Tomorrow Newport councillors will make one of the biggest decisions in the city’s history as they vote on a plan to borrow up to £90 million and then loan it to developers to ensure the Friars Walk shopping and leisure centre is built.

Here the council explains the background to the proposal while two Newport businessmen tell us why they are for - and against - the plan.

STATEMENT BY NEWPORT COUNCIL

Tomorrow Newport councillors will make one of the biggest decisions in the city’s history as they vote on a plan to borrow up to £90 million and then loan it to developers to ensure the Friars Walk shopping and leisure centre is built. Here the council explains the background to the proposal while two Newport businessmen tell us why they are for - and against - the plan.

The proposal for Newport City Council to obtain finance to build the Friars Walk shopping scheme is subject to a full council meeting on Tuesday 26th November.

It is based on a publicly available report which outlines the material facts in relation to the proposal and is available for all to read on the council’s website.

The meeting tomorrow will be attended by the elected representatives of the people of Newport who will consider and vote on this topic, and it would be inappropriate for the council to comment in advance of this meeting and the decision of its members.

Residents who have a view on the building of a new shopping centre for Newport can discuss this issue with their ward councillors in advance of the meeting, and members of the public are welcome to attend and listen to the democratic debate in the council chamber on the day.

FOR: ‘Loan would help ensure timely completion so anchor store stays’

For the proposal - Robert Twigg, commercial property partner at Everett Tomlin Lloyd & Pratt Solicitors.

The success of the Friars Walk development is seen as being a key part of the future of Newport city centre and it is therefore crucial that the scheme is not only completed but also completed on time.

As has been reported, the Friars Walk development is now 40% pre-let with deals having been done with Debenhams, Cineworld, Next, Top Shop, Nandos, Cosmos, Frankie & Benny’s Prezzo and Chiquittos. However, in order for the agreement with Debenhams to proceed, the development must be completed within a timescale which would enable the new store to open in November 2015 or, failing that, March 2016. If that does not happen it is likely that the developer will become liable for penalties and/or that Debenhams will become entitled to pull out of the deal altogether.

Assuming that the other pre-lets are conditional on Debenhams completing its lease, if Debenhams does pull out, it is likely that the other prospective tenants will do likewise. It is therefore vital that Queensberrry secures the necessary funding to commence and complete the development as soon as possible.

By providing Queensberry with the necessary funding, Newport City Council will help to ensure that the development is completed on time and that any prospective tenants who have signed up conditionally will complete their leases and open their stores, restaurants and cinema. In addition, the certainty that the development will actually happen, which the Council’s funding will provide, should also encourage other potential tenants to sign up to the scheme.

Even if Queensberry were to obtain private funding it is likely that Newport City Council would be required to guarantee the developer’s obligations under the private funding arrangements. Although there are certain risks inherent in the Council borrowing money to provide funding direct to Queensberry, the obligations under any guarantee which the Council would be required to give to a private funder would not be without risks either. By lending the money itself, however, the Council will be able to retain some control by taking appropriate security providing the same rights to step in and complete the development, should Queensberry default, that any private funder would have insisted on having.

Under the development agreement with Queensberry, the Council is entitled to a profit share which, in the event of the scheme being sold or re-financed, would give the Council a share of any surplus profit after repayment of the development expenses. The loan will help to ensure the timely completion of the development and hopefully avoid any surplus profit being eaten into by penalties for late completion.

Yes, Newport City Council will itself have to borrow the money which it wishes to lend to Queensberry and it will have to pay interest on the money borrowed. However, it is to be hoped that the Council will be able to borrow the money at a lower rate of interest than that which it will charge on the loan to Queensberry. The resultant surplus interest will, in addition to any surplus profit mentioned above, go back into the public purse.

AGAINST: Why back scheme when no-one else will take risk?

Against the proposal - David Mclean, independent public relations consultant who previously work was a journalist for a national magazine on independent retail.

Newport does not need Friars Walk. The last thing we need at the moment are more ways to send money out of the city via the tills of multinational retailers to be distributed amongst shareholders in far flung corners of the world. Newport needs more business and industry that can sell to the world and bring money into the city. If we can achieve that, Newport will be wealthier and retail will once again thrive on the back of that wealth. That’s how retail works. We need to get wealthier as a city, which will help to get retail back into rude health, and then perhaps we can look at building a new shopping centre when the need for more capacity dictates.

Newport is not in good health. It’s been reported recently that professional occupations make up just 16% of jobs, where the national average is 20%, while fulltime salaries are 13% lower than the national average. These are figures that multinational retailers, developers and the financial world will be aware of. They know that Newport does not have much money to spend, and this awareness is very likely what’s behind the apparent reluctance of retailers and backers to commit to Friars Walk. In its current state, Newport is a gamble.

Yet here we are; a city that is seriously considering taking out a loan of £90 million to underwrite a project that nobody else is apparently willing to take a risk on. If the people of Newport are worried about taking out this loan, they have every right to be.

The buzzwords ‘progress’ and ‘regeneration’ have been applied repeatedly to Friars Walk, but the proposed development is anything but. We’ve seen the list of big names that have so far committed to Friars Walk and it’s pretty much the standard recipe for a clone-town development – the same retailers you will find in any retail centre anywhere in the country. The argument for Friars Walk suggests that the development will bring people into the city. But ask yourself, if you were from Bristol or Cardiff, why would you travel to Friars Walk when you have the same retailers in your own city? The generic list of retailers is the very reason why Friars Walk will not attract people from outside Newport.

There is no doubt that Friars Walk would be a well designed and well managed development. It will stand as an oasis of retail niceness. But that in itself is a problem because it will simply drag trade away from the rest of the city centre and we will see an accelerated number of businesses closing in Commercial Street. The population of Newport doesn’t have the spending power to support both.

The idea of the city borrowing £90 million to underwrite this venture is wrong on every level. It’s certainly strategically wrong to take out a loan to lend to somebody else (on very dubious terms) so they can build something that will make us all poorer. If we are going to go into hock for such an amount, let’s at least spend it wisely. Let’s own something that generates revenue for the city; perhaps build and own a city centre business centre that will enable businesses to set up or relocate here, paying rent to the city and creating real jobs and wealth to be spent at retail.

Retail doesn’t create wealth. It grows on the back of wealth. We need to get those in the right order. That we are seriously considering taking out a loan of £90 million based on a failure to understand this relationship is more than just folly, it is the ultimate expression of turkeys voting for Christmas.