Purchase strategy and development objective report on £51mn Shopping Centres purchased in 2018
Dear Shropshire Council,
Shropshire Council bought Shrewsbury's Darwin, Pride Hill and Riverside centres for £51 million in January 2018. It has been reported on the council website and in the local Shropshire Star newspaper that the shopping centres purchased by the council in Shrewsbury town centre have dropped in value by £33.5mn in just two years, or by over 60%.
Your assets person (Steve Charmley, Shropshire Council’s Cabinet member for assets, economic growth and regeneration) stated on the 9th of July 2020 that when the centres were purchsed it was anticipated their value would fall but did not elude to any forecast or projected figures. A direct quote is "We also anticipated that the value of the centres could fall in the short-term. It’s therefore short-sighted to focus on the current value of the centres." The tax payers deserve and I demand that the information be released around the decision making process and strategy to justify the initial purchase and the projections for financial performance anticipated from rents and other income, costs and asset value over the case period. Also actual financials since purchase where the real data will by now be available to compare to the original justifying case projections and forecasts upon which the purchase decision was taken and went ahead.
Lastly, I am asking for information on how the original £51mn purchase was funded and if part or entirely with loans what are the terms of the loans in duration, interest and is there any tie to assets. With any tie to assets, which assets?
Yours faithfully,
B Greig
Dear Mr Greig
Thank you for your request for information received on 09/07/2020. We are
currently processing your request in accordance with the relevant
legislation.
Your request is for information relating to the purchase of the Shopping
Centres in Shrewsbury.
* This is a summary only and full details have been sent to the team
providing the response.
* If you feel the information is inaccurate or requires amendment,
please notify us as soon as possible using the contact details
provided below.
Please note:
The Council has been facing unprecedented challenges this year. Firstly,
in response to the flooding in February and now in responding to the
coronavirus (COVID-19) pandemic. During this time, resources may have to
be diverted away from usual compliance or information rights work. The
council acknowledges that it can’t extend statutory timescales of requests
and everyone is doing their best to meet these. However, priority may have
to be given to other areas, eg the safeguarding of vulnerable people,
during this extraordinary period.
The Information Commissioner’s Office has blogged about their approach to
requests during this time: [1]blog
The Information Commissioner’s Office has released a statement about Data
Protection and the Coronavirus here: [2]statement
Yours sincerely
Information Governance Team
Shropshire Council
Shirehall
Abbey Foregate
SHREWSBURY
SY2 6ND
Tel: 01743 252179 / 252774 / 252747
Email: [Shropshire Council request email]
Web: [3]www.shropshire.gov.uk/access-to-information
[4]For information about Coronavirus click here/image below
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References
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4. https://www.gov.uk/coronavirus
5. https://www.gov.uk/coronavirus
Dear FOI,
The legal deadline for a response has now passed on this FOI.
I appreciate that many of your workers may be absent from their duties during this period of Covid-19 pandemic but some notification on when a response may be forthcoming would be appreciated with a view to releasing the Shrewsbury commercial property purchase supporting documentation.
Yours sincerely,
B Greig
Dear FOI,
It is coming up to two months now, since the original FOI request and no response bar an auto responder message on the first day. You are filed as having responded to some FOI requests that were lodged in August so it is safe to assume that the function is operating in Shropshire Council.
If no response is forthcoming by the 10th of September, two months after the original request was filed, then I will then raise a complaint to the Information Commissioners Office. As stated in my last message that has gone ignored, an outline of actual reasons for a delay and going forward an outline of anticipated time to completion of this request would be sufficient to delay my action to approach the Commissioners Office.
Yours sincerely,
B Greig
Dear Mr Greig
Thank you for your email. I'm very sorry for not acknowledging your previous email. This was an oversight on my behalf.
With regard to a response. I have been following this up with the teams responding. I have asked for an updated position and I will forward this to you as soon as I am able to.
Yours sincerely
Heather Jones
Information Governance Team
Shropshire Council
Shirehall
Abbey Foregate
SHREWSBURY
SY2 6ND
Telephone: 01743 252179
Email: [Shropshire Council request email]
Dear Information.Request,
It has been another month without any response or possible reason forthcoming for the delay in providing the information requested. I have raised the FOI timeline compliance failure with the ICO.
Yours sincerely,
B Greig
Dear Mr Greig,
I apologise for the further delay I am chasing this up urgently with the department that holds the information and will issue a full response asap.
Kind Regards
Tom
Tom Mullen
Information Governance Team
Shropshire Council
Shirehall
Abbey Foregate
SHREWSBURY
SY2 6ND
Telephone: 01743 252179
Email: [Shropshire Council request email]
Good afternoon
Please see the attached in relation to your FOI Request.
