It’s been a long held ambition of Cardiff Council to deliver a new indoor arena for the city. Seen as the missing link in the capital’s entertainment infrastructure, back in 2020 and following a competitive tendering process, it named one of the world’s leading sector operators, Live Nation, as its preferred partner to deliver a new 16,500 spectator capacity arena in Cardiff Bay - or more precisely Atlantic Wharf.
But the world is a somewhat different place now from then, with soaring construction inflation meaning that the price tag for the project has been revised significantly upwards.
The original plan was for the council, utilising its prudential borrowing powers, to raise around £170m of long-term repayable finance through the UK Government’s Public Works Loan Board (PWLB) - with Live Nation entering into a 40-year plus rental agreement with the proceeds covering the council’s borrowing costs.
Such an approach, while some local authorities have been profligate in the use of their borrowing powers, especially with the acquisition of now significantly devalued retail assets, is a tried and tested one. It is also a positive example of public-private collaboration, where councils can help de-risk major capital projects.
It is understood that the cost of the indoor arena, which is scheduled to open in 2025, has soared to around £270m from the original £170m. The project is not unique in facing rising costs, with schemes across the UK coming under pressure, such as the South Wales Metro project to electrify the Core Valley Lines into Cardiff.
Both the council and Live Nation - whose development partner is Oak View Group and construction partner is Robertson - are now looking at ways to bring costs down, by revisiting the design and energy infrastructure of the project, but with its capacity remaining at around 16,500.
Assuming the cost can be reduced by say £20m that would still leave a funding shortfall of around £80m with the council, set in the context of its overall lending with the PWLB - not looking to increase its exposure. After the disastrous Budget of former Chancellor Kwasi Kwarteng, interest rates on fixed rate borrowing from the PWLB spiked, but have since come back down. The current cost of fixed rate borrowing for 40 years is 4.95%. The council has the flexibility to borrow say over a two-year period and seek to refinance for the long-term with the hope that by then rates could fall further.
However, as it stands, it is understood that Live Nation will look to finance the shortfall and without taking equity in the arena itself. What is not clear is whether this will impact on its rental agreement with the council or if it could have a future option to acquire the arena.
Both parties are in detailed negotiations to get a new funding deal over the line, but in all these matters nothing can be guaranteed until there is financial closure, for which the aim is early spring. Live Nation is no stranger to the city, as it operates the current 7,000 capacity Cardiff International Arena. The city centre located arena recently reverted to its original name after the ending of a naming rights deal with Motorpoint.
The council has already used PWLB borrowing, believed to be around £60m, to acquire the Red Dragon centre at Atlantic Wharf from the British Airways Pension Fund. To accommodate the arena the centre will be demolished and a new facility built. The existing Travelodge nearby will also have to be relocated.
Perhaps an easier option would have been to locate an indoor arena at the brownfield Dumballs Road site running alongside the River Taff with its closer proximity to Cardiff Central Train Station - although plans for around 2,500 much needed new homes there from Vastint is an important investment.
The Cardiff Bay location for the arena has been driven by the council’s cabinet member for investment and development Russell Goodway.
While a complex deal - and there is still a question mark over the long-term future of the council’s own HQ at Atlantic Wharf - the indoor arena would provide a much needed boost to the bay area - as well as being at the heart of a new wave of mixed-use development.
Future phases of the Metro rail network could see it expanded through the development to eventually, with a turn-up-and-go light rail scheme, reaching Newport Road. Such an extension could provide significant opportunities for new housing and other developments, served by good public transport infrastructure, on land owned by Association British Ports.
The council’s return on investment from its financing contribution to the project would have to be seen in the context of its wider economic impact on the city. So, that’s not just the hundreds of jobs created in its construction and once operational, but also in its supply chain and positive impact for hoteliers across the city and Cardiff Capital Region from the hundreds of thousands of concert goers attracted to the city each year.
There will be competition with Bristol now finally getting its act together with the go-ahead for a similar sized indoor arena at Filton - and to a lesser degree the ICC Wales in Newport. However, Live Nation wouldn’t be looking to invest millions if it didn’t believe the business model for the Cardiff arena is viable over the long-term.
The design of the arena, with its dynamic flooring, will allow for concerts in the round, but also for smaller capacity events.
The existing Cardiff International Arena will close when the new arena opens. It could then be demolished for new development, potentially in a joint venture with owner of the adjacent office buildings and surface car park, Rapport.
So, will the indoor arena happen? There are no certainties in this current tough economic environment, but I certainly hope so, as this is not the time to be turning off the tap on much needed capital projects.
Cardiff Council and Live Nation declined to comment.
READ NEXT:
The term dates you need to know for schools in Wales and England
When it will finally stop raining according to the Met Office
Jacob Rees-Mogg accuses Welsh Government 'of treating taxpayers contemptuously'
Michelle Heaton shares harrowing photos taken during alcohol addiction
All the strike dates in January in Wales including rail staff and driving tests
