Garrison Barclay Estates said the award winning Mercure hotel at Chartist Tower might have to close if the local council doesn’t agree to a new ground lease deal

The developer behind the Chartist Tower regeneration project in the centre of Newport, anchored by an award-winning four-star hotel, said its scheme will be rendered commercially unviable unless the local council backs its proposals for a new ground lease agreement that fairly reflects post-Covid trading realities.

In a major vote of confidence in Newport as an investment location, Garrison Barclay Estates, having invested £11m of its own cash reserves, unveiled a 140-bedroom hotel in the building – once occupied by P&O – in 2022.

The scheme also provides around 25,000 sq ft of office space and 15,000 sq ft of retail space, of which 12,000 sq ft is let. This includes a revamped Barclays Bank branch in what was formerly the BHS department store on the ground floor.

While the hotel, which employs more than 40 people and is operated under a management contract by Mercure, has maintained strong occupancy levels since opening, profit margins have been eroded by inflationary pressures.

The scheme’s office element is currently empty after its only occupier, the Newport Argus, relocated, leaving the developer liable for empty business rates.

With Garrison Barclay Estates’ cash injection, bank debt, and £1.6m of grant and loan support from the Welsh Government, provided via Newport Council, the cost of the regeneration project has been around £21m..

The current relief on the long-term ground lease the company has with the council expires in December 2027. As it stands this will see the scheme incurring an annual ground lease payment of £315,000, compared with around £220,000 before Covid.

Cardiff-based Garrison Barclay Estates said that, despite multiple independent reports supporting a reduction in the ground rent, repeated representations to the council have failed to secure a new arrangement.

As an alternative, the company has proposed a revenue-sharing model under which the council’s ground rent would increase as a percentage of revenues as more tenants are secured for the office and retail space and the Ebitda the hotel improves, Under the plans the annual lease payment to the council could reach £220,000.

It said the proposed model would provide the council with full transparency through access to the scheme’s accounts.

Newport Council said the Chartist Tower project has received significant public sector funding. It added that while is was considering the proposals from Garrison Barclay Estates it had to be mindful of the best use of the public purse.

However, without an agreement, with a separate new ground lease deal the hotel, chief executive of Garrison Barclay Estates, Andrew McCarthy, said the hotel could have to close. He confirmed there is already interest from housing associations and added that local authorities across the UK have concluded they need to be more realistic over ground lease rents if they are to sustain and attract commercial investment.

He explained: “If you look back 20 years, councils could expect, for example a large department store, to pay around £1m a year from a ground lease. However, those days are gone.

“The ground rent structure for Chartist Tower was originally established when the building was occupied by a department store and office accommodation, and it no longer reflects the economic reality of operating a modern city-centre hotel.”

To support its case, the company has commissioned independent property and valuation advice, including work undertaken by Carter Jonas, one of the UK’s leading property consultancies with extensive experience in city-centre regeneration and hospitality assets, and BNP Paribas Real Estate.

Additionally, the chief executive said Rockingham Partners has offered specialist assistance to help the council understand how other local authorities have addressed similar issues surrounding high ground rents while promoting the sustainability and long-term viability of their city centres.

The hotel, including visitor spending, generates an economic impact of £10m annually for the city.

Garrison Barclay Estates has also raised its concerns with the new Plaid Cymru Welsh Government, asking it to intervene to help ensure the continuation of one of Newport’s most important city centre businesses.

The company has given the council until July 17 to reconsider its position. If there is no change, it said it would have no alternative but to consider putting the hotel up for sale.

Mr McCarthy said: “If we have to sell this asset, the most likely route for new owners to sustain the existing ground lease would be through securing a contract to accommodate asylum seekers or by converting the property to social housing.

“We believe either outcome could have significant implications for Newport city centre, including its economic vitality, visitor appeal and wider regeneration ambition. “

Mr McCarthy added: “Newport already has substantial levels of social accommodation within the city centre, and the loss of a successful hotel would damage the city’s ability to attract visitors, conferences, business events and private sector investment.