Apologies for the delay.
Regards
Mark Barrow
Director of Place
[1]For information about Coronavirus click here/image below
[2][IMG]
References
Visible links
1. https://www.gov.uk/coronavirus
2. https://www.gov.uk/coronavirus
Dear Mark Barrow,
Thank you for your response to my enquiry.
I am hoping you will be able to respond to some points.
1. Why is the transaction of a commercially sensitive nature? In business, this can be because you are seeking a competitive advantage or have a strategy that you do not wish to share because it may be copied by your competitors. Council business is not commercial business where you are in competition so I fail to see where any justification for commercial sensitivity arises around the spending of public money. Hopefully you can explain this fully.
2. This may well be reliant in part upon item 1 but I'm disappointed you have not included any forecast figures for earnings or costs, merely the actual to budget income which is entirely meaningless against the desire to compare to the justifying case projections. Why are you unable to furnish the justifying casework projected figures for income, costs and asset value compared to the actual figures attained? If they are so sensitive, and I do fail to appreciate why that would be so, maybe try presenting them as a percentage of actual figures compared to the forecast figures for income streams relative to expenditure items and asset value by year. That would at minimum let the public know if you are even in the same county as the original case presented to justify the purchase, I feel that the ballpark is probably nowhere in sight.
There has been considerable concern expressed in Parliament and in the media over councils 'playing' the commercial property market with Treasury investment loans as a variable and potentially casino like means to generate income for a council. I assume those responsible for this undertaking must be aware of the House of Commons Committee of Public Accounts, Financial sustainability of local authorities Twenty-sixth Report of Session 2016–17 issued in November 2016 (https://publications.parliament.uk/pa/cm...) that covers just this topic. This is particularly relevant to the investment made by Shropshire Council as the warnings issued within this report pre-date the council investment in Shrewsbury shopping centres by a good time period. So, when the council sees a large financial investment made in 2018 fall by over 60% in value within 2 years there are many legitimate questions that can be raised over the competency of the decision making process taken by the council, at whatever level within the council, and they deserve to be fully answered.
I am hoping you will be able to revisit my request and reconsider your response to provide the information that I have actually requested. Please advise if you wish that I instead refer the case for internal review or if you are happy to proceed with further data submission without the need for referral to an internal review.
Yours sincerely,
B Greig
Dear Shropshire Council,
I have been advised by the the ICO in an email message today that I should act to move this enquiry on to to an internal review stage so please pass this on to the person who conducts Freedom of Information reviews.
I am writing to request an internal review of Shropshire Council's handling of my FOI request 'Purchase strategy and development objective report on £51mn Shopping Centres purchased in 2018'.
I am requesting the review due to my dissatisfaction with the level of data provided in the council response which didn't even address the questions raised. My detailed response can be found in the link listed below along with the full history of my FOI request and all correspondence; available on the Internet at this address: https://www.whatdotheyknow.com/request/p...
Yours faithfully,
B Greig
Dear Mr Greig
Thank you for your email. We are sorry that you are not satisfied with the response to your request. We will carry out an internal review and respond in due course.
Yours sincerely
Heather Jones
Information Governance Team
Shropshire Council
Shirehall
Abbey Foregate
SHREWSBURY
SY2 6ND
Telephone: 01743 252179
Email: [Shropshire Council request email]
Dear Mr Greig
Thank you for your email. We will pick up these questions as part of the internal review being carried out.
Yours sincerely
Information Governance Team
Shropshire Council
Shirehall
Abbey Foregate
SHREWSBURY
SY2 6ND
Telephone: 01743 252179
Email: [Shropshire Council request email]
Dear Mr Greig,
Regarding your request for an internal review relating to your response
and the fact that some information was exempted as commercially sensitive
under Section 43 of the Freedom of Information Act 2000, please see below
our further explanation of why this information is exempt linking to the
specific questions you asked for clarity on:
1. Why is the transaction of a commercially sensitive nature?
In business, this can be because you are seeking a competitive advantage
or have a strategy that you do not wish to share because it may be copied
by your competitors. Council business is not commercial business where you
are in competition so I fail to see where any justification for commercial
sensitivity arises around the spending of public money. Hopefully you can
explain this fully.
Acquisition of the Shrewsbury Shopping Centres in January 2018 effected
through the purchase of units in three Jersey Property Unit Trusts (JPUTs)
was undertaken by Shropshire Council in order to protect and shape
economic development in the centre of the county’s largest market town.
Due to the specific nature of this acquisition, the Council acquired a
commercial business which is in competition with retail space provided by
other operators in the local area.
