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Should Cherwell District Council be Risking Public Money Buying Shopping Centres?

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As I said in the recent election debate on the BBC, in my opinion they shouldn’t.

There are many reasons it’s a bad idea, both from a business perspective and as part of local spending priorities.

I’ve worked in retail nearly all my life.  I built and ran a national chain of jewellery stores across the country and traded in several shopping centres, including some of the most prestigious in the country such as Bluewater in Kent and the new Bullring Centre in Birmingham.  I write a regular column for Retail week Magazine and comment regularly in the national press on retail issues as well as offering consultancy services.  One of my main focusses is independent retail and commercial property.  So I know a little bit about what I’m talking about.

Cherwell District Council (CDC) leader Barry Wood claims that buying the Castle Quay Shopping Centre in Banbury is a good deal for the people of Cherwell.  This decision was also backed by the Labour group on the council and their leader Sean Woodcock has assured me there’s a good business case for doing it.  Unfortunately neither of them have been able to show it to me so far.

Their belief is that buying a commercial property like a shopping centre is a good idea as property will always rise in value.  This may be the case for domestic property and some kinds of commercial premises, but not always with retail space.

A Good Investment?

The argument for buying the scheme seems to be that if they hadn’t, the centre would have shut down.  It has many long term empty units and is generally struggling to compete in an ever crowded marketplace.  The council’s decision a few years ago to allow a new shopping park to open on the outskirts of Banbury haven’t helped its plight.

It’s extremely unlikely though that it would have closed down.  Much more likely that it would have been offloaded by its pension investment owners to another investment company with more experience of running a shopping centre than some local councillors.

Moreover, if the argument is that the centre was about to collapse, that doesn’t exactly make it an attractive investment for public money does it?

There have been some shopping centre failures in the past, but they are few and far between.  But when they do go, they tend to go completely.  That means an almost total loss for anyone unlucky enough to be the owner at the time.  There will be some residual value in the land, but that’s unlikely to reflect the full price paid for the whole development.

There have been a growing number of retail failures in recent years with 650 collapses so far this year alone, and we’re not even half way through yet!  Some of them very high profile and heavily leveraged operations.  Others are busy negotiating partial closures and rent reductions with their landlords.  Others are moving more into the online arena and abandoning physical retail space almost altogether.

None of this bodes well for an under-let, under-invested and down at heel shopping centre in a struggling town in North Oxfordshire.

So essentially CDC are gambling with public money against the odds.  And it doesn’t end there.

Other Costs

According to Barry Wood the scheme is turning a profit at the moment, but as I’ve said previously, I’ve not seen evidence of that.  I have seen a large number of long term voids in the centre, and with the potential for these to increase in number I fear the profitability may be marginal or likely to decline.

There will also be ongoing running costs for the centre and presumably additional investment to do whatever it is with the place that they feel will revitalise it.  Again details on that are sketchy, but I think there’s some talk about dividing the larger units into smaller ones to attract independent retailers.  Whilst I support that idea to some extent there are a lot of things to consider about that course of action.

Firstly the cost of doing the work, which may include major re-modelling of the units due to, amongst other things, fire regulations.  I’ve seen at least one shopping centre management come unstuck with similar plans due to rules on access to fire exit routes.

Helping Smaller Retailers?

Secondly smaller independents usually don’t have a huge budget for shopfitting, so there will be additional cost in partially fitting out the units, including new shopfronts etc to attract smaller operators and to ensure that their stores fit in with a modern shopping centre scheme.

Business Rates

Thirdly there’s the loss of business rates on the empty units that are there now, and will most likely be there for a while.  Considering the current climate in retail there’s also a good chance that voids could increase.  At the moment the landlords will be paying rates on those premises even though they’re empty and a good deal of that money goes to CDC.  With the council now being the landlords, they’re going to be paying the rates to themselves, effectively wiping out that income.

