The leader of North East Lincolnshire Council has revealed more financial details relating to the authority’s acquisition of Freshney Place.
Councillor Philip Jackson spoke about the shopping centre’s new future in response to a question submitted by resident Paul Henderson to the latest Full Council meeting.
As reported, the council, which now owns Freshney Place, has won significant grant monies for the transformation of its western end. The leisure development will house a new cinema, with local and regional operator Parkway Entertainment Group coming in as an anchor tenant and pledging to provide a venue to complement its offer in Cleethorpes. Three weeks of public consultation started on September 26 and ends on Sunday (October 16).
At full council, Mr Henderson said in his question: “In a recent open letter to Councillor Jackson, I suggested that the council was ill-equipped to take on ownership of Freshney Place. This is on the basis that: 1. the business was failing (and therefore was not a solid investment); 2. and that the council has no track record of operating a retail venture on this scale.
“Councillor Jackson went on record as saying that the business was not failing. Equally, it is a matter of public record that Freshney Place was in administration. Can Councillor Jackson advise of the criteria he used to judge the business to be worthy of a significant investment from the taxpayer, and set out the steps he intends to take in order to turn a profit from Freshney Place?”
Councillor Jackson thanked Mr Henderson for his question and said: “I want to explain why I don’t accept the premise of your question.
“It is common knowledge that retail and town centres face significant challenges borne out of changing consumer habits, and Covid exacerbated these. Local authorities up and down the country are – with Government support from funds such as Future High Streets Fund, Towns Fund and Levelling Up Fund – taking action to try and mitigate against the risk of town centres becoming even more challenged.
“A main theme is the repurposing of such places. There are no guarantees but without action, it is almost certain the cycle and speed of decline will increase. That will result in a variety of social and economic issues that impact on not just town centres but whole places. Freshney Place, again in common with many retail-based assets, experienced reductions in value of tens of millions of pounds. It is on this basis that the centre was put into receivership as it was in substantial negative equity. Considerable revenue income was, however, still being received from leases.
“Against this context and in common with an increasing number of local authorities, the council acquired Freshney Place for regeneration purposes to support the Grimsby Town Centre masterplan. It must be seen in this wider context and as a major part of the town centre, both geographically and economically. The risk of not doing so was considered significant for reasons considered by Full Council at the time the decision was made to purchase.
“This risk includes a number of new entrants to the shopping centre market who were deeming them to now be cheap but with a business model which minimises capital expenditure and seeks only short-term revenue returns. This would have meant there would, highly likely, be no potential for any transformational projects and that would have undermined the ability to slow and reverse decline.
“While acquiring Freshney Place for regeneration purposes, there was obviously a strong focus on financial issues. At the time of the Full Council meeting, these could not be revealed in public due to commercial sensitivities. However, all elected members were furnished with all relevant financial information, and the decision to purchase was made taking that into account.
“We took ownership of the Freshney Place on August 4, and I am now able to publicly reveal more of the financial information. The centre was marketed with an asking price of £17.1-million. The total cost of acquisition, including fees and stamp duty, was below that £17.1-million price tag. This contrast with the value of the centre back in the early 2000s when it changed hands for about £100-million and explains why the previous owners considered it a toxic asset on their balance sheet and placed it on the market.
“The current revenue income of £1.65-million per annum, before financing, represents an initial yield of 10% against the price we paid for the centre. The interest rate of 3% results in a return after interest of circa £1.15-million per annum and once capital payments are allowed for, a net cash position of just over £700,000 per annum. This is the information, based on external advice, that was used to satisfy ourselves of the financial position of the centre before making any decision to purchase.
“So, as it stands, the centre already generates material returns but the aim is to both actively manage the centre to maintain and enhance the financial position alongside progressing the planned leisure scheme to really begin the diversification of Freshney Place and the town centre. As has been reported, the council has appointed professional asset managers with a brief to support the wider vibrancy of the town centre while ensuring there is a strong focus on financial performance.
“As a Conservative, I can assure Mr Henderson that my initial instinct would be not to purchase a shopping centre. However, I became convinced, when presented with facts, that this was a sensible move and, indeed, the only way to prevent the continued deterioration of the town centre. This was also the view of most members of this council.
“If we want to encourage local people to spend more of their money in Grimsby, instead of outside area, want to attract more visitors to the town and, very importantly, attract more inward investment to the area, an increasingly derelict and run-down town centre will scupper all these aims.
“It’s easy to sit on the side lines and snipe when you don’t have all the information or choose to ignore it. In the meantime, we, as elected members, must take a leadership role and sometimes make controversial decisions which we believe to be in the best interest of North East Lincolnshire.
“In your question, Mr Henderson, you mentioned your recent open letter. I have to say that letter contained a number of material inaccuracies. You attributed to us, as an administration, several actions which we had either not taken, or were not our responsibility. There is a legitimate debate to be had about the best way to move the area forward and we welcome informed discussions with you and others. Indeed, this is a cornerstone of the democratic process.
“However, making unsubstantiated allegations and attributing actions and motivations to us as an administration which are clearly untrue is no way to progress the debate.”
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