Disclosure of the detailed income and expenditure behind the net operating
income for the shopping centres would prejudice and harm the commercial
interests of both the Council and associated third parties, such as
tenants, and so affect the competitiveness of the centres.
Release of detailed information in relation to rental and service charge
incomes and centre operating costs would enable competitors to offer more
appealing terms to tenants, making it very challenging to both retain
existing tenants and attract new tenants to the shopping centres. The
outcome of this would be to reduce the net operating income of the centres
and ultimately result in the centres operating on a net expenditure
basis. This would increase budgetary pressures, as the Council would not
only have to fund this net expenditure, but it would also lose the ability
to fund services from the net operating income.
The commercial interests of the centres’ tenants would also be compromised
as provision of detailed income data would necessarily involve the
disclosure of specific, commercially sensitive tenant information
contained in legal contracts between tenants and the trusts. The release
of commercial and confidential information about other businesses
operating in the centres would significantly compromise the trust between
the Council and tenants. Ultimately, this could have a commercial impact
as businesses and individuals may be less inclined to do business with the
Council in the future, once again affecting both the retention of existing
tenants and the attraction of new tenants.
2. This may well be reliant in part upon item 1 but I'm
disappointed you have not included any forecast figures for earnings or
costs, merely the actual to budget income which is entirely meaningless
against the desire to compare to the justifying case projections. Why are
you unable to furnish the justifying casework projected figures for
income, costs and asset value compared to the actual figures attained? If
they are so sensitive, and I do fail to appreciate why that would be so,
maybe try presenting them as a percentage of actual figures compared to
the forecast figures for income streams relative to expenditure items and
asset value by year. That would at minimum let the public know if you are
even in the same county as the original case presented to justify the
purchase, I feel that the ballpark is probably nowhere in sight.
For the reasons previously stated, it is not appropriate for the Council
to disclose the detailed income and expenditure data behind the net
operating income for the shopping centres. However, the net income
figures previously provided for the shopping centres’ first full year of
operation (2018/19) do indeed demonstrate the actual performance compared
to that forecast in the original acquisition proposal business case and so
do provide a comparison to the business case projections.
There has been considerable concern expressed in Parliament and in the
media over councils 'playing' the commercial property market with Treasury
investment loans as a variable and potentially casino like means to
generate income for a council. I assume those responsible for this
undertaking must be aware of the House of Commons Committee of Public
Accounts, Financial sustainability of local authorities Twenty-sixth
Report of Session 2016–17 issued in November 2016
([1]https://publications.parliament.uk/pa/cm...)
that covers just this topic. This is particularly relevant to the
investment made by Shropshire Council as the warnings issued within this
report pre-date the council investment in Shrewsbury shopping centres by a
good time period. So, when the council sees a large financial investment
made in 2018 fall by over 60% in value within 2 years there are many
legitimate questions that can be raised over the competency of the
decision making process taken by the council, at whatever level within the
council, and they deserve to be fully answered.'
Shropshire Council Members and officers involved in the decision to
acquire the shopping centres were, and continue to be, fully aware and
familiar with the concerns expressed in Parliament and in the media in
relation to the acquisition of commercial property by councils. The
shopping centres were acquired by the Council as a long-term investment
with the primary purpose of supporting economic growth and the future
regeneration and transformation of Shrewsbury and not as a commercial
enterprise. Subsequent to the acquisition of the shopping centres, the
evolving economic climate and unprecedented changes in the retail sector
have resulted in significant falls in rental income, which have been
further compounded by the COVID-19 pandemic. The tenancy landscape
directly informs the valuations of the shopping centres.
If you are not content with the outcome of the internal review, you have
the right to apply directly to the Information Commissioner for a
decision. The Information Commissioner can be contacted at: Information
Commissioner’s Office, Wycliffe House, Water Lane, Wilmslow, Cheshire, SK9
5AF. You can find more details at www.ico.org.uk or by telephone on 0303
123 1113.
Kind Regards
Tom
Information Governance Team
Shropshire Council
Shirehall
Abbey Foregate
SHREWSBURY
SY2 6ND
Telephone: 01743 252179
Email: [2][Shropshire Council request email]
Dear Information.Request,
Thank you for the response outlining some reasons why you are unwilling to provide the justifying case information and actual figures since to compare how close the justifying case matches real performance.