Devaluation of the Asset

Finally there’s the issue of valuation.  Shopping developments are broadly valued on their rental potential.  This is why landlords will leave units empty rather than let them out at a reduced rent.  If the council’s plan is to lower the rent for smaller or other retailers, that will have a knock on effect on the value of those units and then on others when rent reviews come around.  Other tenants now paying a higher rent will also push for a reduction when their leases come up for renewal or rent reviews are due or maybe even before.

The net effect of this would be to push down rents, not only in the centre but across the town, reducing loan to asset values across the board.  In broad terms I’d welcome that.  I’ve long argued that retail property values are hugely inflated.  But in terms of the Council’s investment exposure in Castle Quay it’s a potentially dangerous situation, not only leading to a potential devaluation of the asset, but also any loans secured on it being partially called in.

There may be some balancing in terms of appreciation on the total asset value, but in the current climate and in a falling retail market, there a very good chance that the overall value of the scheme will fall relative to the amount the council has sunk into it, both as an initial investment and any further day to day expenditure.

All of this appears to have passed Cherwell Councillors and the leaders of Labour and the Conservatives by.  They obviously have a very patchy understanding of how retail property works and the implications and pitfalls they are letting us all as council tax payers in for.

Moreover there’s the question of if so much money should be focussed in the north of the district while ignoring other areas.  Mr Wood commented in the Radio debate on Wednesday that he recognised that there were empty units in Pioneer Square in Bicester and that it was difficult to get them filled.  Yet this doesn’t seem to have concerned him over the purchase of Castle Quay.  Indeed, having set the precedent in Banbury I asked him during the debate if the council intended to buy Pioneer Square as well.  He didn’t reply.

Other Options

A more sensible and prudent approach to the problems in both areas would be to work with the landlords rather than bailing them out with public money.  Leave them with the risk whilst introducing local initiatives that help smaller retailers get a foothold and would also support the centre.

These could include rates reductions, which Barry Wood dismissed out of hand when I challenged him on it during the election debate.  Neither he nor Sean Woodcock appeared to know that it has been within the gift of local councils to reduce rates on specific properties at their discretion for several years now.

If they wanted to provide smaller, more affordable space for independent retailers, they could lease units from the centres on a medium to long term basis, probably negotiating favourable terms with the landlords as a council will have a very good covenant.  These could then be divided up (if required) and then sublet on flexible terms on reduced rents to retailers, although this would have to be agreed beforehand with the landlord for the same reasons discussed above concerning rental levels and valuations.

This would achieve the same aim of revitalising schemes both in Banbury and Bicester and would not involve the council in risking large amounts of public money.  It would also mean that the bulk of the £60m they are now tying up in one area could be spread across the district.

This is the kind of strategic thinking we need, rather that the amateurish speculation of a council who seems to want to play at being shopkeepers with our money.  This is why we need a more diverse representation on the council and councillors like me who will challenge these misguided moves before millions of pounds of desperately needed council funds are put at risk.

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North Oxfordshire Green Party Announces Candidate For June’s Snap Election

At their selection meeting on 3rd May the North Oxfordshire Green Party unanimously re-nominated Ian Middleton to contest the Banbury Constituency seat for the second time.

Ian stood for the Greens in Banbury in 2015 when the Green vote was almost tripled against the 2010 result.  The party gained 2686 votes giving them 4.6% of the vote up from 1.7% in 2010.  He is a former musician, writer and ethical entrepreneur who  spent 25 years in the retail sector building a national high street retail business which moved exclusively online in 2015.  He has campaigned in the past for issues as diverse as fair business rates for small businesses to animal rights and now writes on politics, the environment and business for Huffington Post and Retail Week Magazine.  Ian Says :

“I’m honoured to have been chosen to stand in North Oxfordshire again.  I feel I learnt a lot from the last campaign and I’m looking forward to having a second opportunity to put forward the case for a progressive Green future”

“My priorities for this election are the NHS, Education, Housing, the environment and Brexit”

“Theresa May called this election for purely opportunistic reasons.  She claims to offer strength and stability yet throws the country into turmoil just as the clock starts ticking on Brexit negotiations.  Whilst our changed relationship with Europe is one of the most important issues we’ve faced for a generation, we’ve also had 2 years to see what the Conservative Party has done to health, education and housing and it’s not a pretty sight.

