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...

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.

Broadmarsh battle isn't over yet

The Broadmarsh story isn’t over yet. There is one final twist in this tale which relates to the 25% shareholding in the long lease on the centre which Westfield didn’t own.
To recap, Westfield agreed to sell its controlling stake in the operation of the centre to Capital Shopping Centres, the owner of the Victoria Centre.
It was, if you like, a ‘knockout’ deal, one intended to overcome the commercial roadblock caused by both Westfield and CSC wanting to redevelop their centres at the same time.
It is thought – though not confirmed - that the prime movers in this deal were John Whittaker, the Lancashire billionaire whose property business, Peel Holdings, has the controlling stake in CSC, and Stephen Lowy, whose family empire owns Westfield.
You’d have thought that the minority shareholder in Broadmarsh would simply have to accept that the senior partner had done a game-changing deal.
But that’s not necessarily the case.
The 25% shareholder is the Royal Mail Pension Fund. And the terms of its shareholding are that it has pre-emption rights – in other words, it can table a counter offer for the 75% that Westfield has agreed in principle to sell to CSC.
In theory, it has 60 days in which to table a bid.
In practice, it will probably have to make up its mind within the next few days. That’s because CSC has also made an offer to buy its 25%.
We don’t know the terms of that offer, but it will almost certainly contain an ultimatum that unless it is taken up the offer will be withdrawn in less than the 60 days allowed to exercise the pre-emption right.
In other words, it’s an attempt to spike the guns of a counter-bid before anyone has the time to put one together.
This may seem uncompromising stuff, but that’s the way big corporates operate when the value of their business is at risk. No one on the stock exchange would bat an eyelid.
Nevertheless, there is emerging evidence that CSC is going to have to be mindful of the impact this deal has on the reception it gets in Nottingham.
There is considerable political disquiet at the way the sale deal was done – no one in Nottingham knew about it, and the first public confirmation was on the Sydney and London stock exchanges.
Phone calls to all the concerned parties were made last Wednesday evening, but by then the die had been cast.
Standard corporate practice though it was, this did not go down well in the city.
It is against that background that CSC may decide that it wants to go ahead with the expansion of the Victoria Centre and ditch the redevelopment of Broadmarsh.
It needs Nottingham City Council onside to do this. Yet the Victoria Centre was probably not their favoured scheme.
While the Broadmarsh design offered an open environment which cleaned up an eyesore right next to the site of the new transport hub, Victoria Centre’s plan envisages a large-scale – and architecturally dull – extension of an existing sealed mall. It’s making a big box bigger.
Worse in the eyes of city planners, it threatens a potentially significant increase in car-borne visitors in the home of what is arguably one of the best public transport systems in Britain.
Finally, sealed malls are all about keeping trade to yourself. Where would that leave the rest of the city centre around Nottingham’s iconic Market Square?
It is this spectre that is now occupying the minds of the city’s political leadership in a very big way. They see a fundamental part of Nottingham’s future apparently being determined not by elected politicians but by corporate Britain. Whether you think it’s fair or not, corporate Britain doesn’t have a great name right now.
Capital Shopping Centres may well succeed in knocking out potential commercial opposition.
That won’t necessarily translate into support from Nottingham.
One way or another, there will still have to be a plan for Broadmarsh.