I do unfortunately find your reasoning a little contrived. You say that disclosure of case and actual financial data could impact upon your tenant and your (as in the councils) ability to levy rents at the current level which may or may not be competitive to commercial rates. I reject this on two counts, how many shopping centres remain under private sector control in Shrewsbury, I believe it is none. So your reasoning has no foundation in reality as there are no competitors able to offer a similar retail business experience and location. Secondly, not all premises are/were occupied so it would be impossible for any commercial body or tenant (prospective or actual) to work out what rent or lease rates the council applies across three locations. it is impossible to drill down to attain the figures on individual tenant income and assigned expenditure relative to the justifying case that you claim is so sensitive.
As I mentioned in an earlier submission, if the council feels the financial data is so sensitive i am prepared to accept a submission based upon percentages. You cannot have any reason to reject that request on the basis of sensitivity but you may wish to hide them as being a percentage it will show the relative performance of proposed/projected to actual. that after all was the reason behind my raising the FOI so I would accept a percentage submission for the income and expenditure and value justifying casework to that actually achieved/attained.
To that end, I will raise the issue again with the ICO.
Yours sincerely,
B Greig
Dear Heather Jones,
I have today received a correspondence from the ICO advising they have reviewed and accepted my complaint against Shropshire Council as suited to further investigation, so you will be hearing from an ICO case worker in due course.
Yours sincerely,
B Greig
Dear Mr Greig,
Regarding your email below we have reviewed your request further and in
particular the part below highlighted in yellow. On this basis please find
attached a summary detailing actual expenditure incurred and income
received in relation to the Shrewsbury shopping centres expressed as a
percentage of the forecast budget.
Kind Regards
Tom
Information Governance Team
Shropshire Council
Shirehall
Abbey Foregate
SHREWSBURY
SY2 6ND
Telephone: 01743 252179
Email: [1][Shropshire Council request email]
Dear Tom Mullen,
Thank you for the additional information which is a viable format but doesn't actually relate to the original forecast as outlined in the original casework to justify the asset purchase. It rather seems to relate performance relative to Council budgets which are set annually and often reflect the prevailing conditions which may, or in this case likely don't, follow the financial projections in the original justifying casework.
Could I please trouble you to provide the percentage realised for the two financial years against those projected in the pre-purchase justifying case rather than against Council set budgets. The reason this transparency is important is because you mention income fell from £2.9mn to £1.8mn from the first year to the second, attaining 90% against budget in the second year though I doubt the justifying casework projected this near 40% fall in income. It is only by sharing the performance against the justifying case that residents and stakeholders can reasonably assess the relative performance of this asset purchase and the evaluate the decision making process behind the investment.
Yours sincerely,
B Greig
Dear Mr Greig,
Apologies for the delay, in response to your further email below please find attached a further response detailing the information you have asked for in your second paragraph.
Kind Regards
Tom
Information Governance Team
Shropshire Council
Shirehall
Abbey Foregate
SHREWSBURY
SY2 6ND
Telephone: 01743 252774
Email: [email address]
Web www.shropshire.gov.uk
Dear Mr Greig,
In reference to my email below please can you ignore the previous email as this was not the final version. Please find attached a slightly updated and final official response to your request.
If you could delete my previous email that would be appreciated.
Kind Regards
Tom
Information Governance Team
Shropshire Council
Shirehall
Abbey Foregate
SHREWSBURY
SY2 6ND
Telephone: 01743 252774
Email: [email address]
Web www.shropshire.gov.uk
Dear Tom Mullen,
Thank you for finally being able to provide the breakdown for the financial projections behind the shopping centre purchase in 2017 and relating those to the actual figures realised. I will likely raise a FOI again in 2 years time to ask for the then five year results compared to the justifying case projections.
You mention difficult trading conditions but the periods reported do fall entirely outside of the Covid lockdown period so I would therefore assume that the pandemic impact would be minimal in the 2019/20 financial year. I also assume things have probably got a lot worse since, though with on 48% income achieved against the justifying case projections in 2019/20 I think the consultants or agencies you employed to produce the figures have a monumental fail on their books. Hopefully there were some penalties tied into underachievement with staggered project payments so that the council can recover or avoid some costs? Its not just a bad miss its a completely different scenario that no worse case projections would come close to.
I will keep a keen watch on the levels of council interest payments, seeing we are entering a time when rising interest rates are a distinct probability, to see if the 'free' money that the council hoped to generated from rental income on the commercial property purchased is a disappearing vision of fools gold as loan servicing costs rise to a level that could easily overtake the revenue achieved.
Yours sincerely,
B Greig
Thankyou for your email, I am currently out of the office and will return
on Monday 21st June 2021
If your message requires urgent attention please email:
[Shropshire Council request email]
Kind Regards
Tom
[1]For information about Coronavirus click here/image below
[2][IMG]
References
Visible links
1. https://www.gov.uk/coronavirus
2. https://www.gov.uk/coronavirus
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