The NHS in particular is facing an existential crisis with yet another round of swingeing cuts being imposed by further Conservative in the guise of sustainability.  Already we’ve seen the results with the closure of full maternity services at the Horton and warnings from the Oxfordshire CCG that we stand to lose hundreds of beds across the county.  This may be the last chance to save our wonderful NHS before the Conservatives achieve their ultimate goal of slashing services and privatising what’s left.

Theresa May wants this election to be all about Brexit, I think we should be holding her party to account for it’s appalling record so far.  We have a chance to end their iniquitous and self serving reign now, before it’s too late”

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Thank You

thatsthat-reducedHaving mostly recovered from last week’s final exertions I’ve now had time to take stock of The Green Party’s performance in the Banbury Constituency and I have to say I’m very pleased with the result.

I am disappointed that we missed retaining our deposit by only 225 votes, but I think we have ample recompense in the fact that we nearly tripled our vote share from 2010! Indeed in Oxfordshire as a whole we retained 4 out of 6 deposits and showed voter shares up to 9.2% and in one local result we actually came second! Well done to Jenny Tamblyn!

In Banbury itself we knew we were never going to win, but we largely achieved the goal we had set ourselves of raising our profile in the constituency and showing people that the Green Party is the rightful repository of support from anyone concerned about real social justice and progressive politics.

Nationally, The Green Party has seen over a million people demonstrating that voting for what you believe in is never a waste of time.  Our share of the vote was nearly 4 times what it was in 2010 and our membership increased by nearly 2000 in the two days after the election.  In Oxfordshire we’ve had 56 new members in the last 2 days!

We now need to build on that support and engage more than ever with a local and national dialogue about how we want to see our society shaped for the future. The Greens have always been a party with long term vision and I think, as the next 5 years unfold, that vision is going to be needed more than ever.

In the meantime I’d like to thank all the Green supporters in the constituency that voted for me, and those who campaigned for me, put up posters, leafleted, knocked on doors and stood in the street with me. You’re some of the unsung heroes of this campaign and you should be rightly proud of your achievement.

My gratitude of course also goes out to my dedicated campaign team and members of The Banbury and Cherwell Green Party branch. In particular my agent and campaign manager John Haywood, researcher and adviser Colin Clark, our Chairman Chris Manley, the irrepressible Lisa Miller for her exertions on Facebook, and all those others too numerous to mention who have worked so hard over the last 5 years to get us where we are now.

A special thank you goes to our press officer and my partner Fiona Mawson, who’s practical and emotional support was invaluable to me throughout the campaign, even though she beat me in the local elections!

After the result of the general election we now more than ever need to see a continuation of the Green surge to offer the people of Britain an alternative to the Conservative agenda of austerity and cuts and the holding of the poor and vulnerable to ransom to pay for the lifestyles of the rich and privileged.

Moreover we need to re-double our efforts to protect our cherished NHS from the clutches of private healthcare providers that will now be given a free reign by a government ideologically opposed to free and comprehensive state health provision.

I’ll remain as our Prospective Parliamentary Candidate (PPC) for the foreseeable future, unless my circumstances change or the local branch decide they want or need someone new.  So I’ll be keeping this website up and running as a place for me to drop the occasional post about local, national and global Green issues.  I hope people will choose to engage with me on them during that time.

If you’d like to read more I have two other blogs you might like to follow.  One on specific retail matters

fiftyshadesofretail.wordpress.com

and another on general political and human and animal rights issues

wavinganddrowning.wordpress.com

I also write regularly for Huffington Post

www.huffingtonpost.co.uk/ian-middleton

I hope we can keep the conversations going through what I think will be some very challenging years to come

Regardless of our differing ideologies I’m never one to miss an opportunity to quote Churchill in circumstances like these, so I’ll leave you with his well known words –

“This isn’t the end, it isn’t even the beginning of the end, but it might just be the end of the beginning”

Thanks again

Ian