Broadmarsh: The Never-Ending Story

We all thought the acquisition of Broadmarsh by the owners of the Victoria Centre was all over…well, it ain’t now.
Yes, Capital Shopping Centres secured agreement to buy the centre off former owners Westfield and the Post office Pension Fund.
But here we are a couple of months on and the Office of Fair Trading has decided to train its microscope on the deal.
I understand it was the OFT’s own decision to do so, a result of its routine monitoring of all large-scale merger and acquisition activity in the UK. It was not responding to a complaint.
There are four possible outcomes – it decides the deal doesn’t qualify for a detailed investigation under the terms of the Enterprise Act; it can conclude the deal raises no competition issues; it can decide it DOES raise competition issues and refer it to the Competition Commission; or it can ask CSC if there is anything it can do/sell to remove any potential competition issues.
The OFT has launched this initial investigation because it thinks it is worth investigating whether one developer owning both major shopping centres in the same city reduces competition for shoppers/retailers.
Where does this leave the Broadmarsh/Victoria Centre redevelopments? Well, treading water perhaps momentarily.
This initial OFT investigation takes roughly 40 days, though any comments about it from interested parties have got to be with them by 24 January.
Who are the interested parties? The ones the OFT will listen to most are shoppers and retailers because it is their ability to enjoy competition and choice that it believes could potentially be lessened by Broadmarsh and the Victoria Centre being owned by the same company.
To cut to the chase, the big issues are whether shoppers will have enough choice if the same landlord owns two destinations, or whether CSC would be able to dictate rental levels and who goes where to retailers because it calls the shots.
Will the investigation lead to anything? Doubtful – with shop chains struggling again the lack of choice comes from a weak economy and the web not market domination. Similarly, there are two sides to the rental landscape: yes, they’ll all have to deal with one landlord now, but don’t assume they would have been less than ruthless themselves if the opportunity to play one developer off against another were still around.
In any case, regulatory interference in development in a depressed retail market would go down like a lead balloon.
The OFT may simply be doing its duty here and making sure people know it didn’t ignore the domination of a city by a single developer.
I’ll conclude this latest instalment of the Broadmarsh Saga with the comment on the OFT probe from Nottingham City Council, which clearly wishes someone, somewhere would just stick a spade in the ground: “It is unfortunate that this referral has been made because although we don't expect it to be successful, it will undoubtedly add delay to our talks over the future development of the south end of the city. We had started constructive discussions with Capital Shopping Centres over their future plans for the Broadmarsh shopping centre and we will continue to negotiate with them irrespective of this development."
So may be this is just a final hiccup. But don’t hold your breath...