Westfield and CSC: This town wasn't big enough for the both of them

So, what are we to make of Westfield’s decision to walk away from Broadmarsh within sight of a much-vaunted £450m revamp?
I don’t think there’s any question that they’ve decided it would be an awful lot easier to make the numbers add up elsewhere – specifically in the south east, which simply isn’t experiencing anything like the downturn seen in the rest of the country.
In Nottingham, they waded through a complex land assembly and protracted planning, only to see the economic tide head back out.
But the signs are that Westfield may not have made the first move in this decision (though it was certainly wearying of a planning process which went on so long a rival appeared).
No one locally knew about this decision in advance. There is evidence, too, that Westfield’s own UK executives may not have been the first to find out, either. Senior figures here were still proceeding with this plan as recently as last week.
From Capital Shopping Centres, under whose name a statement confirming the intended £55m purchase of Broadmarsh was issued yesterday, we have heard nothing.
So who was the driving force behind this move?
One interpretation is that this has the stamp of a clear-sighted attempt to solve the fundamental dilemma facing both Westfield and Capital Shopping Centres: both were pitching the same set of high-profile retailers.
So only one scheme was going to succeed.
This would have affected the prospects – and therefore the value – of the losing side. The respective shareholders in Westfield and CSC would not have wanted that to happen. So there was a price to be negotiated, one determined by the present and future value of one centre and the impact its development might have on the value of the other.
It’s the kind of deal negotiated by people who know development lives on private profits not public plaudits. Pretty no-nonsense hard-heads, I’d guess.
The no-nonsense hard-heads behind this deal have solved their problem. Infact, they’ve handed the dilemma back to the city’s planners and politicians…whose measure of success is defined by the same criteria in reverse: plaudits not profits.
Nottingham City Council wanted the Broadmarsh revamp to go-ahead because it would rid the city of a series of shockingly decrepit 1960s eyesores which should have been levelled by a smartbomb 20 years ago.
Instead, we would have a new, expanded shopping centre featuring big-name retailers in eye-catching street scenes which spoke of an ambitious regional capital.
So one last deal is still to be done. It will determine whether Capital Shopping Centres expands the Victoria Centre and merely dusts a few cobwebs off Broadmarsh, or is persuaded that there is a way of making the Broadmarsh numbers add up in a way Westfield decided it couldn’t.
This will be a very tough negotiation for Nottingham City Council, a negotiation which will determine the way our city looks for perhaps 30 years ahead.
Whether in person or proxy, the man they will effectively be dealing with may well have been cutting a deal with someone in Sydney recently.
He is clearly a formidably determined character. And he now has Nottingham’s retail future in his hands.

Westfield's Broadmarsh bombshell

It’s a bombshell announcement from Australia which will send ripples not just across Nottingham but the whole of the UK retail industry.
Westfield announced overnight that it has sold its controlling stake in the city’s Broadmarsh shopping centre. And it has sold it to the people who own the Victoria Centre.
The £55m deal will see the Australian shopping centre giant’s 75 per cent share in Broadmarsh taken over by Capital Shopping Centres.
The deal has huge implications for the future development of Nottingham city centre, and its status as one of the top retail destinations in the UK
Westfield was about to push the button on the first stages of the £450m redevelopment – one that Nottingham has been waiting for the best part of 20 years.
So why has it backed out when designs have been drawn up and negotiations with a raft of big retail names have reached an advanced stage?
The official line from Australia – and that’s where this announcement has come from, not London – is that it has taken a strategic decision to increase its focus on ‘larger, iconic centres’ like the giant mall it has developed next to the London 2012 Olympics site.
But the fact that it has sold to Capital Shopping Centres raises another question. CSC is also in the advanced stages of a £250m plan to massively increase the size of the Victoria Centre, and the consensus among property experts was that only one of these two schemes could succeed.
So has Westfield decided to cut a deal where it walks away with a premium on the book value and leaves the field in Nottingham open to one developer?
Either way, its decision to abandon Nottingham is hugely controversial. The city has lived with a weary retail relic for years, watching a previous redevelopment plan sink beneath the credit crunch.
After some difficult negotiations with the city council, Westfield then came forward with a new plan which would not only have redeveloped Broadmarsh but also have tidied up the southern gateway to the city centre, dovetailing neatly with plans to turn the railway station into a transport interchange.
So it was not just retail redevelopment, but tangible regeneration.
As I write, there is no statement from Capital Retail to say what their intentions with Broadmarsh are. But the city will be desperate to keep the idea of a southern gateway alive, and it has real concerns about a Victoria Centre extension which appears to tilt the retail centre of gravity away from the city centre and northwards.
There could be some political recrimination from this, too – has the city allowed a major opportunity to slip out of its grasp for a second time?
Let’s hope not. In terms of spend, Nottingham is still the fifth biggest retail destination outside London, and the interest of the likes of Harvey Nichols predates the current Broadmarsh plan.
Capital Shopping Centres hasn’t spent £55m buying out Westfield for nothing: one way or another, a big investment in Nottingham retail is still going to happen.

That shabby shopping centre...

A replacement for soemthing shabby?

If someone called your shopping centre shabby and outdated and suggested few people enjoy shopping there you’d be pretty unhappy, right?

Wrong. In Westfield’s case it was entirely happy to spread the bad news about Broadmarsh this week.

