Monmouthshire council ‘optimistic’ on Newport retail site’s future despite Covid hit on value

Monmouthshire council has said it remains ‘optimistic’ over the future prospects of Newport Leisure Park, despite a fall in income and the site’s value due to coronavirus.

A performance review shows the retail site at Spytty – which was bought by the council in March 2019 – is bringing in a return on investment of just 1.02 per cent, which is below the minimum two per cent level the authority requires for commercial investments.

The closure of Frankie and Benny’s and a Company Voluntary Arrangement (CVA) for Pizza Hut has hit rental incomes at the site which was bought by the council for £21-million in 2019.

A report says the council carried out “an options review” in September after investment returns fell below the minimum level, and had ultimately decided not to sell the site.

“Investment committee agreed to retain the asset as the structural impact of Covid on the leisure sector will continue to affect realisable capital values,” the report says.

“Any sale at this point would result in a reduction in the sale value and the associated disposal fees that will also arise.”

Funding provided by the Welsh Government means the retail site will still meet a £400,000 income target this year.

A council report says this provides “short-term relief from income losses”, but the longer-term position is less clear as “tenants continue to struggle with the impact of the pandemic and the structural changes to the retail and leisure markets,” the report says.

“In common with all leisure parks, Newport Leisure Park has been badly hit by the impacts of Covid which are reflected in a falling rent-roll, return on investment and capital value,” it says.

“It is reasonable to assume that the position will deteriorate further in the short-term as consumers are not yet able to access the hospitality and leisure sectors and post-opening social distancing will limit capacity levels and financial viability.”

Occupancy levels have fallen from 100 per cent to 97 per cent since the site was purchased, while return on investments have fallen from 2.11 per cent to 1.02 per cent.

However the report adds that interest shown in one of the empty units demonstrates the site “continues to be an attractive proposition to the leisure sector”.

Castlegate Business Park in Caldicot, which the council bought in 2018 for £7-million, has also been impacted by the pandemic but its return on investment level is 3.57 per cent.

Income targets for Castlegate are expected to be met with no claims for Covid hardship funding having been made from Welsh Government.

A spokeswoman for Monmouthshire council said the authority is “continually monitoring the performance” of the Newport site.

“The loss of Frankie and Benny’s and the Pizza Hut CVA have impacted on the rental income and therefore the capital value, however we remain committed to the site and remain optimistic of its future, particularly given the level of interest that we have in the vacant unit,” she said.

“Working with Welsh Government, we have been able to ensure that we do not have a shortfall in rental income for the current year and both borrowing costs and our net income target have been met.”