The operator of Newport’s Mercure hotel has accused the city council of clinging to “toxic” commercial ground rents that no longer reflect reality – and warns the policy could end up killing off one of Newport’s most successful regeneration projects.
Garrison Barclay Estates holds a 250‑year lease on Chartist Tower, where it has spent more than £17m turning the former BHS building into a four‑star hotel, offices and shops. Under the current lease, ground rent to the council is due to start at £316,800 a year from December 2027, rising again at future review dates.
Carter Jonas, in a detailed proposal to Newport City Council in February 2024, said that level of rent was “not sustainable” given actual trading at the hotel and the rents being achieved on the commercial space. They urged the council to extend the existing rent‑free period by 10 years, to 2037, and to convert a £600,000 regeneration loan into a grant to help stabilise the scheme.
Their report shows construction costs running more than £6m over the original £11.1m budget and hotel profits projected at around £150,000 – far below the £1.1m assumed when financiers agreed the deal.
It warns that without relief the funder could step in and pursue more lucrative options, including sale to a housing association or use as asylum accommodation, with the loss of up to £10m a year in visitor spending for Newport.
Newport City Council says only a small proportion of its roughly 270 leases are in the city centre and that terms vary between historic and newer agreements. It says it must achieve “best value and a market rate of return” on its property portfolio and is “considering a proposal in relation to the ground rent for Chartist Tower”.
In a broader statement, the authority highlighted grants, loans and a business‑rates relief scheme for city‑centre businesses, and said a 2015 report often cited by critics showed opportunities to increase commercial income, not a policy of indiscriminate rent hikes.
Mr McCarthy argues the numbers on the ground tell a different story. He says retail units that might once have let for £20,000–£25,000 a year are now being filled at £2,500–£9,000, and that even a new bank branch is paying far less than pre‑Covid levels – figures that leave little headroom to support a six‑figure ground rent.
“Newport encouraged us to get the shops let just to keep the street alive, and we’ve done that on heavily discounted rents,” he said. “But the council won’t accept that this has to feed through into a realistic ground lease if they want the city centre to survive.”
A spokesperson for Newport City Council
"Newport City Council offers a wide range of support for businesses in the city centre, of all sizes, and has done this for a number of years.
"As well as grants and loans, it has also offered a unique business rates relief scheme.
"Many businesses, including new and established ventures, have received grants via the council either directly or indirectly. A new council-run business fund is due to launch again very soon.
"It is disappointing that the comment that Newport has the most empty shops in the UK continues to be trotted out even though it is inaccurate.
"The data referred to, which is now four years out of date, was based on research into around 60 cities and towns in the UK, not all of them.
"Since it was published, the number of empty properties in the city centre has decreased. That same report noted that Newport also had the highest rate of commercial units and the vacancy rate at that time still was on a par with “high-performing” centres.
"Newport City Council holds ground leases for properties and land across the city but only a small number of these are within the city centre. The figure of 270 appears to be taken from a 2015 report but the number will vary from year to year depending on disposals or any acquisitions.
"Terms and conditions will vary according to each lease. In some cases these leases are historic leases. If they are then assigned to new tenants they will enter into the existing terms.
"Where a new lease is granted, the terms are agreed between the parties at that point.
"Newport City Council is considering a proposal in relation to the ground rent for Chartist Tower."
Welsh Government said:
“Newport remains an important economic, commercial and cultural centre for South East Wales. The city has benefited from significant public and private sector investment in recent years and continues to play a key role in supporting regional growth. We are committed to working collaboratively with local authorities, businesses, investors and other stakeholders to support regeneration and unlock development opportunities for Newport.
“We have engaged with Newport City Council and other stakeholders regarding a range of regeneration matters in Newport city centre, including issues relating to Chartist Tower. The building's ground lease is a commercial agreement between private partners, not Welsh Government.
“As the new Welsh Government we have also announced our intention to create a Town Centre Task Force within the first 100 days of government. We are determined to drive conditions for sustainable investment which support thriving town and city centres, and ensure that places such as Newport are well positioned to benefit from future growth and regeneration opportunities.”
Hotel spokesperson said:
“Mercure Newport continues to welcome guests and operate as normal. The hotel remains an important part of Newport's hospitality offer and is focused on delivering a high-quality experience for visitors to Newport. As the hotel operates under the Mercure brand via a franchise agreement, we are not party to the commercial ground lease arrangements referenced and therefore it would not be appropriate for us to comment on those discussions or speculate on their outcome.”
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