CROYDON IN CRISIS: The Government-enforced fire sale of council assets is about to see the borough lose even more money, on a commercial property that has been making millions for the borough.
EXCLUSIVE by STEVEN DOWNES
Sales pitch: how the decision to sell the Colonnades – ‘ asset disposal’ – appears in council reports
Croydon’s Mayor and Tory councillors, egged on by their Conservative chums in Westminster, appear determined to prove that they can lose public money at the cash-strapped council just as incompetently as their Labour predecessors.
The council is flogging off the Colonnades leisure park off the Purley Way for around £25million less than the council paid for the property just four years ago.
Official documents even admit that the handling of the sale has been a bit of a council cock-up, as they seek to rush through the decision: “An administrative error setting the decision status to ‘Abandoned’ has given need for the decision to be republished on the Forward Plan under Special Urgency procedures,” says one of the annexes to a report from Jane West, the council’s finance director.
“The decision is time sensitive as legals have been agreed by both parties and the council is now in a position to exchange.”
It needs to be emphasised here that Mayor Jason Perry and his Conservative colleagues on the council have absolutely no control over major financial decisions affecting the borough, and that the move to sell the Colonnades will have been approved by the Whitehall-appointed commissioners on the so-called “improvement and assurance panel”, chaired by Tony McArdle.
The price is right: how the Colonnades sale price appears in the Savills brochure
The council papers say that they received at least eight bids for a commercial property that the sales brochure claims is making £2.8million per year in rents – double what the council anticipated when making the initial purchase just five years ago.
Clearly, property speculators believe there’s some serious profits to be made from the cut-price sale.
The council is being stupidly coy about the sale price, keeping it all under wraps in secret “Part B” official reports. Meanwhile their agents, Savills, have distributed a sales brochure in which they “invite offers in excess of” £35.5million.
The income from the sale will be used towards staunching the black hole in the council’s budget this year, but will barely touch the £1.3billion mountain of debt that remains to be serviced.
Pays the rents: apart from lockdown year 2020, the Colonnades has proved ‘a nice little earner’ for Croydon Council
Buying the Colonnades cost Croydon Council a total of £61.5million, according to Land Registry records.
The council’s purchase was made in two phases: £53million (including VAT) for the majority of the site in October 2018, then another £8.45million in August 2019 for three new units that are now occupied by McDonald’s, Nando’s and KFC.
With its Premier Inn and one-time bowling alley (since reconfigured into a trampoline park), the Colonnades was originally operated by Punch Taverns. It boasts the country’s first (only?) drive-through Costa Coffee shop.
When making the purchase, the council argued that the rental income from the centre would go towards meeting the costs of delivering council services. “We’re investing in our borough, for our borough,” was the line peddled by Simon Hall, the cabinet member for finance at the time, who described the Colonnades as “a solid investment”.
Hall, of course, was forced to resign as a councillor in 2021, as the vast amounts of borrowing he had committed the council to had brought about its financial collapse. Nearly three years later, he remains suspended by the Labour Party, but has been subject to no other disciplinary processes for his role in the borough’s bankruptcy.
Speculate: ex-councillor Simon Hall:
The Colonnades has remained a going concern, a “nice little earner”, to coin a phrase, and could have continued to do so for the council for many years to come. The site may now prove attractive to residential property developers, who might consider the juicy profits that could be made from building up to 600 flats on the site, next to Purley Way Playing Fields.
The sales spiel in the council’s official report states: “The Colonnades Retail and Leisure Park provides 174,362 sq ft of modern retail warehouse and leisure accommodation arranged over a two level terrace, a hotel, a modern three restaurant unit and two single restaurant pods.
“The main terrace provides retail warehouse and leisure accommodation across ground and first floors and is currently occupied by Nuffield Health, Kidspace, Oxygen Freejumping and Wickes. In the northeast corner of the site there is an 81-room Premier Inn which reports high levels of occupancy through the week and weekend.
“In 2019 three new restaurant units (one with a drive-thru lane) were constructed and are now occupied by McDonald’s, Nando’s and KFC. Costa and Pizza Hut occupy purpose-built units in the car park, with Costa benefiting from a drive-thru lane.
“There are two vacant units within the main terrace at ground floor level. Car parking is located to the front of the units. There are a total of 480 car parking spaces…”
Fast food city: the Colonnades, where people can go in their cars to eat Big Macs, fried chicken or pizzas, and then drive-through a coffee shop
West’s recommendations in her report, under powers delegated to her by Mayor Perry, come into force on Wednesday, October 18, unless the decision is “called in”.
