Developers Clouston Group are in talks to hand over management of its Stephenson Quarter car park to a national operator amid a growing rent debt owed to Newcastle City Council.
The firm, which started the regeneration of Newcastle’s Stephenson Quarter, owns and operates the car park and pays rent to the council.
But in Clouston Group accounts published for 2018, it claims that lack of further development at the site has hit the car park, resulting in debts of £656,645 to the council in outstanding rent, service charges and insurance sums as of December 31 2018, and that it has since developed “further substantial arrears”.
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Directors say they are in discussions with the council to agree a plan for the outstanding sums – and that it is also in talks which could see a national car park operator take over management of the site, which would also see it underwrite future rent and other operating costs to the council.
The move comes less than a year after it also handed over day to day management of the Crowne Plaza Hotel to a US leisure firm.
Separate accounts for the subsidiary Stephenson Rocket Ltd show the car park brought in £563,356 in 2018 but had net liabilities of £780,929. It blamed the lack of further development at the site saying: “The incomplete development of the adjoining Stephenson Square site and the lack of the expected access improvements from the station has contributed to the car park failing to achieve anticipated utilisaton and as a consequence not being able to price its spaces at anticipated levels sufficient to pay its full rental obligations to Newcastle City Council.”
The firm said that it is confident negotiations over the sums owed will be concluded on terms that are mutually acceptable, but that there is “a material uncertainty that casts significant doubt upon the company’s ability to continue as a going concern”.
The group accounts also say they “further intend” to develop the area, despite being cut out of the scheme by the council almost two years ago.
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It had launched the multimillion-pound drive to develop the derelict patch of land behind Central Station, leading to the creation of the Crowne Plaza Hotel, the Boiler Shop event space and Rocket office scheme and car park and the UTC.
But in June 2018 Newcastle City Council ended its contract with Clouston, citing the company’s failure to make agreed payments. The authority has yet to announce a new development partner.
In accounts for Clouston Group’s financial performance in 2018 – signed on February 25 – the firm says its has more plans for the site, saying: “It further intends to develop this area to include residential apartments, commercial offices, exhibition and event space, retail and restaurant facilities.”
Overall, group turnover rose from £15.5m to £20.8m, and 2017’s operating loss of £1.6m was converted to operating profit of £1.3m. It also narrowed its loss for the financial year considerably, from £4.56m to £941,634.
Fortunes also improved at the 251-bed hotel which it said had “grown steadily since opening”, despite the lack of further development around the Stephenson Quarter and no improved access to the area from Central Station.
It recently emerged that Newcastle City Council had agreed to lend another £14.8m to the owners of the Crowne Plaza Hotel in 2019, on top of an earlier £15m loan in 2013 to build the site.
The group is also currently in talks with the North East LEP over £1.741m loan which was to have been repaid by last March.
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Following the publication of the accounts, a spokesperson for Clouston Group said: “The 2018 accounts represent a snapshot in time when the business was, as a whole, going through a strategic restructuring process and repositioning itself to build upon past successes, place greater emphasis on its strongest performing assets, ie the Crowne Plaza Newcastle and Boiler Shop, and deliver strong future growth.
“The loans, agreed by all key stakeholders involved including Newcastle City Council, refer to the initial development and construction of the hotel back in 2013, and a planned financial restructure in 2019 to ensure that the Crowne Plaza remained as one of Newcastle’s highest performing hotels, benefitting the city and the local economy. This also included the appointment of leading global management company, Interstate, to optimise performance further.
“Fast forward to the present and the hotel is thriving, meeting all financial obligations and is ahead of trading forecasts on a wholly positive trajectory.
“The loan is being fully repaid to Newcastle City Council in accordance with the refinancing arrangements set out and consistent, excellent results are being achieved due to these changes.”