Surrey Heath Borough Council’s chief executive has defended its decision to buy a House of Fraser shop in Camberley that is among the retailer’s proposed closures, saying the store is “doing very well”.
In October 2016 the council bought The Mall shopping centre in the town for £86m from Capital & Regional and then two months later bought the nearby department store at 45-51 Park Street from M&G Real Estate for £17.6m.
Surrey Heath had been working with House of Fraser to redevelop the 123,000 sq ft property that would see HoF stay in situ and chief executive Karen Whelan insists that its investment will still pay off for the local community.
“We have different investment strategies depending on what we’re purchasing things for. This particular purchase was a regeneration project – it was not a pure investment acquisition, for which we would expect returns to be higher,” she said.
Regen proposals
“On regeneration proposals, we have to accept that there will be large periods of time, while things are demolished and rebuilt, during which our income streams will be affected. Our business plan is designed to cater for the times when there is not as much income coming in while we rebuild.”
The council has not given up on House of Fraser committing to the location, despite it being one of 31 proposed closures as part of its CVA, and Whelan is searching for answers as to why it is looking to shut up shop when the store appears to be profitable.
“We have been working with the board and understand our proposal is still being considered. What we have wanted to do with HoF was to improve the offer and make sure we could utilise some of their space more effectively,” she said.
“We want to repurpose some of that site, along with improved delivery of HoF’s brand – some of its brands are working incredibly well in our town centre.
Making a profit
“The store itself is doing very well. From what we know, it is making a good profit. It is a situation that I think has happened nationally with the brand, and we need to understand from HoF why it has opted for these closures.”
If House of Fraser does ultimately close in Camberley, the council is planning to consider a more mixed-use approach to the asset.
“Like everything in a town centre environment nowadays, we can’t rely solely on the retail offer to sustain our towns.
“We have to make sure that there are plenty of different experiences to supplement retail trading including leisure and entertainment. We also [host] lots of events to help keep the vibrancy of our town centre and bring in footfall.
“We shouldn’t shy away from the fact that change often brings an opportunity to do something new.”
Prudent borrowing
Council spending on property, fuelled by prudent government-backed borrowing to generate income for services, has been criticised by many corners of the industry, raising concerns that the public sector should not be taking on such investment risk.
Whelan says that Surrey Heath has chosen to buy only in its local area rather than elsewhere, as some other councils have, as pure investment plays, as it not only means it can have a positive impact through regeneration but also have a greater bearing on the future of the asset.
“We purchased our town centre purely for regeneration [purposes]. The advantage of doing this is that you can control many more of the factors in your borough. You also understand more about the planning policies and requirements and you know how best to work with them, but if you’re buying something outside your borough, you have no real insight into that planning process,” she said.
“There are people buying outside their borough and making good returns for their bottom-line revenue budgets, but the drawback is, they can’t control the outcome, if for example they want to think about changing the site’s use. It’s those kinds of things you have to weigh up. There are risks associated with out-of-borough investments, and fewer if you’re buying in-borough.”
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