Harlow Council leader pleased with financial progress of Harvey Centre
Business / Mon 17th Jul 2023 at 08:45am
THE LEADER of Harlow Council has said he is pleased with the financial performance of the Harvey Centre following their acquisition of the shopping centre last year.
This comes after a question from a member of the Harlow Alliance Party at last week’s cabinet meeting
Question: Alan Leverett to Councillor Dan Swords (Leader of the Council): The previous Leader of the Council indicated that investing in the purchase of the Harvey Centre would produce a profit of £500,000.
Could you provide me with a summary of how this claim can be made in view of the interest on the £21M investments, and whether the statement still stands true in light of the fact that more retail space has become vacant in recent weeks?
Reply from Councillor Dan Swords (Leader of the Council):
Thank you for your question about the council’s historic decision to acquire the Harvey Centre in line with our priority to rebuild our town by regenerating the town centre.
The Harvey Centre is significantly exceeding expected performance as recorded elsewhere on the Cabinet agenda tonight as part of the 2022/23 financial reports.
I am pleased to report that a surplus of £767,000 has been achieved above and beyond what was expected at this time. This represents the centre operating 24.3% better than expected at this time. This outstrips many competitors in the industry, and I am sure that you will agree that this has shown that the council’s prudent management has already to date produced an incredible surplus compared with our business planning.
|During the business planning and budgeting prior to acquisition, prudent assumptions were made about the income profile from the tenants. Whereas the technical vacancy percentage based on number of units has increased from 2.27% at acquisition to 6.82% today, this has been due to two small kiosks closing, one restaurant operator going into administration, and one unit being repossessed due to significant rent arrears and the need to protect the Council from further risk.|
This gives the appearance of challenge however, the original business plan allowed for some tenants to vacate at the end of their leases.
We have successfully secured their continued occupation, so the net result is that income before debt is actually 24.3% above acquisition forecast due to lower than budgeted void costs and requirements for capital expenditure to renew shop units.Significant announcements will shortly be made about new tenants and facilities coming into the centre, which I believe will be strongly welcomed and show the benefits of our acquisition.
The centre will continue to be managed prudently and in line with the Council’s plans for long term improvement to the town centre. The Council used a variety of sources to raise debt in a prudent manner, and the performance of the Harvey Centre continues to provide a margin which is intended to help support town centre regeneration.
On top of the £767,000 surplus achieved to date, the council has secured the reverse premium of the former BHS unit, on which the council has received an extra £4 million of capital receipt on top of the £767,000 surplus. We are now actively planning the regeneration of the centre as a result of this.
Therefore, I would consider that you are correct in your assertion that the figure given by the former Leader of the Council was wrong. However, you seem to believe it would be far lower than £500,000 and you put an open-ended time frame on this. I have set out that we have already achieved a £767,000 surplus above and beyond our expectations to date, as well as a further £4 million capital receipt having been received. I hope that this puts to bed the doubters who vehemently opposed this acquisition.
There's nothing like a prudently managed nice little surplus and some nifty reverse premium feeding into your void costs to clearly explain what's going on. No wonder a magical extra £4m appeared out of nowhere on the back of it. Job done.
Prudential Code for Capital Finance in Local Authorities "Authorities must not borrow more than or in advance of their needs purely in order to profit from the investment"
So that’s a 3.65% return on 21 million. Looks reasonable to most until you take into account the 10% plus inflation which gives you an adjusted loss of 6.35%. That’s assuming you did not borrow the 21 million in the first place and are paying interest on it.
Mr Swords didn't really answer the question. How much did the Council make/lose AFTER interest payments on the £21 million loan?
Mr Swords will not even answer an email,I found him rude.
How can you get money to pay for the Harvey Centre, where nobody live but cannot put money back into the council housing properties you have in Harlow. How long does it take to get a repair done correctly, first time. Your priorities are totally wrong with tenants having to suffer under your negligence.
What is the point of regenerating the Town Centre when many people cannot get there because of the disappearing bus services?
What do you all expect from a Councillor, they're all on the take, under the table golden handshakes, or hand jobs whichever way you wanna look at it!!
Guy Flegman, your calculation is somewhat flawed to say the least. Think about it.
James It would be of useful to residents to know the actual figures for the Council to arrive at the profit from the Harvey Centre from the borrowing to purchase it for £22M. This is what one would expect from my question at the cabinet and not just given a suggested profit figure. It will stop speculation by others.
I noticed the phrase " income before debt" in the Leader's answer. Alan Leverett is correct in pressing for income after debt costs.
Not sure how the Harvey centre is making money its just the same shops duplicate times we have multiple jewellery stores and multiple opticians nothing new and exciting bring back the market and shops we don't have around the town centre would be nice.
James, that was my point! Anyone can manipulate figures to show what ever opinion they want. Eventually the ball will stop rolling and the council will have to show us the money.
I should also add that only a year into a project of this size is too short of a period to call success or failure. I am assuming of course that the council are in this for the long term and are not looking for a quick flip.
Why is there no financial safeguards in place that would mean huge purchases to add to a portfolio should be by a town referendum and not by a select few? If safeguards were put in place then events such as Thurrock councils spending leaving the council £1.3 billion in debt would never have happened. Harlow bus station only lasted 19 years before another company will be awarded another big chunk of council tax payers cash, or the playhouse handouts on a regular and substantial sum despite a trash and rebuild scheme approved for the same area. The people of Harlow are fed up of poor projects, short term lasting and things that are little more than councillors wimsies. Peoples memories last longer these days, especially at election times.