“This is no longer simply about ground rent, but about whether Newport wishes to protect one of its most successful regeneration projects or risk losing a key city-centre asset that has already delivered jobs, investment and economic growth.

“We invested in Newport on the back of council plans to bring further investment into the city, including a proposed knowledge quarter, but this has failed to materialise.

“The number of hotel visitors originally envisaged from delegates attending conferences at ICC Wales has yet to be achieved. While the hotel is award-winning and close to 100% occupancy, our revenue per room would be improved if more events and investment in the city, as promised, were realised.

“However, there is still significant potential for the city and, with a new approach from the council, we want to play our part as an active investor in helping Newport maximise that potential and position itself as a thriving commercial city..”

When announcing its funding package for the project in 2019, the Welsh Government said: “The refurbishment of Chartist Tower is a pivotal development in the next phase of sustainable investment and regeneration for Newport, and is ideally placed to capitalise on business tourism associated with the opening of the new international convention centre ICC Wales.”

Last year, the hotel received the TripAdvisor Travellers’ Choice Award for the third consecutive year.

A spokesman for the council said: “Newport City Council has provided considerable financial support to the developer in relation to Chartist Tower. It is also owed significant sums of money as, to date, the developer has not paid the interest on the council-provided loan in line with the agreement.

“Over the last two years, the developer has approached us for even more financial support on more than one occasion. The council has consistently refused, despite ‘warnings’ that the hotel would be closed if it did not agree.

“The developer has recently approached us again with yet another proposal, and this is being considered.

“However, taxpayers’ money is precious, and we have a responsibility to ensure that we do not simply hand over public money unless there is a clear business case that provides a clear benefit to the city.

“At all stages, appropriate due diligence is undertaken. All the evidence shows that the hotel is thriving and attracting thousands of guests. New businesses have also opened in Chartist Tower (retail tenants) in the last 12 months.”

Mr McCarthy said the £1.6m of support from the Welsh Government, passed through the council, consisted of a £1m grant. He add that there was an agreement with the council that, at the point of refinancing next year, the remaining £600,000 loan element would be converted back into grant support.

He said the £1.6m was significantly less than the standard level of public sector support of 10% of overall development costs (£21m for Chartist Tower) for projects seeking to regenerate city centres.

In a statement responding to the council’s position, Garrison Barclay Estates said:“The council’s assertion that it provided ‘considerable financial support’ fails to reflect what actually occurred.

“During the development, Newport City Council required the project to proceed with approximately 40% less grant funding than was originally available. Furthermore, after construction had commenced, around £600,000 of grant funding was converted into a loan, fundamentally altering the agreed funding structure and increasing the financial burden on the project.

“It was understood that this loan would ultimately be converted back into grant, as is common practice on regeneration schemes of this nature. That conversion never took place.

“The council also refers to extending the commencement of the ground rent as evidence of its generosity. That is not an accurate characterisation. The extension occurred during the unprecedented disruption caused by the Covid-19 pandemic and the resulting economic downturn.

“It reflected the exceptional circumstances facing the hospitality sector rather than any extraordinary concession by the council. To be clear we have not asked Newport City Council for further public funding.

“Our position has remained consistent throughout: we have requested only that the historic ground rent be reviewed and brought into line with current market conditions so that the hotel can remain sustainable for the long term. This is a commercial lease issue, not a request for taxpayers to provide additional subsidy.

“The hotel itself has been an outstanding success. It has attracted thousands of visitors, created employment, generated significant economic activity and become an important part of Newport’s hospitality sector. It has achieved this despite the much slower pace of the wider city-centre regeneration that was envisaged when we invested in Chartist Tower.

“We committed to this development based on the council’s regeneration vision and the economic assumptions that underpinned it. While the hotel has consistently delivered, many of the wider regeneration ambitions that formed part of that vision have not materialised.”