Fat cats and own-goals

They earn fortunes, they're arrogant, they leap from one multi-million job to another no matter how well their outfit is performing . You’ve got to be brave or foolish to stand up and back big business bosses in the current climate.
So what are you all staring at me for?
OK, here goes. Public anger about the perceived unfairness of PLC pay packages compared to the wages Mr and Mrs Average take home may be understandable in the wake of the biggest financial crash in living memory.
But there’s a clue in that sentence: How many of those among us who inhabit Planet Average know how to stand up in front of a room of industry analysts and explain why their Price/Earnings ratio is where it needs to be?
Thought not.
How many of us are willing to live in a hotel room for months on end because all the action in the business is taking place on the other side of the globe?
Well, I like holidays as much as you do but since this involves staring at office walls may be I’ll give the long haul travel a miss, eh?
And how many of us are willing to stand up and push the button on 300 jobs because a rival’s new technology has pulled the rug from underneath one of our key revenue streams?
I don’t see many hands going up for that one, either.
Now, I know the odd PLC chief exec and it’s fair to say their lives do not include some of the mundane frustrations which leave me muttering at the end of the day. Like most people I mutter a lot about money (why is there never enough of mine in those bloomin’ holes in the wall?). I doubt Mr PLC does. He’ll have a company credit card and his PA probably knows when he’ll need a few readies in his briefcase.
But it’s not the readies that really exercise public outrage at the moment. It’s a package which is likely to run into a six-figure salary, a performance-related bonus, dividend payments and share options. The kind of package that means the moment you sign your contract is the moment when you take on millionaire status.
Now, I don’t think there are that many people who begrudge Sir James Dyson his millions. After all, he effectively invented his millions by putting a cyclone into a plastic container which, today, does everything from cleaning carpets to drying hands. So fair dinkum.
But what about some bloke who started off as a tax & audit accountant and, well, just rose through the management ranks? The bloke, indeed, who presided over a 30% fall in the share price but still marched away with a golden goodbye? This is where the PLC CEO equation starts to get distinctly iffy, especially if that 30% fall in the share price was caused by a drop in revenues which led to cost-cutting and job losses (sorry, ‘right-sizing the headcount’ – y’know what I mean).
I could go on, but I won’t. Countless self-elected righters of wrong and soapbox experts have decided that Big Business is Full of Fat Cats so All Big Business is Bad.
That’s cobblers. So, let me put a few counter-arguments.
PLCs are crap at explaining what they do to the public. They spend too much time waffling on to analysts and shareholders, nowhere near enough talking about the patents they’ve taken out, the jobs they’ve created, the wages they hand out, the contracts they pour into supply chains, the taxes they pay.
Creating value for shareholders is all well and good, but when PLC bosses end up in a situation where politicians are suggesting that the shareholders should vote more formally on whether they should actually get any of that value something’s gone a bit wonky on the PR front, hasn’t it?
PLCs are also one of the reasons why we gave birth to such a strong financial services sector (told you I was being brave), and some of most talented lawyers and accountants on the planet.
But despite the name (PLC simply means anyone can buy their shares), these are PRIVATE enterprises. They are not taxpayer-funded democracies. Giving a PLC chief exec a six-figure salary is not depriving frontline council services of money, and whether it’s right or not is surely a matter for these businesses. It’s their profit or loss, remember.
My biggest beef with this whole kick-the-corporates agenda is this. It's been dressed up by some as a natural consequence of the financial crash, almost a key component of recovery. It's nothing of the sort - reining in top bosses' pay might pander to prejudices and make a few politicians look good, but it'll do diddly-squat for economic recovery.
Similarly, the idea that Alan from admin can sit on the board and have a say in how much the directors get paid suggests politicians think business is some kind of collectivist utopia. That or they're guilty of cynical populism. As if...
And if we’re off on a fairness kick, what about the worst offenders of all? They earn fortunes, they're arrogant, they leap from one multi-million job to another no matter how well their outfit is performing.
And their contribution to UK economic growth consists of kicking a ball...

Buddy, I can still spare a dime

I’ve puzzled for a few days how to wrap up the first year of this blog.
The answer's easy, though.
With a thank-you, of course, because 4,880 of you have taken a peek and had a read (or a laugh) at what I’ve had to say.
The biggest audience by far has been in the UK, with useful chunks coming from the USA, Germany and France. So the transatlantic alliance is alive and well and relations with Europe weren’t completely trashed by the Cameron V Sarko bust-up.
I’d also like to say thank you to some regular readers in Russia, India, Hungary and Singapore, and some welcome attention from Brazil and Canada.
What have you been reading? The single most-visited post was ‘Champagne, Chips and property development’, some thoughts about the Invest in Nottingham Club’s London day (and the champagne and chips I had at St Pancras).
But even that was dwarfed by the three posts which followed Westfield’s bombshell decision to sell Nottingham’s Broadmarsh shopping centre on the eve of a planned £450 million redevelopment. I’ll have a few more snippets on that in January.
Various observations on the economy, notably about oil prices, inflation, employment trends and public sector job losses, also appeared to go down well.
Well, I hope they did anyway. I’ve tried to shed light on a mix of major business-related issues in Nottingham and get underneath what seem to me some misleading analyses of where our economy is at.
Once again, I’ll have more to say on that shortly and it won’t all be depressing.
One of the lessons I’ve learned over the years in business journalism is that people who own and run businesses can get really fed-up of clichéd representations of what they do, and don’t regard one set of bad numbers as reason to give up and go home.
So ‘leaps’ in this number or ‘plunges’ in that might make today’s headlines but they tell you little about economic reality. Rifling through the Office for National Statistics website, you soon discover that some of these leaps and plunges aren’t leaps and plunges at all.
Similarly, the biggest beef for me at the moment is the lack of long-term perspective in some reporting of our economic predicament. Yes, we are going through an unprecedented economic crisis, but we are doing so during a period of unprecedented wealth and health. So, buddy, I can still spare you several dimes.
Whether its Christmas, the holidays, Hanukkah or just another day at the office, have a good one.

Eon or eeyore?

More consumer misery...
I take a call on my mobile from someone who says he is from the energy firm E.on. It goes something like this:
He begins: “Is that Mr Baker?”
Me (wearily): “Who is this?”
Him: “I’m from the customer winback team at E.on, and as a valued former customer...”
Me: “I’ve never been a customer of E.on.”
Him: “Oh, is that right? Well, I just wondered if you could tell me who your energy supplier is at the moment ‘cos I want to talk to you about some special deals...”
Me (even more wearily): “Do you seriously think I’m interested in doing business with someone who cold-calls me, on my mobile, at work, and tells me I’m a former customer when I’m not?”
Him, laughing: “Oh, okay, then. See ya.”
Dismal.

