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Shrewsbury shopping centres
On 24 January 2018 we completed the purchase of Shrewsbury’s three main shopping centres from UK Commercial Property Trust Limited, which was advised by Standard Life Investments.
Under the terms of the deal, we've purchased:
- The freehold of the Charles Darwin Shopping Centre, including 11 Castle Street
- The freehold of the Pride Hill Shopping Centre
- The leasehold of the Riverside Shopping Centre
- The leasehold of the Riverside Medical Centre
The purchase price was c£51 million.
What were the reasons for purchasing the shopping centres?
The primary objective for the purchase of the shopping centres was to support the economic growth and regeneration of Shrewsbury town centre. It will support the development of Shrewsbury as a ‘destination’, help provide an improved and attractive retail and leisure offer, and secure employment for Shropshire residents both directly and indirectly.
It will also generate a sustainable year-on-year income stream, including £2.7million in the first year.
Other benefits and opportunities from purchasing the centres
- Support for the enhancement of the shopping centres
- Support for some of the council’s key outcomes and strategies (ie prosperous economy, the Economic Growth Strategy)
- Support for the delivery of the Shrewsbury Big Town Plan by facilitating the economic regeneration of the town centre
- Improving car parking
- Building a strong relationship with the Shrewsbury Business Improvement District, Shrewsbury Town Council and University Centre Shrewsbury
- Opportunity to address poor retail linkages in the town centre and an under-provision of larger modern units for fashion, discount and family dining brands
- Opportunity to resolve some of the key transport issues: sustainable transport, links with the proposed Northwest Relief Road reducing traffic on Smithfield Road, and provision of car parking/lifts/escalators for those with specific needs
What happens now?
The Darwin Centre Development
The major refurbishment of the middle level of the Darwin centre, made possible by significant capital investment from Shropshire Council, opened to visitors on Friday 16 October 2020. These improvements were planned when Shropshire Council purchased the centre in 2018.
Brand new toilets and a Changing Places facility have been created to meet the needs of all the town’s shoppers. A brand-new family room has also been created, which features a baby changing area, breast feeding zone, play area and dining counter, as well as a kitchenette and family toilet facilities. The Changing Places unit allows accessible toilet and changing facilities for adults and carers and is the most modern and up-to-date facility of its kind in Shrewsbury.
New floor tiles and renovated ceilings have created a contemporary finish and new wayfinding signage has made all the new services easy to locate and use. Shop fronts have been upgraded and the existing ceiling has been stripped out and new lighting installed, to make the centre brighter and lighter.
On Monday 7 December 2020 a new specially created shopping gallery for independent traders opened in the Darwin centre. Called the Collective, the space will house up to 10 independent businesses. It’s located on the ground floor of the Darwin Centre, in the former QVC unit. Traders already open include Sidney’s Café, Jennico, Val B’s Wax Jewellery, Heavenly Brides, Beauty & Nails Inbox, Tubeway Records, DVD Megastore, and Irehab. They relocated from the Pride Hill centre as part of plans to establish the Darwin Centre as Shrewsbury’s main retail centre, and with the Pride Hill Centre set to be redeveloped.
Pride Hill Works
Work to prepare Shrewsbury’s Pride Hill centre for future development started on Monday 1 February 2021. This ‘enabling work’ is a first, vital step in the transformation of the shopping centre and Shrewsbury town centre.
Contractors will initially focus on stripping out shop fronts and installing hoardings in and around the centre. This will allow essential works to begin whilst allowing any remaining stores to reopen or relocate after the lockdown. The work is being part-funded by a £5m grant from the Marches Local Enterprise Partnership.
Earlier this month Shropshire Council announced that the Pride Hill centre is the preferred option for a new civic centre to house the Council and some of its public sector partners from 2023, with Councillors set to consider this at a meeting of the full Council on 25 February 2021.
Alongside proposals to develop the new civic hub, the Council is looking at other commercial and cultural mix of uses for Pride Hill.
Shropshire Council has always been clear on the intention to demolish Riverside and to redevelop the site. The Council is looking at a development framework for the site and will be able to update on timescales shortly. This includes a technical report on the complexities of the demolition.
The redevelopment remains a priority as a key element of the Big Town plan. The development framework is suggesting that a mixed-use scheme is likely to be the most viable option and potentially include residential, offices, leisure, retail, education, culture, arts, and hotel use.