“This report recommends the disposal of the freehold of The Colonnades. The objectives for the disposal were to secure maximum receipts, achieve bids that were on an unconditional basis with the lowest possible transactional risk and to target capital receipts with the preferred bidder by the end of the calendar year,” the report states.
Hard sell: how the Colonnades appears in the Savills’ brochure
The sale of the Colonnades follows the disposal of another ill-considered commercial investment by the council, the Croydon Park Hotel.
Hall and his boss, the discredited former council leader, Tony Newman, managed to push through a dodgy deal to buy the hotel, near East Croydon Station, for £5million more than the actual asking price.
The hotel, which went out of business in 2020, is now being demolished to make way for hundreds more town centre flats, with a private business making potentially huge profits by doing what Croydon Council failed to do.
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I am wondering what they will eventually return, when the final deal is done on the disposal and subsequent occupancy of Red Clover Gardens, in Lion Green road Coulsdon.
The distinct lack of disclosure and clarity on the proposed revised bid is a shameful stain on this Conservative administration.
Ironically, when I questioned a Conservative councillor over the matter, he told me to ignore the published statement made in July 2023 by Croydon Conservatives.
However, don’t worry, “ The money is real and due diligence, had been undertaken”
Possibly a stash left in a bus shelter somewhere in the Borough🤔
Labour buy things for more than they are worth
Conservatives sell things for less than they are worth
Doesn’t matter if it is red or blue, it’s Croydon residents who lose out.
If you keep voting for the same old parties then you will just get the same old politics. If you want something better, vote Green.
Actually in this case Hall was right – perhaps broken clock right, but still right. 2.8 million is a shade over the 4% basic return on investment and that has been without tapping the overhead development potential. Even with inflation killing that return which is a Conservative fault – I am not seeing any Labour screw up here except poor implentation anf a failure to see the project through to fruition.
It might be good to keep banging on about both parties from a political view but this is one that may not quite fit that narative.
Th real question here is why are Central Government ensuring they realise a loss when it has little business benefit?
This again comes across as a contrived financial straightjacket for political purpose. Again the one that are paying this bill is Croydon Residents and Taxpayers and again we are denied any say in that decision.
So the Greens are now the part of business??? I think not,
They couldn’t organise a fuck up in a Durex factory. They’ve been watching Brewster’s Millions too often.
The Labour council should never have bought a retail estate. It is not an appropriate investment for any Council. They paid too much at the top of the market. Retail yields on sale have risen and prices dropped because buyers want more protection against occupancy dropping, reflecting the economic pressures currently affecting retail. Croydon are so heavily in hock that despite a weak market they have to sell.
Sorry not seeing that at all. They paid the market price for the long term £65m then was the cost.
That area has potential to build 600-700 homes on leases of average £350k at a rough cost of £80 – 100 million build cost and the land price the sums give at least a £40m profit that will generate a further £1m in rates and with better facilities the rents and rates would increase from the commercial side ot £3m and rising. – Show me anywhere in croydon that has occupancy falling?
The last part that the Borough is in hock is correct. The Market is not weak its a known desperate sell and few trust Croydon Ciuncil with its issues around planning and development. Stick that on an open market with outline agree planning permission and see the real bids tha are made then.
That there is a buyer (and more than one) shows there is a profitable opportunity.
This sale is a forced sale to buff Central coffers and Croydon can go fiddle with itself as Central Government are happy to have someone else to blame for their stupidity.
If you cannot see vacant retail premises in Croydon perhaps you do not go there any more. Allders, now Sainsburys, and Whitgift Foundation made £40m provisions against the value of their portfolio.
Croydon Conservatives getting close to the same financial mismanagement as Labour if, as is suggested in this article, the Colonnades has been sold at an 8% yield. There is also uplift value for the purchaser from likely planning approvals for housing flats here. A council that is telling residents that it can no longer provide in person access to services needs to save every penny or indeed many millions that it continues to mislay.
It was a terrible decision by Labour to spend over the odds for a retail site which they predicted would get less than 3% yield, a bunch of incompetents that were deluded enough to think they knew anything about business. There didn’t seem to be any plan at all when they made this vast investment. Now it’s unacceptable the Tories are planning to sell this site for a huge loss. Seems like even one extreme or another going on at Croydon Council, they all seem utterly hopeless.
I think there are quite a few drive-thru [sic] Costas.
Ahh. But Croydon’s was the first! A pit stop on the Purley Way
As usual, thorough and incisive investigating from Inside Croydon that you’ll NEVER see in the “local” newspapers owned by Reach plc with their client journalists who report the company line…