BHS paid £5m to make way for Primark in Carlisle

Details of the deal to buy BHS out of its city centre lease and free up the prime Lanes site have been revealed by Carlisle City Council, which stumped up almost a quarter of the cash.

Leader Colin Glover said its share totalled £1,397,128, and described it as an investment in the future of the city.

The Lanes is owned by a company called Carlisle Shopping Centre Ltd, in which the council has a 23.66 per cent stake.

The biggest partner is property giant F&C Reit, which has been keen to bring Primark to Carlisle as an anchor store.

They contributed the majority of the payout.

Mr Glover said F&C Reit approached the council late last year with a proposal that would finally see the high street giant opening in The Lanes.

Until now it has been confidential, for commercial reasons, but with the deal now signed he is able to explain the reasoning behind it.

“Late last year there was a report which came to council to say they were in negotiations with Primark,” he said.

“The units they were looking at were occupied by BHS. As part of the deal it would require us to give permission and contribute financially to the costs.

“The upside is it gives a higher profile to the shopping area and attract others. Primark is one of the top three in attracting other retailers because they like to be where there is high footfall.”

The council’s share of the cash is coming from its reserves and the sale of under-performing assets, not taxpayers, he stressed.

Mr Glover explained why he believes it is a sound investment.

“Income from The Lanes has been under-performing for some time for us, simply because of the trading environment we are in. What this has done is give us an opportunity to significantly improve that.

Colin Glover “Primark are prepared to pay a significantly higher rent than BHS, and will also help fill up other units, driving revenue for the city.

“The annual rent we would get from BHS, our share, was £49,695. From Primark it will be £177,481. That’s an extra £127,000 a year. That’s the point - it’s an investment. It’s not dead money.”

He added: “We didn’t pay BHS direct, this company did. Our contribution was £1,397,128.46 but it was part of a much bigger deal.

“They will have paid about three times that. They wouldn’t do that if they didn’t think it was a good investment.”

Proportionally that would take the total payout awarded to BHS to more than £5m.

Mr Glover said councils are increasingly having to look at commercial investments to offset national cuts.

“With ongoing reductions in Government funding we are going to be more reliant in future years on trading income. They are going to withdraw the Government Grant by the end of the next Parliament.

“What that means is we are totally reliant on council tax, business rates and trading income. We can’t not to this,” he said.

“These are the sorts of property deals local authorities do all the time when they have got ambition. The alternative is you just say no and stay a backwater. We have got real ambition for the city. This has been an aspiration for a lot of people for many years now.

“BHS were amenable to the deal. It was too good an opportunity to pass up - that would have been a really bad signal for marketing the city as a shopping destination.”

BHS ceased trading in Carlisle on January 9 with a loss of 50 jobs.

Primark plans to open in the autumn, creating 144 posts.

But long term, Mr Glover believes even more big names will move in.

“In retailing circles, Primark is considered to be one of the game changers. It improves the city’s profile as a retail destination and will prevent leakage to other centres - to the Metro for example.

“That will lead to employment opportunities and increased economic activity in other sectors, such as cafes and restaurants.

“Even John Lewis - we might not be on their radar right now but we want to make sure they know they are on ours.”

Ultimately he said it was an opportunity too good to pass up.

“F&C Reit were having the discussions with BHS about surrendering the lease. They did all the negotiations and created the deal, which they then brought to us and asked us to authorise as one of the partners in the shopping centre,” said Mr Glover.

“They asked if we were prepared to meet our share of the costs. If we’d said no then the deal wouldn’t have gone ahead.

“All this work has gone on to encourage Primark to come to the city, to find a site - if we hadn’t it wouldn’t have happened.”

David Jackson David Jackson, commercial director of The Lanes, said getting Primark to Carlisle will prove a major draw. 

“It will bring increased numbers of shoppers from across our catchment. We know that some of those are currently bypassing Carlisle to go to a Primark city.

“That brings an opportunity for everyone, other businesses - food and beverage, visitor attractions, even hotels. It’s a major boost to the retail viability. It will attract other retailers who see footfall as an opportunity and will want a slice of the action.”