Saracens - the West stand

Default as inevitable as the tide coming in, just slower?

Right, so on the casting vote of 'reckless' Richard Cornelius Barnet council agreed in principle to lend Saracens Coptall LLP the kingly sum of £22,900,000 which is supposed to be repaid over 30 years and which Mr Mustard doubts will last the full term. Mr Mustard hopes he is wrong.

There is already a West stand and this will be a new modern replacement which will increase the ground's overall capacity by an extra 500 seats (for which the planning permission has been granted). For one game each year temporary stands are allowed to increase capacity to 15,000.

Now nearly everything you might want to know about the stadium's finances (apart from what is in the published Accounts, and that isn't detailed enough) to give you an idea of the profitability of a new stand simply isn't in the public domain. Mr Mustard will have to guesstimate as best he can.

An extra 500 hospitality spaces are coming. They have premium pricing and will bring in about £800 to £1,000 a season so let's say £450,000 if they can all be sold. There is no doubt that Saracens is a popular club to watch so we'll assume these all get sold in the end.

The other 2,500 seats will replace the ones that aren't under cover (in 2018!) and will generate an extra £120 to £180 per season (an extra £10 to £15 per seat) so let's say another £375,000 of income.

Middlesex University are renting 30,000 sq ft of space for which market rates are somewhere in the range of £15 to £18 a sq ft, so let's say £500,000 income from that source (probably the most reliable income stream of them all).

Those extra incomes, come to £1,325,000. 

There will be extra costs, most variable costs of a match will be up by 5% in line with the capacity increase.

There will be higher rates to pay on the new stand. The current rateable value of Allianz Park is £290,000 on which business rates are paid. They will go up when the new stand is completed, by possibly somewhere between £50,000 and £100,000. It won't need any straightaway but it would be prudent to spend 1% of the build cost on annual maintenance, so that will £290,000 p.a. in later years, as otherwise the place starts to look shabby and premium ticket prices can't be maintained. The new stand will need a lot more in the way of electricity supply for better lighting, air conditioning and heating.

Loan costs,as set out in a previous post, are almost £1,650,000 

Let's suppose that Mr Mustard has got his possible income figures way out (at least two Saracens related twitter accounts follow his tweets so might want to say his figures are wrong, he is quite happy to read the actual documents Saracens sent to Barnet Council in support of their application if they were to be forwarded). If we add 50% to Mr Mustard's projected income figures and use £2m as the potential income there still doesn't appear to be enough leeway to make the repayments particularly as Saracens are loss-making.

This company holds the headlease and derives income from Saracens Ltd

 

The holding company of Saracens Ltd is Premier League Holdings Ltd. In the published Accounts it says the following:

The new West stand won't now be ready until at least 2020 so Mr Mustard thinks you should expect losses for at least the next 24 months, not just 12. Those losses have got to be eradicated before any repayment can be funded. Mr Mustard notes that matches will continue during the rebuild so turnover will be down as soon as the old stadium is knocked down.

Nothing he is allowed to see has changed Mr Mustard's conclusion that this loan is very risky indeed. He told reckless Richard Cornelius it was risky. In return Richard called him 'dismal Derek' which is an equally fair comment (who is realistic? the optimist or the pessimist, answer to be provided by the actual future outcome) and that he was 'cautious Cornelius'.

Only councillors know what was in the exempt report but you cannot make a silk purse out of a sow's ear.

Mr Mustard really doesn't want to be right in this instance and predicts that by 2025 this loan being unpaid will be on the agenda at a future committee meeting and the finances of the council will be in an even more parlous state than they are now, where costs are being borne down on to get the overall budget back into balance. Why take risks that you don't have to take?

Mr Mustard would like to point out to the various supporters that his viewpoint isn't about whether rugby is better than football, whether clubs should be playing at this ground or another, the social benefits being provided by any particular sporting club, which he thinks would be provided regardless of council involvement, but about hard cash and whether a council should borrow in order to lend, rather than sticking to their knitting of providing public services.

This loan is reckless Richard (and anyone else who is reading).

Yours frugally

Mr Mustard 

Saracens - loan repayment costs

All the facts about this loan are top secret with Mr Mustard not even being trusted, as a member of the public, to be told the planned drawdown dates (as it will be in staged payments as the build progresses) or the frequency of the repayments or even the type of loan i.e. is the capital going to be repaid as we go along or will it be left to the end to repay in one lump sum (Mr Mustard is currently managing a multi-million euro portfolio of Spanish mortgages which have loan terms of up to 30 years on an interest only basis. Some were made to people as old as him so when they hit the ripe old age of 91 they will suddenly have to find £100,000 out of nowhere, their only 'asset' being a Spanish villa worth half what they paid for it and on which they borrowed 70%).

The repayment figures therefore are only indicative of likely repayments if you were to borrow £22.9m in one lump sum and then start repaying even instalments, including the capital, from month 1 all the way through to month 360.

Saracens will have to find £137,297 every month, even when there aren't any matches.

They will repay £49.4m in total (if they manage to) as interest comes to more than the loan. Given that Barnet Council were the lender of last resort, the only body foolish enough to put our (borrowed) money where their mouth is, they should have been charging at least 10% as this loan is, on Mr Mustard's risk rating index, somewhere between reckless Richard and crazy Cornelius.

Yours frugally

Mr Mustard

aka Dismal Derek (copyright Richard, allegedly cautious, Cornelius)