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House of Fraser closures pose problems for council developments

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  • by Colin Marrs
  • in 151 News · Development
  • — 13 Jun, 2018

Two councils investing in town centre regeneration schemes face redevelopment headaches after House of Fraser announced it is to embark on a far-reaching store closure programme.

The department store chain announced last week that it is to close 31 stores as part of a rescue plan for the business.

Finance officials at Surrey Heath Borough Council along with Cheshire West and Chester Council now face reworking business plans for town centre schemes which involved House of Fraser.


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In December, Surrey Heath invested in an 11,000m² House of Fraser store in Camberley for £17.6m, hoping to use some of the 5.75% rental yield to fund council services.

Following House of Fraser’s rescue plan, the authority played down the importance of rental yield in its decision to purchase the property.

A joint statement by Karen Whelan, the council’s chief executive, and Moira Gibson, the council leader, said the council acquired the freehold site as part of the “wider regeneration” of Camberley.

A report last year said that in addition to the regeneration benefits, the authority hoped to make £2.1m, before loan repayments, from this and a separate purchase of a neighbouring shopping centre.

“Whilst being disappointed by the news, because Surrey Heath is in control of the freehold of this site, like other sites we have bought, it enables us to continue our regeneration proposals by being able to move forward more flexibly and agilely with solutions,” the statement said.

The council has had its fingers burnt with a previous shopping centre investment — The Atrium — which opened in its town centre in 2008.

The council’s statement of accounts for 2012–13 show that it was forced to dip into reserves to find £300,000 “to support the rental income from the Atrium which only achieved 25% of what was originally predicted due to the economic climate”.

House of Fraser’s troubles have also hit the plans for a £300m investment by Cheshire West and Chester Council in the Northgate shopping centre in Chester.

In October last year, an officer’s report to the council warned that the scale of the project “brings with it substantial risks”.

Because of the risks, the report said, construction on the project would only begin after the store, and a cinema chain signed an unconditional lease for occupation.

The same report said that scrapping the scheme would mean that the council would have to write off £57m in site assembly and other costs.

However, Samantha Dixon, leader of the council, said that the authority would reflect on the impact of the “disappointing” House of Fraser news.

She said: “The retail element of the scheme is scheduled to be delivered in the second phase of the development and so House of Fraser’s decision at this point does not fundamentally undermine our ambition to see the comprehensive redevelopment of this vital part of the city.”

Speaking to Room151, Charlie Barke, capital markets partner at property consultancy Knight Frank, said there remained a strong case for local authorities to invest in retail assets, despite House of Fraser’s decision.

He said: “Yes, the market is going through a turbulent time, but proactive ownership is necessary to protect our town centres, and who better to steer that course of action than the local authority?”

“Looking at the example in Camberley, of course it will be disappointing for Surrey Heath if they do lose the tenant but this property forms just a small part of their wider investment in the town.

“Arguably, you are better to own such an asset and be in control of its re-letting, or redevelopment, rather than leave it in the hands of a third party who may not be willing, or able, to take a course of action that is in the best interests of the wider area”.

He said that councils need to obtain specialist advice when acquiring commercial property and appoint external managers to run them post-acquisition.

House of Fraser creditors will vote on the store closure programme on 22 June, with 75% support needed for it to go ahead.

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