Changed market: Developer Thornfield is having to reconsider its residential strategy at its The Rock scheme in Bury. By Stacey Meadwell
A group of retail agents is gathered in the plush private screening room of the Courthouse Hotel in London’s West End for a presentation by Thornfield Properties.
Having had their fill of bacon butties, it is now time to hear the developer talk about The Rock, its £350m retail-led, mixed-use scheme, which is under construction in Bury.
The presenters have the usual enthusiasm, but there is one throwaway comment that suggests a different feeling.
It comes from Peter Warden, Thornfield’s associate director. As he runs through the scheme’s configuration, which includes 500,000 sq ft of retail and 408 flats, he comments: “If anyone would like an apartment, please?”
The audience laughs and the moment passes, but the company would be foolhardy not to be concerned about developing in what is shaping up to be a record-breaking recession.
It must be galling when a hard-fought-for regeneration project like this one gets to a critical stage, only to have the market collapse.
Major projects are subject to the same forces in Bolton and Rochdale.
Thornfield has the advantage of having secured prelets to the likes of Debenhams, Marks & Spencer, AMF bowling and Vue Cinemas before committing to construction. Completion is due in summer 2010.
“There’s been no fall in demand from the types of retailers we want, and we are confident that a substantial amount of space will be let by 2010,” says Andrew Sanderson, director at Thornfield. “We have seen a yield shift, but that is relevant only if you are looking to trade on, and we are not trading.”
Like other developers, Thornfield, which is 50%-owned by Lloyds Banking Group, is reconsidering its strategy. The residential element of The Rock will be placed in a separate investment vehicle, and the developer is looking at renting and rent-to-buy as alternatives to selling.
Nonetheless, Sanderson extols the virtues of the residential element, saying: “I’m thinking of putting my name down for one.”
Simon Carr, associate director at Briant Champion Long, which is agent on the town’s Millgate Shopping Centre, says: “Bury does need another anchor and good-sized Marks & Spencer. It needs the leisure offer to bring families in. We do want The Rock to be successful, but can’t let it happen to the detriment of Millgate.”
BCL partner David Fox adds: “If The Rock fails, then it doesn’t help Bury.”
Millgate has already lost tenants to the failing economy, and is competing for the same retailers as Thornfield. There is concern that the amount of space available will exceed demand in the blue-collar town.
For Bolton, the predicament is worse. Bolton council’s chosen joint venture developer, Ask Bluemantle, received outline consent for its £200m mixed-use Church Wharf scheme last year.
Alan Burke, executive director at Ask, explains: “We remain absolutely committed to Church Wharf but the rapidly falling yields are affecting the financial viability of the scheme. We are negotiating with the Northwest Regional Development Agency to get financial assistance towards short-term funding for infrastructure and site assembly costs.”
Burke says that gap funding would ensure that work continued on schedule. That means construction could start in 18 months’ to two years’ time, when it is hoped that market conditions will have improved.
Bolton council’s director of development and regeneration, Keith Davies, says: “We’ve had to make some adjustments. For example, the number of apartments has been reduced and replaced by family homes, which has affected the value. If we don’t get the money from NWDA we will look at the phasing and timing again.”
Public sector funds are increasingly being sought to help keep regeneration projects afloat, but there is only so much cash. Paul Lakin, the NWDA’s head of development, says: “We want to have a long look at the project in terms of its viability and prospects. The last thing you want to do is pay the upfront costs, only to find that, at the end, the developer can’t go ahead. We can’t take the ‘build it and they will come’ approach.”
A decision is expected this spring.
Also awaited this spring is a decision by Rochdale metropolitan borough council on whether to issue tenders for a £100m town centre regeneration in the Official Journal of the European Union.
Comprehensive scheme
The proposals fell foul of an EU ruling relating to the publication of “weightings” criteria last year, which meant that the development agreement with Wilson Bowden had to be torn up.
Peter Hill, deputy chief executive of the Rochdale Development Agency, says that the tender will be submitted on 31 March following economic research by DTZ, and using the results of a developer open day last year to gather the views of potential private sector partners. The selection of a developer is not expected until June next year.
“Because we are not looking at commencing on site until 2012, all the developers were quite confident of being able to take forward a comprehensive scheme, and didn’t think it was worthwhile waiting 12 months,” says Hill.
The EU ruling might just have dealt Rochdale a lucky hand in holding back the proposals by a year or two.
For other developers in the area, it is a case of holding steady and hoping that the cards come good in the end.
North Manchester key schemes at a glance
The Rock, Bury
Thornfield Properties is developing 500,000 sq ft of retail including a Debenhams, M&S, 60 other shops, a 10-screen Vue Cinemas complex, AMF 24-lane bowling, eight restaurants and 408 flats at a construction cost of £167m. CACI predicts a jump in retail rankings from 159th to 62nd on completion, which is due summer 2010.
Bolton Church Wharf
Ask Bluemantle joint venture on a £200m development with 300,000 sq ft of offices, a 10-screen cinema, leisure, retail and residential. Outline consent was granted last year, but the developer is seeking gap funding from NWDA for infrastructure and site assembly. A decision is expected this spring.
Rochdale town centre regeneration
Tender documents for the Official Journal of the European Union to be submitted to Rochdale council for approval on 31 March. Will be a retail-led, mixed-use scheme with an end value of around £100m.
