Grosvenor take £49m write-off on centre

Apr 15 2008 by Alistair Houghton, Liverpool Daily Post

FALLING property prices have forced the developer of the massive Liverpool One shopping scheme to write-off £48.8m from the value of the city centre project.

It also emerged yesterday that Property group Grosvenor, owned by the Duke of Westminster, is being sued by Liverpool One anchor tenant Debenhams for the late opening of its Liverpool store. Debenhams is claiming around £1m in the High Court as compensation for a two-month delay.

The £48m write-off comes on top of a £140m charge last year to cover cost overruns on the £1bn scheme based around Liverpool’s Paradise Street.

However, it was not all bad news for Grosvenor, which yesterday posted financial results for 2007 showing a 3% rise in pre-tax profits to £524m – despite the Liverpool One write-off.

The company revealed it had let 65 of the 80 shops that form part of the first phase of the development, due to open in late May.

Grosvenor’s Britain and Ireland chief executive Mark Preston, who is set to take over as group chief executive on July 1, said the development was doing “incredibly well” to secure retailers for 60 of the 80 shops given the tough economic climate.

He said: “We’re making a lot of progress and it’s really encouraging.

“The extra £48.8m provision is all about the decline in value that’s not specifically a Liverpool issue. It’s a reflection of the overall UK drop in commercial property values.

“What really shows the enthusiasm that retailers have got for this scheme is that even in these uncertain times we continue to sign up retailers more or less on a daily basis.”

Mr Preston said many commercial property schemes had seen their values fall – and said Grosvenor was not surprised at the latest figures.

He said: “We saw the credit crunch restrict bank lending, and therefore the number of buyers out there would be significantly reduced, and that would have an impact on price which would have an impact on values.

“From my perspective, the values in the course of the last year were unsustainable and needed to be adjusted.

“We are not really surprised at that level of adjustment. This is not just in the UK but in the entire Western world.”

Liverpool One’s first phase will open on May 29, with an official launch on September 30 when all 160 retail spaces will be complete. The whole scheme is about 80% full by floor space.

Mr Preston said: “We expect 2008 to be a tougher business environment to complete sales and lettings, but remain confident that we are making a lasting contribution to the city centre for the people of Liverpool and thereby creating an excellent investment for Grosvenor and our funding partners.”

Debenhams is suing Grosvenor for failing to meet its “notified” opening date of March 31. Debenhams is claiming damages of £125,000 a week from that date until the store can open on May 29 – damages that could total over £1m.

Grosvenor says the March 31 date was given in error. Debenhams has now asked the High Court to rule on the issue.

Mr Preston confirmed Grosvenor was defending the claim.

He said: “It’s not affected our relationship with Debenhams. We look forward to them opening on May 29.”

A spokeswoman for Debenhams said she would not comment on ongoing legal proceedings.

She said: “We are very much looking forward to opening our flagship Liverpool store.”

alistairhoughton