A shopping center snapped up by a Kent council for £154 million has crashed in value by more than 50%.
Canterbury City Council’s purchase of Whitefriars between 2016 and 2018 represented its biggest-ever property acquisition, with bosses hailing the “savvy” move.
But recent appraisals of the site – which features chains like Next, Fenwick and HMV – show its worth has slumped by almost £80 million over the past four years.
Leaders of the ruling Conservative group insisted the deal has been a success, as they argue its market value is irrelevant because the authority has no intention of selling the complex.
Despite this, concerned critics have branded the scandalous revelations, and fear this will precede a drop in the council’s rental income from the shopping centre.
Lib Dem councillor 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 social housing, improved services, reduced parking charges.
“It was bought in order to create a rental income stream for the council.
“The only people benefitting from this are the ones we bought it from.”
When the city council purchased Whitefriars – largely paying for it with loans – then-leader Simon Cook, who later lost his seat, said it was another step towards the authority becoming more “self-sufficient”.
It was also stressed the acquisition would provide a lucrative long-term investment for the district, particularly in 23 years’ time, when the borrowing will be paid back.
“There has been a fall in Whitefriars’ valuation, but it’s not up for sale…”
Senior Tory Rachel Carnac revealed the slump in value during last week’s full council meeting, explaining the valuation had fallen to £75.25 million by the end of March last year.
Appraisals of the site carried out four months ago show its price remained unchanged, which the Reculver councillor believes “indicates stability”.
Responding to Cllr Sole’s concerns, she said: “Obviously Mike’s electioneering.
“Whitefriars has never been paid for with council tax money; it was borrowed with money that is being repaid using the income from its rents, which also provides income for services like parking.
“There has been a fall in Whitefriars’ valuation, but it’s not up for sale.
“It’s a paper value, which has dropped and held steady.”
The Covid crisis has wreaked havoc on the retail sector, forcing some shopping complexes around the country into administration.
Within five months of the first lockdown, Whitefriars’ value had already crashed by £46 million.
Cllr Sole questions whether future rent returns will meet the huge repayments and what will happen if shop units start to fall empty as the growth in online shopping continues.
Income from rents already started to fall before the coronavirus outbreak, from £8.25 million in 2018/19 to £7.4 million in 2019/20.
“Up until March 2020, before the pandemic, rental income from Whitefriars was above expectations…”
Figures show they tumbled further in 2020/21 to £3.6 million, before a slight recovery the following year, which saw earnings rise to £5.4 million.
Cllr Carnac also claims the plateauing of its vacancy rate at 10% – against a national average of 16% – this year is an encouraging sign. Its vacancy rate stood at 6% prior to the pandemic.
“It’s difficult to know if its rents will ever get back to the levels we saw five, six, seven years ago – but I don’t think the picture’s as bleak as Mike is predicting,” the council leader added.
“Up until March 2020, before the pandemic, rental income from Whitefriars was above expectations.
“Surplus income was put into a reserve to smooth future income fluctuations. This was used to meet income shortfalls in 2021 and it will again be used in 2022.
“Retailers are continuing to demonstrate their confidence with Whitefriars – it is something to be very proud of and shows the resilience of this district and its people coming through the pandemic.
“Parts of it are being repurposed because the council offices are moving there from the end of 2023.
“There’s also a lot of interest not just from retail, but from the office and health and fitness sectors.”
Whitefriars – which now has up to 1,200 retail employees – was built in 2005, with Fenwick as its flagship store.
It was sold by Land Securities in 2007 for £253 million to Henderson Global Investors – later to become TH Real Estate – and the Canada Pension Plan Investment Board as part of a 50/50 venture.
The authority already owned the freehold to the site but bought the first 50% of the retail center from the pension board in 2016 for £79 million, a move that received full cross-party support.
A deal for the remaining £75 million was agreed with TH Real Estate four years ago.