A shopping center bought by a Kent municipality for £154million has fallen in value by more than 50%.
Canterbury City Council’s purchase of Whitefriars between 2016 and 2018 was its biggest property acquisition ever and bosses hailed the “wise” move.
However, recent reviews from the site – which features chains like Next, Fenwick and HMV – show their value has plummeted by almost £80m over the last four years.
Leaders of the ruling Conservative group insist the deal was a success, arguing its market value is irrelevant as the agency has no intention of selling the complex.
Still, concerned critics have branded the revelations scandalous and fear it will precede a fall in the city’s rental income from the mall.
Lib Dem councilor Mike Sole told KentOnline: “It’s absolutely shocking.
‘There was no need to buy Whitefriars. It was unwise.
“Rather than borrowing the money to fund a loss, we could have borrowed money to invest in the district – we could have built public housing, improved services, lowered parking fees.
“It was bought to generate rental income for the community.
“Only those from whom we bought it benefit.”
When City Council bought Whitefriars – paid for mostly with loans – then-Chairman Simon Cook, who later lost his seat, said it was another step towards becoming more ‘self-sufficient’ for the authority.
It was also stressed that the acquisition would represent a lucrative long-term investment for the district, especially 23 years from now when the loans will be repaid.
“Whitefriars’ valuation has fallen but it’s not for sale…”
Senior Tory Rachel Carnac revealed the fall in value during last week’s full council meeting, explaining that the valuation had fallen to £75.25m by the end of March last year.
Assessments of the site, conducted four months ago, show that the price has remained flat, which Reculver City Council says “indicates stabilization”.
Responding to Cllr Sole’s concerns, she said: “Obviously Mike’s campaign.
“Whitefriars was never paid for with council tax money; It was borrowed with money that will be repaid with income from its rents, which also provide income for services such as parking.
“Whitefriars’ valuation has fallen but it is not for sale.
“It’s a paper value that has fallen and held up.”
The Covid crisis has devastated retail and forced some shopping complexes across the country into administration.
Within five months of the first lockdown, Whitefriars’ value had already plummeted by £46million.
Cllr Sole wonders if future rental income will cover the huge repayments and what will happen if store units become empty while online shopping continues to grow.
Rental income was already starting to fall before the coronavirus outbreak, from £8.25m in 2018/19 to £7.4m in 2019/20.
“Up until March 2020, before the pandemic, Whitefriars rental income was above expectations…”
Figures show they slumped further to £3.6m in 2020/21 before recovering slightly the following year with profits rising to £5.4m.
Cllr Carnac also claims that its vacancy rate plateauing at 10% this year – versus a national average of 16% – is an encouraging sign. The vacancy rate before the pandemic was 6%.
“It’s hard to say if rents will ever get back to where they were five, six, seven years ago – but I don’t think the picture is as bleak as Mike is predicting,” added the council’s vice president.
“Up until March 2020, before the pandemic, Whitefriars rental income was above expectations.
“Income surpluses have been set aside to cover future fluctuations in income. This was used in 2021 to compensate for lost revenue and will be used again in 2022.
“Retailers continue to show their confidence in Whitefriars – something we are very proud of and shows the resilience of this district and its people coming through the pandemic.
“Parts of it will be rededicated because the municipal office will move there from the end of 2023.
“There’s also a lot of interest, not just from retail, but also from the office and health and fitness sectors.”
Whitefriars – which now employs up to 1,200 retail staff – was built in 2005, with Fenwick as its flagship store.
It was sold in 2007 by Land Securities for £253m to Henderson Global Investors – later TH Real Estate – and the Canada Pension Plan Investment Board as part of a 50/50 venture.
The Authority already owned the land but bought the first 50% of the retail center from the Pensions Authority for £79million in 2016, a move that received full bipartisan support.
A deal for the remaining £75m was agreed with TH Real Estate four years ago.