Council pays over £1m to subsidise centre rent
NEWPORT City Council has paid more than £1m to Friars Walk in subsidies to cover the cost of rent at the shopping centre.
Friars Walk, which has been owned by Canadian equity company the Talisker Corporation since 2017, has seen a number of shops close in recent months.
The council made an agreement during the sale of the centre, which said that they would subsidise rent to a maximum of £500,000 a year, if the rent from the centre did not reach a minimum level.
It’s based on a maximum of 15 years.
Since 2017, Newport council has paid a total of £1,136,537 in subsidy payments.
The Western Mail has previously reported that an “investment subsidy arrangement” was struck between the Talisker Corporation and Newport City Council when the centre was sold.
A 2017 Cabinet report following the sale of Friars Walk said an “investment subsidy arrangement was based on the council agreeing to pay up to a maximum of £500,000 per annum for a fixed period of 15
years, to effectively guarantee the level of net rental required to secure the full purchase price and the bank funding” to the buyer of the centre.
It continues to say that “in reality, the subsidy is only intended to cover any rental shortfall for the first few years of trading”.
In the same report, the chief financial officer said: “There is a potential future payments in relation to the investment subsidy, however this is based on a maximum amount over 15 years of £7.5m, and as detailed in the report with future lettings, rent reviews and growth in the scheme it is unlikely that this subsidy will be
payable after a number of years.”
Now, following a Freedom of Information request to Newport Council, the exact figures can be revealed:
■ In 2017, Newport Council paid £116,209 in subsidy payments.
■ In 2018, the subsidy payments came to £334,675.
■ In 2019 the council paid £435,653, while so far in 2020 it has paid £250,000 in subsidy payments.
That’s a total of £1,136,537 paid in subsidies to Friars Walk since 2017.
Leader of the Conservative group in Newport Cllr Matthew Evans said he was shocked by the figures that have been paid out.
He claims he understood the deal was to be a “just-in-case” measure but now it looks like the council has spent “a hell of a lot of public money”. He recalled the initial mention of the deal being referred to as an “insurance policy”.
Cllr Evans said: “When they first said they were going to do this, it was a safeguard, they said it was more of an insurance policy and they wouldn’t be using it. They made some comments about how it was to be used just in case of emergencies.
“So I’m quite shocked to find they’ve already spent more than £1m.”
A spokeswoman for Newport Council said: “Full details of the investment subsidy agreement for Friars Walk have been in the public domain since July 2017. The purpose of the detailed report to cabinet was to ensure that there was complete openness and transparency regarding the financial details.
“If the council had not agreed to subsidise the rental income in this way, then the value of the scheme would have been reduced by approximately £8.3m and the council would only have received a payment of £76.2m. Therefore, even if the council paid the full amount of subsidy for the full 15 years, this was still less than the reduction in the capital receipt.”