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.
Now council-owned: the £53m Colonnades, off the Purley Way
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.
Even the asset manager in charge of the property described it as “unloved”.
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 Oxygen trampoline park has moved in to the Colonnades recently
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.
Simon Hall: ‘investing in our borough’
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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Assuming the money is borrowed on a maturity basis for 30 years, then the interest will be £1.542m per annum based on today’s PWLB rate of 2.91%. They say it will generate a net surplus after interest of interest and other costs, so they will need to get a minimum of £3m in rent. Sounds like a lot for such a poorly used venue.
Hopefully it won’t end up costing us taxpayers as much as the council’s last venture on that site – the infamous Water Palace.
The history of this site is worth noting. Back In the late 1980s/early 1990s the Council built the Water Palace Leisure complex on part of the Purley Way playing fields. It was a design, build and operate contract that the operator walked away from. The Council were left with a white elephant that was knocked down, site sold and replaced with The Colonnades.
I doubt if the land sale recouped the cost of the building. Thus for the second time the Council are obtaining control of the site but this time at a significant cost.
As the article says investment in retail and the like must be seen as risky in the current climate and there are almost daily reminders in the media of the demise of this sector.
I must admit that I miss the Water Palace: it was the only facility that ever got me to do anything sportive! It may not have been profitable, but it always seemed busy.
The only way this purchase can make any ounce of sense is if those in the Croydon Council purchasing department have had a word with the Planning department. A nod and a wink to the development of say 200 flats and Croydon Council will possibly make a few quid.
Sounds a very silly deal to me.
It must be encouraging for those who seek a better life for all, that an American style highway-side mall is unpopular with the public.
These abysmal non-places, with their predictable line up of chain eateries, should never have been been given planning permission.
The Water-palace itself was a failure, probably due to location out on the edge of the town, and its huge size, like a Center Parcs, when most people just wanted to go for a swim. .
I would like to see the whole thing knocked down and replaced with a new selective grammar school for children from out-of-borough !! ……….. excuse me, a Freudian slip of the keyboard digit there…….No, what I meant to say is , replaced with ………….. er………. what?
Flats? Hotel ? ……..or a warehouse style housing complex for homeless people, based on the concept of those Japanese pod hotels ? Solve the rough sleeper crisis in one fell swoop !
A multi-storey vertical cemetery, modelled on the concept of a storage unit building where , for 75 years, your remains can be stored (prior to recycling) , with virtual reality holograms so that you can talk with your loved ones when ever they visit? Thereby solving Croydon’s burial needs for the next 500 years.
No, I.ve got it…… a new council recycling centre allowing the good folk of Croydon to go and get rid of their recyclables and garden waste. Redevelop the Purley Oaks depot for housing and a small park . Make a modest profit
Eureka!.
Madness, madness, madness, madness and then more madness. The Colonnades is a doomed retail graveyard destined to suck and destroy money from whichever source decides to become associated with it. I go there most days, to the Nuffield Gym, and its the gym and only the gym that is consistently busy. All the rest, including the mini-Mcdonalds, has a dribble of occasional custom. Costa Coffee is the exception and that is only because it is situated by half the parking. What on earth are they going to to with the space? One guess: one way or another hand it over to Brick by Brick which will wreak its residential magic thereupon….in other words, nothing for a long time and then nothing successful. At least our Council is consistent. Silly ideas followed by failure…always.
All down to greed and hidden agendas. Parkside is already leaving us with half truths on the extent of the scheme, which is bigger than we were led to believe.Who gets the Back handers and benefits, not us.Wyevale Garden Centre is closing, what will they do with the grounds which has a listed diving board. We do not need housing there. The traffic is already horrendous on Waddon Way due to being a rat run.Footballers take over the weekend with their inconsiderate parking on both sides of the road and also on the bends.The ambulances have trouble getting through already, there is an ambulance station on Waddon Way which should have priorities.Numerous calls to Croydon Council due to footballers parking.
It’s interesting reading the comments how people only view the one or two facilities they themselves use as the busy or successful ones. People clearly haven’t queued to the door in the McDonalds, circled the car park looking for a space to visit Wickes or seen the hundreds of kids bouncing away at Oxygen during school holidays. McDonalds are supposedly expanding and moving to the larger plot where Gypsy Moth used to be (which WAS terrible if you ever had the misfortune to eat there, so not surprised it closed due to lack of custom) so clearly think the site has a good future. I think it’s a great little complex with a good mixture of facilities (Gym, food, kids entertainment and retail) and now it’s in public ownership it’s in all best interests that it’s a success.
I go to the Colonnades every day and have never seen the crowds as described….only once or twice at weekends.
Interesting to see the range of views above, and that some Inside Croydon contributors use the Colonnades facilities. Interesting too to read that Wyevale are to close the Garden centre. (sad for customers like me, and for the staff) .
We should be very mindful of the employment benefits of the Colonnades when looking at the future options. I am also wondering if Croydon will vet future tenants to exclude perceived “junk food” outlets ?
With the Purley Way playing fields nearby, potential housing development in these sites could be linked to create a green setting for new houses, far better and healthier than large swathes of Croydon where there is no open space to cleanse the air breathed by residents. So maybe we should look seriously at the housing potential as well as commercial.
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