It may have a motive for releasing the results of a shoppers’ survey, though: on Wednesday, Nottingham City Council planners will vote on whether to give the go-ahead to plans for a £500m redevelopment of the centre.
And Westfield is hardly telling us something we didn’t know already. Broadmarsh is a 1960s Arndale dinosaur which should have been redeveloped at least a decade ago. High end retail chains voted with their feet. To call it outdated is an understatement.
The bigger issue here – one which Westfield has now acknowledged – is that its redevelopment is an opportunity to do more than play retail catch-up.
It is a chance to get rid of a brutalist concrete eyesore and present people who come in from the railway station approach with a proper entrance to Nottingham – one which is modern, upmarket and has street scenes which lead you to the heart of the place.
Westfield’s decision to release information about a survey which lays bare how poor shoppers think the current centre is does more than up the ante at development control.
It also suggests that, after all the years we've been waiting for Westfield to get on with it, the Aussies are at last ready to push the button.
They have already committed to a £40m spend on the main square in the existing centre and the walk that leads up to Bridlesmith Gate.
That side of things seems to have gone quiet, though. Instead, a lot of noise is now being made about the bigger redevelopment and extension of Broadmarsh.
So what’s Westfield up to?

Finally Broadmarsh: The £500 million game-changer

I was sitting in the office early last week looking over some sprawling indicative drawings for the wholesale rebuilding of a massive part of Nottingham. And it’s a big deal.

The drawings sketch out the detail of a £500 million retail scheme ranged across three levels which could not only put Nottingham beyond the reach of its regional rivals, but also rid the city of the out-dated eyesore that is its southern approach.

So what was my reaction? One of deja vu.

The story of the redevelopment of Broadmarsh is a modern-day parable about the relationships between big cities and big developers and shopping centres and the economy.

I first saw photos, drawings and CGIs of the redevelopment of Broadmarsh in the early noughties. Even then, redevelopment was long overdue, with the centre which defines the boundary between the city centre and its southern approach looking every inch the 1960s Arndale dinosaur it really is.

As time went by, the amount Westfield said they were going to spend on the redevelopment slowly rose. But so did the sense that it wasn’t their top priority. Nottingham City Council bent over backwards to try to make sure it remained a priority. Indeed, some critics would point to the strange decision to rid Lister Gate of what looked like perfectly healthy trees. Chopping them down opened up a nice sightline to a re-clad Broadmarsh entrance, but was there really anything wrong with the trees? We’ll never know.

What we do know is that while Nottingham City Council tried to keep what had become a £700m scheme alive, Westfield promptly went and spent a load of money in Derby.

The Australian developer has a long-established reputation for taking a robust attitude to business, but this decision went down very badly in Nottingham – on two fronts.

With the arrival in the City Council’s planning department of Jennifer Dearing, an experienced outside consultant brought in to give some backbone to a drifting planning department, Nottingham’s attitude to Westfield hardened.

More than once, I heard senior figures in the city say that if all Westfield had to offer was a bigger version of the curtain-walled giant they built in Derby, then Nottingham was no longer interested.

It didn’t stop there. The city took the advice of some senior national figures in architecture and urban development and decided that, whatever happened, the plans Westfield had sketched out to the council all those years ago were dead. Whether it was Westfield or someone else, a new approach was needed – one which would use large-scale retail redevelopment to solve an ageing blot on the landscape.

The credit crunch effectively killed off Westfield’s original plan. No one was going to throw £700m at a large scale shopping development when retailers were being deserted by consumers suffering from badly-bruised credit cards.

But none of this changed the fact that Nottingham is Britain’s fifth biggest shopping city and the centre of the East Midlands’ catchment. It may have bled some people to Leicester (which now has a John Lewis as well), but Derby hasn’t got the high-end retail brands to challenge. Neither is as big.

So now, finally, we have a new plan - all £500 million and 5,000 jobs worth of it.

Going back to my initial point, I have to admit that I haven’t seen it all before in the design sense. The drawings I pored over last week show a scheme that has changed drastically. Instead of a monstrous, old-fashioned mall, Westfield has now agreed to produce a series of smaller buildings which will open up new street scenes, and rid one of England’s eight most important cities of a Berlin Wall of a centre which shouts regional mediocrity at anyone walking in from the railway station.

It could lead to Nottingham getting something genuinely different – a new generation of shopping centre which doesn’t stand out like some monstrous blob. One with streets to wander through and an open air atmosphere, one with views of the city it is part of.

