LA INTERVENTION, WORCESTER Local authority town centre intervention – Worcester Arches final phase

Kevin Moore BSc MSc FRICS

Kevin is Head of Property and Asset Management at Worcester City Council and Secretary of Heart of England Branch.

Kevin outlines an imaginative regeneration project which certainly proved complex and challenging. With a successful outcome, it illustrates the impact a proactive council can make. Moreover, it illustrates the satisfying aspects of a career for a public sector chartered surveyor. 

The ambition 

It had been a longstanding ambition to provide better connections between the commercial core of Worcester City Centre and River Severn.  A proposal for the demolition of 56 Foregate Street situated opposite the busy Foregate Street Railway Station was included in the 2019 City Centre Master Plan.  The demolition of this property would be the final link of a direct through route for pedestrians and cyclists between the station and riverside parks, the racecourse and university campuses. The route runs parallel to the railway viaduct housing a variety of businesses in its arches, traditional arch uses such as motor vehicle repairs and storage, but now a burgeoning destination for new restaurants and bars.  The historic route was effectively “stopped up” in 1964 by the building of 56 Foregate Street under the terms of a 99-year ground lease granted by the British Railways Board. 

56 Foregate Street

The project 

An aerial view of a section of Worcester

In 2018, the City Council led a consortium of parties including the university, Network Rail and various arts organisations to submit a proposal to the Arts Council for funding from its Cultural Development Fund (CDF).  A programme of projects would see the refurbishment of 7 arches for arts and creative uses, festivals and the opening up of the route to the riverside with new public realm.  A funding agreement was signed in 2019 and the first phase of 5 refurbished arches for arts and creative uses completed and fully occupied in 2023.  The City Council took a sublease from the university of these arches for the 7-year period required by the funding agreement and has sublet four arches on affordable terms, one arch available for hire. 

The stakeholder agreement that supported the CDF funding bid envisaged that Network Rail and its leaseholder Darvist (a privately owned property company) would find it mutually beneficial to reach agreement on the surrender of 56 Foregate Street. 

As most readers will be aware, Network Rail transferred its national portfolio of railway arches into its joint venture, The Arch Company (“ArchCo”) in 2019. So, the make up of property interests in 56 Foregate Street was now: 

• Freehold: Network Rail 

• Long leaseholder: ArchCo, 125 years 

• Sub-long leaseholder: Darvist, holding a 99-year lease from 1964 that also included nos 54 and 55 Foregate Street, arches 62, 63 and 64 and the shared roadway from Farrier Street in the demise 

• Sub-tenancy: JAQS (fried chicken takeaway) franchisee held on a 10-year lease at a rental of £17,500 pa. 

The Arts Council grant ostensibly provided for the purchase of the sub-tenancy but on this basis of the stakeholder agreement between Network Rail and Darvist, there was nothing for the acquisition of the superior interests. 

The Cultural Development Fund deadline of 31 March 2023 (extended from 2022 due to Covid) for the council to complete and claim grant was looming without any progress in securing control of the property, let alone its tricky demolition adjacent to an operational railway. 

Negotiations 

Negotiations had got underway to purchase the subtenancy and compensate for the loss of the business, but reaching final settlement and paying the landlord rent for a vacant property was something the council had been anxious to avoid. 

Negotiations were also coloured by the absence of any formal accounts, a lease that had been drawn up by the landlord without any legal qualifications, and the zero star Environmental Health score.  Nevertheless, a settlement of £50,000 plus £7,500 for fixtures and fittings was agreed, the tenant being keen to complete due to closure now enforced by Covid rather than an Environmental Health Officer, and the council agreeing to do so on the basis that it recognised the hardship delaying matters would cause, and this would also be an opportunity of closing the deal which may not have arisen once the superior interests had been secured.  This was something of a “horse deal”, with some robust justification very far removed from a careful analysis of annual net profit and the use of an appropriate multiplier. 

It’s been quite some time since I’ve done a total extinguishment of goodwill claim and I was interested to note as part of my research that what was the usual Lands Tribunal multiplier of around 3 appears to have been superseded by far higher years purchase. 

Negotiations between Darvist and ArchCo were proceeding extremely slowly, and it appeared that there was little prospect of agreement between these parties. ArchCo was taking a very commercial approach and saw little incentive to agree, despite the seemingly obvious increase in footfall past their arches which would surely stem from the project at other parties’ cost. 

The structure of the 1964 lease held by Darvist was not helpful or straightforward to deal with. It included other properties and the rent was calculated by reference to a formula that in effect provided a base ground rent plus a 50:50 share of the rack rent, assessed annually by reference to rents receivable in the previous year. 

Any compulsory purchase action was ruled out: any CPO would draw an inevitable objection from Network Rail as a statutory objector, though no operational land was actually affected. 

Tentative discussions were held with Darvist to sound out its interest in selling the whole ground lease to the council. With under 45 years left, this was a depreciating asset, but the council had to be proactive and not put the success of the scheme at risk.  Terms were agreed, financed by prudential borrowing, on the strength of rental income from the ground floor retail units and first and second floors over at 54 and 55 Foregate Street. 