Mary Portas on retail: The future isn't the past

Mary Portas’ 55-page review into the future of Britain’s failing High Streets can be summed up in seven words: The future doesn’t lie in the past.

She begins her lengthy examination of traditional town centre retailing by gently pointing out that a key part of the problem is the failure of planners, retailers, landlords and even the public at large to face up to reality.
That reality is that supermarkets and shopping centres have thrived because they offered something which High Streets shaped by another era were always going to struggle with. The days when shoppers could park on the street and meander from shop-to-shop were dying as long ago as the 1960s and 1970s.
From the 1980s onwards, the writing has been on the wall: people leading increasingly busy lives have been looking for four key criteria from their retail experience – convenience, value, speed and an experience (as opposed to a simple transaction). Supermarkets, shopping centres and websites easily tick those boxes. High Streets don’t
Yet planning policies and councillors on planning committees have persisted in trying to preserve an economic model which fractured long ago. I’ve heard many a councillor say that they don’t want a big supermarket on their doorstep because of the damage it might do to local shops.
They should read this one paragraph from Mary Portas’ report:
“The phenomenal growth of online retailing, the rise of mobile retailing, the speed and sophistication of the major national and international retailers, the epic and immersive experiences offered by today’s new breed of shopping mall, combined with a crippling recession, have all conspired to change today’s retail landscape. New benchmarks have been forged against which our high streets are now being judged. New expectations have been created in terms of value, service, entertainment and experience against which the average high street has in many cases simply failed to deliver. These reasons alone conspire to create a new shopper mindset which cannot and should not be reversed.”
Or to put it more succinctly, shoppers have already left the High Street behind. A policy which seeks to preserve it in its current form is almost certain to prolong its suffering and delay its recovery.
Mary Portas may not be the first person to delve into the future of retailing, but councils would do well to pay particular attention to her investigation because it comes at a critical time – and there is an absolutely crucial difference in her approach.
Where others have carried out academic, economic and planning-based analyses, her report is that of a retailer and consumer. Where others focused on improving process, she started with a simple question: what do shoppers actually want?
They clearly don’t want the High Street to carry on trying to serve up a pale imitation of supermarkets or shopping centres. It therefore has to do something different.
What is that something different? Clues are beginning to emerge. It would be about a mix of uses which may still take in some conventional retail formats, but would also look at services which cannot be delivered online and work better locally, socially useful services (like council departments themselves), residential use, leisure and event-based use.
Councils do need to look long and hard at the continuing relevance some of their policies and consider whether they infact do more harm than good. Refusing a planning application for a particular type of shop because it involves a different use is barking mad if the property stays empty. And surrounding the car-borne consumer with parking restrictions, price rises and traffic wardens is an open invitation to go elsewhere. What value is there in a short-term hike in parking revenues when it contributes to the long-term decline in business rates?
The authorities who impact on the way our High Streets operate have got to take on board the scale of the change that has happened in retail and its whirlwind speed. Decades ago, shoppers used to trawl the shops and the streets physically looking for ‘bargains’. These days they go on discount websites, receive email alerts and, in some cases, wield smartphones capable of what’s known as Near Field Communication – so the store can ‘talk’ to them when they walk past.
Against that background, sitting in a council chamber and voting to block a supermarket development is like facing a tsunami with a bucket. Or telling consumers they should go back to a time when they had to spend more time looking for a limited variety of goods which cost more.
Your average independent small-town retailer cannot hope to compete with a global, technology-driven onslaught. Mary Portas’ point is that they shouldn’t even try – they should do something else.
That’s where the debate about the future of retailing in Nottingham’s town centres and high streets has to go next.

