping centres in the UK are in danger of falling into administration, unless their owners secure fresh funding.”
The £53million price tag on the Colonnades looks steep, too.
Just two years ago, just up the road on the other side of the Purley Way, a tract of industrial estate changed hands in a £45.6million property deal. LaSalle Investment Management bought Purley Way Retail Park – which includes various light industry buildings, warehouses and stores, such as Currys and PC World – and was fully occupied.
The Colonnades last changed hands two years ago, when an unnamed London property firm bought the freehold for 160,000 sq ft of property from an Italian investment trust.
The site’s tenants include Pizza Hut, Premier Inn and McDonald’s. A trampoline park has moved in there recently, filling the long-vacant bowling alley space. Until it closed eight years ago, the City Limits leisure park also included a Laser Quest zone, amusement arcade and sports bar and night club.
The council’s announcement this morning claimed, “The site currently has nine units, with an additional three being constructed to further enhance the facilities.
“The purchase is in two phases; the first will be for the nine existing units and the second, anticipated in May 2019, when the three additional units are completed and are generating income. The initial sale will include an obligation for the council to purchase the second phase of the estate development.
“A combined purchase price of £53million has been agreed.”
The council adds, “Additional income-generating opportunities have been identified that could further enhance the value of the asset,” though they fail to specify what those “income-generating opportunities” might be.
The council states: “It is anticipated the purchase will provide an annual income of around £1.4million, net of interest and other costs. This will help to protect local services for residents. It is the first purchase since a £100million fund was approved as part of the Asset Investment Strategy signed off by the council last month.
“It is proposed the existing companies providing estate and asset management services for the estate will be retained and help develop further opportunities within the portfolio.”
According to Simon Hall, the Labour-run council’s cabinet member for finance, “We’re investing in our borough, for our borough.
“This is a solid investment on a well-performing asset, enabling us to bring in additional income to fund core services. As government grant funding for local authorities remains uncertain, we’re doing what we can to ensure we can provide services our residents expect and deserve.”
Let’s hope that those retailing experts and analysts quoted by the BBC are wrong, then, and Cllr Hall is right. Otherwise you can guess who will end up picking up the bill…
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