Shropshire Council completes purchase of Shrewsbury’s main shopping centres

Shropshire Council has today (24 January 2018) completed the purchase of Shrewsbury’s three main shopping centres from UK Commercial Property Trust Limited, which is advised by Standard Life Investments.

The purchase was approved at a meeting of the full Council on 14 December 2017 and contracts were exchanged on 21 December 2017.

The purchase price is c.£51 million.

The Darwin Centre in Shrewsbury

Under the deal, Shropshire Council has purchased:

• The freehold of the Charles Darwin Shopping Centre, including 11 Castle Street.
• The freehold of the Pride Hill Shopping Centre.
• The vendor’s leasehold interest in the Riverside Shopping Centre.
• The vendor’s leasehold interest in the Riverside Medical Centre.

The primary objective for the purchase of the shopping centres is to support the economic growth and regeneration of the 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. (also see additional information below)

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.”

In the short-term, people will see no change to their experience of the centres whilst Shropshire Council considers future development opportunities.

A specialist property management company will be responsible for all aspects of over 113 tenant lets, the properties themselves and the marketing of the shopping centres – as has always been the case – as well as considering the future development of the sites.

Further information

(1) The primary objective for the purchase of the shopping centres is to support the economic growth and regeneration of Shrewsbury town centre.

 The reasons for the purchase of the shopping centres include:

• Support for the development of Shrewsbury as a ‘destination’.
• Support for an improved and attractive retail and leisure offer.
• Securing employment for Shropshire residents both directly and indirectly.
• Support for the enhancement of the shopping centres.
• Support for some of the council’s key outcomes and strategies (ie. prosperous economy, Economic Growth Strategy).
• In strategic planning terms, the redevelopment of the town centre remains a key policy in the Local Plan and necessary to drive the future visitor economy in Shrewsbury.
• Support for the delivery of the Shrewsbury Big Town Plan by facilitating the economic regeneration of the town centre. This will have potentially wider benefits for the town centre, hotels, restaurants and Shropshire as a county and will support many of the key themes within the Plan.

The purchase also provides a number of opportunities, including:

• Greater control of a significant town centre site that will support the development of a wider master plan for 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 within 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 North West Relief Road reducing traffic on Smithfield Road; and providing car parking/lifts/escalators for those with needs.
• Generation of a sustainable year-on-year income stream.

(2) The purchase will be funded from Shropshire Council’s ‘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.

(3) The purchase of the shopping centres will be via the purchase of the units of each of the three existing Jersey Property Unit Trusts (‘JPUT’). A JPUT is a legal type of trust, established under the laws of Jersey, which is commonly used for holding property and other assets, as well as for the formation of investment funds. A JPUT is a well-established property investment vehicle in the United Kingdom, with a well-understood legal and regulatory framework and well-understood UK tax treatment.

(4) Shropshire Council has been in discussions 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 Shropshire Council’s 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.

(5) 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.