“The council’s reliance on the hotel’s operational success misses the point entirely. A successful business can still be undermined by an unrealistic lease structure.

“If the council insists on charging a ground rent that exceeds what the property can reasonably sustain in today’s market, it risks damaging a successful business that continues to deliver benefits to Newport.

“The statement also creates an accurate impression of the commercial market within Chartist Tower Although businesses have opened within the building, recent lettings have been completed at rental levels significantly below those originally forecast. In several cases, space has been occupied at little or no rent to support local businesses, maintain activity and contribute to the vitality of the city centre. Those are the realities of the current market and they cannot simply be ignored.

“Moreover the council’s suggestion that there is no clear business case is incorrect. An independent report prepared by Carter Jonas provided a detailed professional assessment of market values, viability and the sustainability of the development. That evidence demonstrated why the existing ground rent requires review. Rather than engaging with those independent findings, the council chose to disregard them.

“This has never been about seeking additional public money. It is about securing a fair, market-based ground rent that reflects today’s commercial realities and protects the long-term future of one of Newport’s most successful regeneration projects.

“We remain willing to engage constructively with Newport City Council to achieve a fair and commercially realistic outcome.”

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Emerging markets bull Christopher Wood says the spectacular AI trade is showing clear signs of “fatigue”, and Jefferies is responding by tilting exposure toward cheaper, under‑owned markets such as India and China that stand to benefit from mean reversion away from crowded AI winners. He believes the “picks and shovels” of the AI capex boom will keep outperforming even as investors rotate out of hyperscalers and into value names across Asia.

In his newsletter ‘GREED & fear’, Wood writes that the new quarter has opened “with much talk of ‘AI fatigue’ as investors look out for a peaking out of momentum and rotation into cheaper ‘value’ names which have not been part of the AI trade,” citing Tencent as one Asian example. He argues that sharp pullbacks in Korea’s AI leaders are “both natural and healthy” after “hyperbolic moves,” with the Kospi now down 22% from its 19 June peak and single‑stock leveraged ETFs on SK Hynix and Samsung Electronics dropping around 30% from asset highs.

Wood highlights just how extreme the AI run‑up has been: since the start of 2023, a market‑cap‑weighted basket of Micron, SK Hynix and Samsung Electronics has surged about 760%, versus a 180% gain for a basket of Alphabet, Amazon, Meta and Microsoft. “Long‑term GREED & fear would still rather own the DRAM makers,” he says, adding that “the demand for compute can keep growing even as the cost of tokens collapse,” while he has “no idea which of the hyperscalers, if any, are going to be successfully monetising their AI capex.”

Also Read | Korea’s pain will be India’s gain? Why Nifty bears betting on Kospi crash may get disappointed

Trillion‑Dollar AI Capex, Thin Monetisation

Jefferies underscores the macro scale of the AI build‑out, estimating that the four major US hyperscalers will spend about US$700bn on capex this year and more than US$800bn next year, rising to over US$1tn in 2027 when Oracle, Anthropic, OpenAI and neo‑cloud players are included. This US$1tn figure equates to roughly 3% of US GDP, around 22% of US non‑residential fixed investment and an estimated 33% of total pre‑tax profits of all US non‑financial companies, underlining Wood’s description of AI as “the mother of all cycles.”
Yet, he warns that the financing and accounting of this capex arms race are increasingly stretched. The four hyperscalers have lifted projected capex to a massive 92% of projected operating cash flow, collectively issued US$169bn of bonds so far this year and accumulated US$662bn of future data‑centre lease commitments that remain off balance sheet, with total undiscounted lease obligations nearing US$969bn.
Why Jefferies Is Rotating Toward India

Against that backdrop, Jefferies is deliberately tilting its Asia Pacific ex‑Japan asset‑allocation toward markets less dominated by AI momentum. In its latest GREED & fear note, the firm assigns India a 12% recommended weight versus a 10.9% benchmark weight in the MSCI AC Asia Pacific ex‑Japan index, giving India a positive mismatch of 1.1 percentage points.

