BOURNEMOUTH council has lost out on £1 million in rent on its recent retail park purchase due to flagship stores going into administration.
The Echo can reveal, from leaked confidential documents, that the borough was expecting to take in £2.5m annually from the Mallard Road Retail Park when it was purchased with £49m of borrowed money in September 2017.
However the financial troubles of Homebase and Carpetright, both of which have entered three year company voluntary arrangements (CVAs), have reduced its income to £1.5m.
The Echo has approached several councillors who have expressed private concerns about the purchase, and some are expected to have tough questions for the borough’s cabinet and leadership at its meeting tomorrow.
The figures show that Homebase should be paying £920,000 in rent but is only paying 10 per cent of this – £92k – as a result of its CVA, while Carpetright is paying 50 per cent of its due rent.
On Homebase, the report states: “It is understood that this store continues to trade poorly and shows no sign of increasing turnover to a level that makes the full rent of £920k p.a. affordable. Therefore, it is anticipated that Homebase will exercise a break option under the CVA rather than pay the full rent at the end of the three year period.”
The cabinet is due to discuss the letting of two currently empty units – the former JYSK furniture store and the unit next to Aldi – and around £1m of alterations to both this pair and the Homebase unit by the mooted tenants.
The confidential report states that the rent from the new leases would return the total rent from the site to £2.2m, however this is “excluding the impact of any initially agreed rent free periods”. New stores often demand periods of their occupancy in which they will pay no rent.
Due to negotiations thus far, the report says, it will receive only £1.5m in 2019/20. The borough therefore plans to dip into its Asset Investment Strategy –Rent, Risk and Repairs Reserve to make up the cash it needs repay its loan, cover costs and provide £600k for services as planned in its budget.
The council’s leadership has insisted the site was a sound investment.
Councillor Philip Broadhead, cabinet member for economic growth, told the Echo the council’s retail park strategy had been “tremendously successful”.
“When the council purchased the retail park, it took the decision to hold off on the marketing of the vacant units on the park until Aldi had arrived and opened, in the expectation that this would see a significant increase in footfall to the park and therefore greater market interest.
“As the rent for the vacant units was covered for a time period by the previous owner, this seemed like a sensible course of action.
“This strategy was successful, and I’m delighted that we have now secured tenants at these two units, which means that the park is at 100 per cent occupancy.
“Furthermore, the sizeable increase in visitors since Aldi’s opening, coupled with these new additions to the retail park, means that we have secured jobs and economic growth into the area.
“The investment in Mallard Road continues to add a healthy surplus into the council’s finances, helping to protect frontline services for the council tax payer.
“It should also help assure the sustainability of the new Bournemouth, Christchurch and Poole Council, as part of a balanced portfolio of investments which both help the local economy and generate income.”
Cllr Broadhead said plans to subdivide the Homebase unit in the event of its closure were “all in hand”. He has previously said the clearance store in the Grade II listed former Yellow Buses depot could close “in the short term”.
The new tenants have not been revealed due to “commercial sensitivity”.