The acquisition also secured the first 3 railway arches in from Foregate Street.  Arch 62 provided access to the rear of nos 54 and 55, and arches 63 and 64, though inaccessible at present, would be available following the demolition of no 56. Acquisition also meant of course that the subtenancy merged and that the council was no longer paying rent for no 56. 

The acquisition of the Darvist lease was completed in 2022 but negotiations progressed still too slowly with Arch Co to obtain landlord’s consent to demolish no 56. Arch Co wanted full compensation for loss of its share of rental income from no 56.  The company was not prepared to recognise any longer term improvement in rental value of its arches due to the scheme and was also unwilling, or unable under the terms of the JV lease, to extend the council’s lease. 

Conscious of looming deadlines, the council accepted a deal that comprised of compensation for Arch Co for the loss of rental income arising out of the demolition of no 56, the surrender of arches 63 and 64, and new rental clauses for 54 and 55 providing for a fixed rent based on approximately 50% of the open market rental value, subject to 5 yearly reviews. User clauses were modernised to allow Use Class E (Commercial, Business and Service) high street uses including hot food takeaway and bar, both of which fell outside the existing user provisions  The council would also take back arches 63 and 64 for 5 years at a peppercorn rent, to provide 2 more arches for art and creative uses, in compliance with Arts Council CDF obligations. 

Demolition 

Meanwhile, the procurement of a demolition contractor and all technical/other consents were pursued. 

The West Midlands Procure Partnerships Framework was used for a mini competition to its pre-approved demolition contractors, shortlisted on the basis of previous experience of liaising with Network Rail over similar jobs. 

Party Wall Awards were required with the adjoining owners either side.  Network Rail, as the building was attached in part to the viaduct, and the freeholder, and those with tenancies in 57 Foregate Street, a 3 storey Listed Georgian property with an employment agency on ground floor and 6 flats on the upper parts and an Airbnb apartment at the rear.  The owner was supportive of the scheme and the council agreed to compensate him for keeping the Airbnb apartment vacant during the noisier periods of the demolition. 

Once the council had acquired the fried chicken takeaway business, the opportunity had been taken to survey the building, and as far as possible, remove all identified asbestos-containing materials and soft strip the interior to de-risk and expedite the demolition once a contract was awarded.  Investigations had confirmed that no 56 was not attached to no 57 and did not share a party wall and the surveyor’s award principally dealt with matters of making good and pointing as necessary once the building was taken down, to ensure the exposed wall was weather proofed. 

Planning permission ie conservation area consent for the demolition was obtained in 2023. 

So, the deal with Arch Co required 5 separate legal documents:

1. Agreement for Lease and Surrender, which was conditional on the completion of the works and the payment of the agreed compensation to ArchCo 

2. Licence to Alter, which was conditional on the council obtaining planning permission, Network Rail consents under a Basic Asset Protection Agreement, party wall consents and ArchCo consents to the further detail required in drawings originally submitted, as well as to method statements 

3. Deed of Surrender, of arches 63 and 64 

4. New Lease, of arches 63 and 64  

5. Deed of Variation, revising the rental and user clauses in the council’s lease. 

Network Rail 

It was always known that the demolition of the building would require a line closure from Network Rail, perhaps even a series of short weekend line closures which would impede demolition progress and add greatly to the cost of the project.  The difficulty of knowing when these line closures would be acceptable to Network Rail also added to the uncertainty of being able to provide a confident end date to the council’s funders and stakeholders. 

In the event, we were fortunate to have selected a pro-active demolition contractor and to deal with an engineering team at Network Rail happy to come up with a pragmatic way forward. Only two short line closures were required, each of no more than 7 hours after midnight in the early hours of a Sunday.  The first allowed the scaffolding already erected to first floor height to be taken above the adjacent viaduct parapet level, and the building securely hoarded from the railway. And the second to allow this scaffolding to be taken down once the second floor of the building had been removed. 

It was accepted that the route to Farrier Street would not become adopted highway: the council only has a leasehold interest and Network Rail in any event was not willing to cede ultimate control.  The council has to manage this space as the landowner in possession, and has set up a parking enforcement scheme to deter drop offs and collections for the railway station and shoppers parking. 

The works 

New link after demolition of no 56

A series of large, brick railway arches

Once the building had been demolished, the first 10 metres of the walkway were paved in matching stone from the same batch of slabs which paved the footway to Foregate Street under the council’s Future High Street Fund programme.  The remainder of the route has made good with a new tarmacadam surface and street lighting installed on the face of the viaduct.  Electricity and water services have been laid to serve arches 62 and 64; the hoarding to arch 63 has been decorated with a place map with images of town centre buildings and personalities in the “Worcester” palette of colours (as close as possible to Lee and Perrins orange without infringing copyright). 

The hoardings were removed on 17 February 2025 and with little need for signposting the route has been extremely well used by pedestrians and cyclists alike heading for the river, racecourse, the university, or the bars and restaurants in the arches. 

Final thoughts 

This project has been one of the most rewarding in my time at Worcester City Council. From a property manager’s point of view, it’s had a bit of everything - project management, negotiation of the acquisition of property interests, renegotiation of leases, dealing with adjoining owners, construction procurement, placemaking and heritage. 

The council has been bold to do so much at risk and the town centre now reaps the reward.