Despite a correction in memory stocks, GREED & fear remains Underweight Taiwan and only Neutral on Korea, having cut Korea’s neutral weighting from 24.6% to 20.8% since late June, while maintaining exposure to smaller ASEAN markets largely “just to maintain a presence there.” Wood’s message is that markets like India, which host “cheaper ‘value’ names which have not been part of the AI trade,” are well positioned to benefit from any sustained rotation out of momentum AI names.

China: Valuation Play in the Rotation

China is the other key leg of Jefferies’ rotation. Wood states that “it is too late to sell MSCI China or indeed Hong Kong,” arguing that this is “precisely the area that should benefit from any mean reversion out of momentum AI names,” a view he credits to Jefferies’ global head of quantitative strategy, Desh Peramunetilleke.

MSCI China has de‑rated sharply to just 10.6 times 12‑month forward earnings, down from 13.9 times in October 2025 and 18.5 times in early 2021, even as the CSI 300 is up 11.9% in the first half of 2026 while MSCI China is down 14.9% in US dollar terms. Wood concedes that falling household loans and rising retail non‑performing loans are “one area of concern,” but maintains a base case that consumption is stabilising at a lower share of GDP and that China will avoid a self‑feeding negative equity cycle in residential property, leaving consumer and domestic‑demand stocks already pricing in much of the macro strain.

Bigger Than Dot‑Com – And Now Rotating

To frame the AI cycle historically, Jefferies notes that US investment in information‑processing equipment and software has climbed to 4.88% of nominal GDP in 1Q26, surpassing the 4.46% peak reached at the height of the dot‑com boom in 4Q00. Wood stresses that the earnings from this capex boom are “front‑end loaded” in favour of picks‑and‑shovels suppliers, while hyperscalers spent US$130bn on capex in 1Q26 but booked only US$41. 6bn of depreciation and amortisation, making profits look technically overstated.

With the Hyperscalers‑4 index underperforming the S&P 500 by 11% since early May and AI leaders well off their highs, Wood argues that investors can no longer ignore the risks around monetisation, financing and political pushback to data‑centre projects. “So long as the AI capex arms race continues, the beneficiaries will remain the picks and shovels trade (i.e. the people being paid for the capex, not the companies spending the money),” he concludes, as Jefferies repositions toward India, China and other Asian markets poised to gain from a long‑overdue rotation out of AI momentum.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Meta must change Facebook’s and Instagram’s “addictive” design or face a heavy fine, the EU has warned.

In its preliminary findings, the European Commission said features such as infinite scroll, autoplaying videos and personalised recommendations could encourage “compulsive use”, particularly among children and teens.

If Meta does not make suitable changes, it could be fined up to 6% of its total global annual turnover.

A spokesperson for the tech giant told the BBC it disagreed with the findings “which don’t accurately take into account the significant steps we’ve taken to protect teens”.

In the preliminary findings, the Commission said the endless stream of content “shift the brain into autopilot mode, contributing to unhealthy habits”.

In particular, it is particularly concerned about the impact social media platforms may have on younger users.

“Protecting the physical and mental health of Europeans must be a priority for social media platforms,” EU tech chief Henna Virkkunen said in a statement.

The Commission said Meta failed to adequately assess the risks posed by how Facebook and Instagram were designed, as well as how long children spend on the platforms, particularly at night.

It raised concerns about features such as Reels and Stories, arguing they could contribute to excessive use, and claimed Meta’s safeguards do not go far enough.

The Commission said time-management tools on Facebook and Instagram, including those enabled by default for teenagers, can be dismissed and do not meaningfully reduce usage.

And it also criticised Meta’s parental controls, arguing they are only effective if parents have the time and technical expertise to understand and use them properly.

But Meta said it had rolled out Teen Accounts that “automatically protect teens and put parents in control – allowing them to block access to Instagram at night and cap daily screen time at just 15 minutes”.

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