When the A453 speeds up, so will the economy

The reporting of the Chancellor’s Autumn Statement (that’s the mini Budget he said he was getting rid of) has been almost ritually gloomy
Growth worse than forecast, borrowing worse than forecast, cuts worse than forecast, unemployment worse than forecast (that’s enough worse than forecast – ed.)
There are a couple of reasons for the headline gloom-fest. For starters, this is not what George Osborne said would happen, and it lands him in a suspiciously similar position to his political opponent, Nottingham High School old boy Ed Balls. So some would say he is properly being held to account, others that it’s political schadenfreude.
The second reason is that we appear to have a fixation with news agendas:
“I think it’s grim, what do you think?”
“Well, yeah – it does sound grim, doesn’t it?”
“Terrible, pretty grim really.”
Now, it would be a brave person to stand up and suggest anaemic UK growth and the euro zone horror story signal that happy days are here again.
But I’ll try to dial in a little bit of perspective.
Besides a potential hiccup in this quarter and the next (that’s the R-word or the Double-D phrase), the economy is likely to grow a little bit over the next year.
As that’s a national average, some regions of the UK are likely to grow more than others.
The East Midlands looks like it’ll be one of them.
I says that because I saw a piece of research towards the end of last week from the Institute for Public Policy Research which analysed when employment in the regions was likely to get back up to its pre-recession peak.
Some of its research does sound, ahem, grim. Northern regions may not see employment peak again until 2018 or beyond. That’s a lost decade.
But other regions will see it return to the high by 2014. And we’re bracketed together with the south, south east and east of England in this group.
One more point of perspective. Whether it was courage, confrontation or carelessness, the Chancellor chose the day before the public sector pensions strike to announce that these workers could also look forward to pegged pay increases and more job losses.
In total, the Office for Budgetary Responsibility is now estimating that more than 710,000 public sector workers will have lost their jobs by 2017.
In isolation, that’s a huge number. But, as I’ve blogged before, it is a proportionally small part of the economy – of the UK workforce of 30 odd million, 6 million are employed in the public sector. So the job losses would amount to less than 2.5% of our total workforce, and over that length of time at least some of those jobs will be replaced by private sector growth (not as many as George Osborne would hope, though).
Besides the raft of measures aimed at encouraging lending to small and medium-sized businesses, the major headline for us was that we finally appear to have dragged the A453 widening project over the line.
After only 30 years of trying...
This single carriageway link between Nottingham, the M1, East Midlands Airport and the East Midlands Parkway railway station has accurately been described as the biggest car park in Nottingham.
Beyond the jokes, it has cost the local economy millions in delays, and Boots dropped some heavy hints in private that it regarded progress on this project as a factor in future investment – especially after the decision to turn part of its sprawling and under-utilised campus into an enterprise zone.
While we don’t have a definite start date, that project will now begin before 2015, which is earlier than expected. Turning it into a four-lane road should reduce congestion and cut journey times.
More significantly, it is also likely to open up swathes of land for residential and commercial development, and I wouldn’t be in the least bit surprised to see land transactions and planning applications start to shift in this area.
We can’t kid ourselves – it’s going to be slow progress for a while now. We could well have a situation where, when the A453 finally speeds up, so does the economy.

Broadmarsh: They think it's all over...it is now

Capital Shopping Centres now owns Nottingham.
Well, in retail terms anyway.
It agreed a deal today to buy the remaining 25% shareholding in Broadmarsh from the Royal Mail Pension Fund. With the 75% it agreed to buy from Westfield for £55m, it means it now has complete ownership of the centre.
For those interested, it paid £18.3m for the pension fund’s 25%. It’s the same quantum as the Westfield price, and probably a premium over the paper value.
The wording of CSC’s announcement, made to the Stock Exchange, is interesting.
CSC had said it wanted to pump £250m into expanding the Victoria Centre, which it already owns. The fear in Nottingham was that this would mean a more ambitious revamp of Broadmarsh – which would also tidy up a massive eyesore on the southern approach to the city – would be sidelined.
Not only that, but the artist’s impressions of what CSC has said it wants to do to the Victoria Centre are, shall we say, quite traditional (and that’s putting it politely
Anyway, this is what David Fischel, CSC’s chief exec, said in today’s announcement:
“CSC is delighted to have acquired this important asset in Nottingham. Common ownership of Victoria Centre and Broadmarsh greatly improves the prospect of transformational retail and leisure led development taking place within the city to the benefit of the local and wider Nottingham community.
“The Victoria Centre has been at the heart of Nottingham for over 40 years and this acquisition further underlines our commitment to the city, which is one of the UK's top ranking retail destinations. We look forward to working with Nottingham City Council on this exciting opportunity.”
That may just be holding back an already familiar deck of cards. Or it could be an olive branch to a City Council which privately has considerable concerns about what CSC may – or may not – do. Or, it could be an indication that, now it’s got two centres, it will revise both plans.
Legal completion of the purchase hasn’t gone through yet, so I doubt we’ll hear a categorical statement of intent until then. CSC will also be discussing its options with the likes of Harvey Nichols, Marks & Spencer, Apple and Hollister, all of whom had agreements of varying status in relation to Westfield’s Broadmarsh redevelopment.
Either way, it’s time for CSC to start talking to Nottingham.