So it’s wrong to be churlish about this plan. If it proceeds the way Westfield are suggesting then it could change the face of the city for the better while bringing in 5,000 jobs.

The knock-on impact of its construction will be considerable: a project of this scale will have an economic multiplier during and after construction through the jobs it creates and the money spent during building and the likelihood that – if it brings in new names – it will bring in new visitors.

Those new names should, finally, include Harvey Nichols, with whom Westfield has an informal agreement.

It may also add to the logic behind investment in redevelopment of the railway station and expansion of the tram

In short, a project of this size has the potential to give the city’s economy a noticeable tick-up.
A scheme on this scale does not come without its question marks. What will happen to other parts of the city’s retail core when Broadmarsh opens? And what impact will it have on the Victoria Centre (which has expansion plans of its own)? How will we cope with radical revisions to the city’s road network implied by this plan?
The biggest question of all is the oldest question of all. After all these years, is Westfield finally going to come good on its promise?

An expensive decision?

There's been a reoccurring theme in conversations I've been having with people in property recently. You'll hear it yourself if you use the words 'planning' and 'charges' in conversation with a surveyor.
I did last week and was on the receiving end of a five-minute, from-the-heart tirade. If you feel that strongly go public, I said (I would, wouldn't I?).
The response was almost depressing: "We can't, we do business with them. It would be too much of a risk."
We all know the way the world works. Suppliers don't diss clients. Particularly powerful, influential ones.
But that's not the relationship that's at the heart of this problem. Developers and their agents are feeling sore because of fees Nottingham City Council's development control department wants to charge for a service IT gives THEM.
That service, in simple terms, is the advice it gives to developers and their agents about proposals for new buildings before they put in planning applications. If you want to meet a planning officer and talk through the issues your proposal for an office block raises and get a written response it will now cost you more than £1,200. And further conversations mean further fees.
So why is an industry which routinely deals in millions bothered about a bit of small change? First there's the principle: we already pay for the planning department through council tax. The fees mean people are being charged twice (never mind the fees for the actual planning application itself).
Second, there is no guarantee this advice will smooth the application's journey through development control. Indeed, the worries here are best summed up by the nickname which some property people have given the decision-making body – the 'Out of Control Committee'. So it could be a thousand quid or more for nothing.
Third – and this is the contentious part – some in property think the quality of advice they get from the city's planning department is average at best.
It's an open secret in property circles that the department has gone through a difficult time recently. It is being restructured, experienced, senior figures have left and the council has struggled to find replacements. There is unhappiness, too, about the hand the city played during the good times, nodding through some pretty mediocre developments while regeneration zones went nowhere.
It also has a tense relationship with Broadmarsh owner Westfield, the feeling being that the council spent 10 years bending over backwards to accommodate its whims only to see them redevelop Derby instead.
As if to rub salt into these wounds, Tesco wants to build its biggest Nottingham store yet on Eastside – a site which the council had hoped to see turned into a £900m new office quarter.
So planners are under pressure to assert themselves at a time when the council is strapped for cash (which is what the introduction of these new fees is really about).
I wonder whether the name 'development control' is really appropriate. It suggests the authority is there to rein developers in rather than find ways of enabling regeneration and growth. If it wants to be seen as a body which offers authoritative input into development proposals in a major, regional city then its committee won't deliver unpleasant, expensive surprises which begin with the word 'no'.
And if the city is bringing in fees for professional advice (as opposed to a simple, technical service), it must understand that it changes the dynamic of a relationship. The expectation will be that the advice is delivered in a timely, professional manner, hits a certain quality standard – and gets results.
If that happens the complaints will disappear.
There are some dedicated, experienced people in city planning, and they have to deal with an industry which takes an approach which is often robust, occasionally aggressive. That's the nature of the beast when large sums of money are at stake.
The reality (as the council calculated) is that these fees will simply disappear in the cost of a major development. Smaller developers will probably also swallow them. Property and planning agents who act for developers may be less happy, because they'll could be asked by some of their more uncompromising clients to pay the fee on the understanding that "we'll reimburse you when the plans are approved" (i.e., it's your problem if they say no).
There is an opportunity here for the council to change the way it is seen in some quarters of the business community. If that is the approach it is taking then may be the grumbles will die down.