Cherwell 'has lost £47m' on Banbury shopping centre and council tax payers are losing services to fund interest charges - Green councillor says
This is the accusation of Green Councillor Ian Middleton who has raised concerns about Cherwell District Council's investment in Banbury' s Castle Quay Shopping Centre.
The council says the valuation reflects the national market, which has been sharply affected by the pandemic and because it is not planning to sell the centre, it does not have a direct financial impact on the council.
A major extension to the centre - the Waterside development - saw the opening of a Lidl supermarket and a motel. The council hopes the development will revitalise the shopping mall which has seen Marks and Spencer, Debenhams and BHS move out in recent years.
Mr Middleton, a business journalist and retail analyst, said the shopping centre's losses were listed at £1.6m in the last budget announcement.
He now says the council's annual financial statements show the shopping centre is now worth less than a third of what the council paid for it three years ago.
"This represents a further loss in value of this asset over the past year of around £13m," he said.
"The council already owned a 15 per cent share of the shopping centre when they paid around £58m for the remaining portion in 2018. This values the whole deal at around £68m. Since then it has continued to haemorrhage retailers with major anchor stores such as Marks and Spencer's, BHS and Debenhams now long gone.
"Waterside, with an estimated cost of another £60m, takes the council's overall investment in the site to around £130m. It has been touted by Cherwell's Conservative leadership as being the key to revitalising the shopping centre."
Mr Middleton referred to the council's 2020/21 statement of accounts which show the shopping centre has now been valued at £21.6m, a cumulative loss in equity of around £47m, he says.
"The council used government borrowing to finance the purchase of the centre, with interest rates at the time suggesting they are currently paying in the region of £2m in interest per year, representing an effective interest rate of 10 per cent on this heavily devalued asset.
"The council leadership seems remarkably relaxed about a £47m total loss in equity which I think is going to be nigh on impossible to recover now. If they had financed this on a commercial basis, I don't doubt the lenders would be calling in a large portion of the debt. But as it's effectively underwritten by council tax payers, the council seems to have a rather blasé attitude about it.
"The supposed revitalisation of the town, promised as part of the original purchase in 2018, shows little sign of materialising. Instead everyone pays for it through higher council tax and reduced services. Given the council's fragile financial state at the moment, I would think there would be more concern over how this will impact on next year's budget," he said.
Mr Middleton also questioned a decision to ditch six or seven restaurants initially planned in favour of a bowling alley which Banbury already has.
"It really makes very little sense. The building of an hotel also seems incongruous when Cherwell is crying out for affordable housing. That site could easily have been used for a socially rented apartment block rather than another chain hotel. I don't see how an area that will be predominantly anchored in the night-time economy is going to help stores which will presumably be closed at night.
"With 18 empty units all major anchor stores gone and a plummeting asset value, there seems to be no realistic exit strategy that won't leave Cherwell residents footing the bill for decades to come."
A spokesman for the council said: "The shopping centre was bought to ensure a valuable town centre asset was protected for our residents and only secondarily as an investment. Rental income is still being received and this is not impacted by the valuation. The £2m interest referenced on borrowing relates to the sum total of all of the council’s borrowing and not specifically to Castle Quay Shopping Centre and Castle Quay Waterfront."
The council says having control of the site has allowed it to regenerate the canalside quickly and attract visitors. The development has resulted in more enquiries, it says. And a new cinema next Easter will offer eight screens and ten lanes of bowling with a sun terrace.
"Several restaurants will open at the beginning of next year, all of which will create a new leisure destination in Banbury. Increased parking and improved access have been provided including a new pedestrian bridge over the canal," the spokesman said.
The council says some vacant stores in Castle Quay cannot be filled until their legal agreements end. And national brands have been closing nationwide because of the pandemic.
"The Council has focussed on re-purposing units including the former BHS department store into Lock29, an independent food, drink and lifestyle destination which is virtually fully let and it is exploring opportunities to do the same elsewhere. Tenant interest in Castle Quay remains very positive.
"Banbury is in a much stronger position than many other towns because of the Council’s decision to purchase and develop Castle Quay. While many UK shopping centres are struggling following the pandemic, Banbury is bouncing back with footfall continuing to increase every week. Castle Quay Waterfront will sustain and enhance the economic, social and environmental performance of Banbury and increase its attractiveness to businesses, investors, residents and visitors, whether for leisure, tourism, culture or to work.
"Our investment in Castle Quay is not about money, it’s about promoting regeneration and supporting the town centre economy for the long term and we are proud to be doing this." the spokesman said.