A council paid £1 million to the private owners of a shopping centre to subsidise lost rent from empty units over a period two years. Figures obtained by WalesOnline following a Freedom of Information request show the council paid the money to Canadian company Talisker Corporation as part of a 15-year deal agreed when the Friars Walk was sold back in 2017.
Opened in November 2015, the £90 million Friars Walk was seen by many as the driving force in regenerating Newport city centre. Following the sale of the centre to Talisker Corporation in 2017, Newport City Council entered an investment subsidy agreement to pay the company up to £500,000 per year until 2032, which it said would "effectively guarantee the level of net rental required to secure the full purchase price and the bank funding" to the buyer of the centre.
In a council cabinet report at the time the council said that "in reality, the subsidy is only intended to cover any rental shortfall for the first few years of trading". However, seven years on from the opening, figures show the council paid £500,000 to Talisker in both 2020 and 2021 - the maximum allowed for in the agreement and a total of £1 million in public money - to make up the shortfall in rent from empty units.
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In the 2017 cabinet report, the chief financial officer said there were "potential future payments in relation to the investment subsidy" based on a maximum of £7.5m over 15 years. They said at the time it was "unlikely that this subsidy will be payable after a number of years" due to the growth expected in the shopping centre.
However, Friars Walk has been hit with a number of high profile closures in recent years as high streets across the UK grapple with changing consumer habits. Topshop, Schuh, Carphone Warehouse, Flying Tiger and The Body Shop are among those who have left the centre since 2020, capped off by the closure of anchor tenant Debenhams in May 2021 after the brand collapsed. Cineworld, the only cinema in Newport city centre, has also not reopened since earlier in the pandemic due to a dispute with the centre's landlord. You can read more about the empty Debenhams stores in Wales here.
A host of independent traders have since breathed new life into the shopping centre, which you can read more about here. But questions remain over larger empty units such as Debenhams. For all the latest Newport news straight to your inbox, sign up for our NewportOnline newsletter here.
Reacting to the figures, Newport Conservative leader Matthew Evans said: "At the time they said it was just an insurance policy and would not have to call on the funding. Since then it's slowly gone up and up. £1 million of taxpayers' money is quite frankly shocking and the fact that they have not been able to do something about the empty units is appalling."
Urging the council to work on a solution for the empty Debenhams unit, Mr Evans pointed to plans announced by Carmarthenshire Council earlier this year which will see its empty Debenhams store transformed into a hub delivering a range of health, wellbeing, learning and cultural services. The development is in its early stages but could feature state-of-the-art leisure, culture, and exhibition spaces alongside health and educational facilities, tourist information, customer services and more.
With Debenhams lying idle for over a year, Mr Evans said the city could not rely on retail in the future and urged the council to "explore every avenue" to fill the empty unit. He said there were a "variety of options" including using it to host the Newport Ship, a mid-fifteenth-century sailing vessel discovered by archaeologists in 2002 and which is currently being restored by experts.
"We cannot afford to hand over millions more for nothing. It's a hell of a lot of money that could be spent public services," he added. "It's being chucked away. I've raised it on a number of occasions saying it has to be a priority.
"We are giving money to someone which means they have no incentive to fill the empty units. It would be interesting to see how many meetings the council has had with the company. You need to be there talking to them and seeing what could be done."
Ray Mogford, Newport Conservative councillor for Bishton and Langstone, said: "It does seem a huge amount of money that's getting very little or no return. It was all put into place by the administration at the time, and they have been stung."
Newport Council said its arrangement with the owners of Friars Walk was “agreed by the full council” when the centre was sold in 2017 and “represented best value as it allowed the council to fully pay off its borrowing costs of £82 million.
“As a result of the agreement to subsidise the rental income, £84.5 million was received on completion of the sale,” a council spokesperson said. “If the subsidy had not been agreed, the value of the scheme would have been reduced and the repayment would only have been £76.2 million.
“The subsidy agreement has meant the council has already received an extra £8m from the sale of Friar’s Walk. The subsidy is required if the rent from the scheme does not reach a minimum level. Even if the council pays the full amount of subsidy for the 15 years of the agreement, the overall outgoings will still be less than the £8 million the council has already gained.
“The subsidy also ensures that the council can take a 'profit share' of any increased rental income from the scheme. Over future years, the council could receive an additional £7.5 million making a total return of approximately £92 million. Full details of the subsidy agreement for Friars Walk have been in the public domain since July 2017.”
The council said any financial contributions towards the centre had “been conducted in an open manner” including in cabinet reports and published accounts. Regarding the future of empty units like Debenhams it said: “Friars Walk, like most of the city centre, is in private ownership and filling such a large space as the former Debenham’s store is challenging as the retail climate has significantly changed in recent years as a result of the impact of the pandemic and online shopping.
“However, the council is working with partners on potential opportunities for the building. The council works in partnership with all stakeholders in the city centre, including the business improvement district organisation Newport Now, as its future is not about one individual business or operator.
“It has been pleasing to see a number of new businesses opening in the smaller units in Friars Walk, and across the city centre including the newly reopened Newport Market, offering a good mix of independents alongside the High Street chains. The council is doing everything in our power to support local businesses and increase that footfall.
“This includes grants to new and expanding SMEs and a unique rate relief scheme on top of the Welsh Government one which means that many city centre businesses will only pay 25% of their business rates this year.”
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