Demolition of the Riverside centre will be a complex process and any plans for this will be made available once the technical aspects of the project are clear and the recommendations of the development framework is concluded. Any demolition will only take place after consultation with businesses and stakeholders. There are currently no dates identified to commence demolition.
Management of the centres
Montagu Evans is responsible for all aspects of the management and marketing of the shopping centres – as has always been the case – as well as managing and advising on the future development of the sites.
The short to medium-term management of the centres will be covered by a detailed business plan agreed with the council. This sets out the plans for the future success of the centres and will be regularly reviewed, reported on and updated annually.
How was the purchase paid for?
The purchase was funded from our ‘capital budget’. This is money that legally can only be spent or invested on assets and infrastructure projects and not on the direct provision of council services. Any money earned or saved as a result of a capital project can then be added to the council’s ‘revenue budget’ to help fund key frontline council services.
About the purchase
The purchase of the shopping centres was via the purchase of the units of each of the three existing Jersey Property Unit Trusts (‘JPUT’). A JPUT is a common, legal and well-established property investment vehicle in the United Kingdom. Legal, regulatory and tax issues relating to JPUTs are well understood.
The properties were already held offshore and therefore this was a like-for-like transaction.
This was by far the simplest way to complete the deal, and saved the council a great deal of money, which can be used to benefit the people of Shropshire.
On Monday 1 February 2021, Shropshire Council successfully returned the Shrewsbury Shopping centres onshore following a technical and administrative process. This is the latest step in the Council’s wider plan to transform Shrewsbury.
Repairs, maintenance and refurbishment of the shopping centres
Refurbishment costs in addition to the usual maintenance costs have been considered in detail during the due diligence process and are covered by the Planned Maintenance Programme. The costs are recovered through the service charge
Allowances have been made for the mid-level works in Darwin and Pride Hill with a continued refurbishment programme, together with capital expenditure associated with tenant fit out across a number of specific units.
In addition Shropshire Council will receive £5m as part of the Government’s £900m Getting Building Fund. This sum will be spent on the overall project cost for the repurposing of the Pride Hill centre. These funds are made available through the Marches LEP.
Detailed financial information on allowances is confidential at this time as it is commercially sensitive.
History and timeline
We've been in discussion with the owners and managers of the shopping centres for a number of years to encourage investment and redevelopment. In 2017 the owners made it clear that they were looking to sell the shopping centres, as opposed to entering into any partnership arrangement with Shropshire Council. In July 2017 our cabinet agreed to formally express an interest in acquiring the shopping centres, subject to contract.
Work began on the potential acquisition in September 2017. Montagu Evans has undertaken due diligence on a wide range of property management considerations. Browne Jacobson has undertaken due diligence on a wide range of legal considerations.
The purchase was approved at a meeting of the full council on 14 December 2017, and contracts were exchanged on 21 December 2017.
The national context
Within the last two years, 15 local authorities have acquired shopping centre investments in their areas for a total of £570 million, with a further £220 million under offer or in negotiation.
What have people said about the purchase of the shopping centres?
Councillor Peter Nutting, leader of Shropshire Council, said:
“The investment in the shopping centres is very exciting and hugely important. It will provide us with the opportunity to shape the redevelopment of a large part of the town centre. In particular, the redevelopment of the Riverside Centre is desperately needed as the area is looking tired and rundown. It offers huge opportunities for development.
“Over the coming months we want to carefully think through our next steps in terms of the wider development opportunities and how these align with the vision for the town as articulated within the Shrewsbury Big Town Plan. We’ll also be seeking people’s views before any decisions are made.
“The investment in the shopping centres will also enable us to get a better financial return on our money, providing the council with £2.7 million income in next year’s budget.”
Councillor Steve Charmley, Shropshire Council’s deputy leader and cabinet member for corporate support, said:
“This is a once in a lifetime opportunity to enhance and improve the town centre and change Shrewsbury for the better.
“Whilst this is an investment in Shrewsbury’s shopping centres it’s an investment that will benefit the whole of Shropshire, so this really is great news for the whole county.”
Will Fulton, fund manager at Standard Life Investments, said:
“The sale of these three centres is in line with our previously stated strategy of reducing our portfolio’s weighting towards retail. Furthermore the sale provides us with additional financial resources which we intend to recycle into other investment opportunities that fit with the company’s investment strategy. We have been discussing long term options for these centres with Shropshire Council for a while which ultimately led to negotiations around the council acquiring them and managing them going forward. We believe that this is a very satisfactory outcome for both parties and for the future of the centres.”