From Tuesday's Evening Standard:
The deal for [West Ham] football club to buy the [Olympic] stadium in partnership with Newham council broke down with no end in sight to a legal battle triggered by rival bidder Tottenham Hotspur. The process was halted to end months of uncertainty which threatened the deadline for reopening the stadium in 2014 and jeopardised London's bid for it to host the 2017 world athletics championships...
Ministers and London's Mayor portrayed the public ownership model as in the best long-term interests of the taxpayer... Boris Johnson said: "As everybody knows there has been a great deal of to-ing and fro-ing, but we've come up with a very good solution to keep it in public hands and rent it to football clubs such as West Ham that will cover the cost. That will be a very good deal."
Slack Scammers
1 hour ago
16 comments:
The usual problem with publicly funded buildings is that they cost far more than they should because of the lack of commercial nous in those who issue contracts. The inevitable consequence is that renting-out the building cannot raise enough to service the build cost.
There is a hope that a leading football club will find it acceptable to pay over the odds in rent simply because it cannot raise enough capital to build its own new stadium.
I wouldn't be over confident that a full market rent will be achieved, however, because the same lack of nous will be present in the negotiators.
TFB, if in doub,t apply common sense:
1. The money has already been spent/wasted, so that's a sunk cost and irrelevant.
2. The point is to maximise future income from that site.
3. If they sell it, they will no doubt bungle the sale (or sell it off at a huge discount to their mates, like they did with a couple of thousand flats in the Olympic Village)
4. If they rent it out, provided two or three clubs are in the bidding (Spures, West Ham, possibly Leyton Orient?) then by definition, the rent they get IS market rent.
5. For sure, they may bungle the initial rental agreement, but at least the next mayor can renegotiate upwards in ten or twenty years' time when the agremeent is up for review.
6. If the running costs are so high that the rent doesn't cover them, then by definition, the Stadium has a negative value, which I doubt very much is the case.
"4. If they rent it out, provided two or three clubs are in the bidding (Spures, West Ham, possibly Leyton Orient?)..."
It breaks down on the proviso.
Tottenham? Rent a running track with a pitch at the centre? Nope, they'll rebuild. Maybe not at The Lane, but it will be a football stadium.
Os? Much too big for them. And they'll raise the same proximity objections as now if West Ham move in.
I'll be surprised if it's ever used for football.
VFTS,
- sure, it's probably too big for O's (plus they did up their own stadium recently).
- Whether Spurs or West Ham really want it, or whether they just want to prevent the other team having it is unknown, BUT the same logic applies to a sale as to renting out, so this is IRRELEVANT.
- as to proximity, what about Everton/Liverpool? What's the relevance? In fact, what about Munich 1860 and Bayern Munich who share a stadium? As things stand, O and WH are only about two miles apart, if one of them moved, they'd be a mile apart.
- clearly, Spurs will only rent (or buy) it if they can get rid of the running track and shift the seats in closer, so what? This is a deal breaker whether they are renting or buying. If the Olympics people are so prissy to insist on a running track, well that's where the real problem lies.
I'm sure I read that the rent was £2m a year but the running costs of the stadium are £5m a year.
BE, on the VOA website it says the rental value of West Ham's current stadium is £2,660,000 a year, the Olympic stadium looks a lot bigger (possibly too big? They'd have to shift the seats further in).
And it depends how you define "running costs", doesn't it?
Twenty-five matches a year x 50,000 fans = 1,250,000 per year, just to put it in perspective, surely they make a few quid profit per fan per game?
BE, plus we can safely assume that the running costs are paid by the tenant, so if the rent is £2m then that is the end of that.
There's no point in taking the tenant's costs into account, e.g. if West Ham pay £100 million a year in salaries, that has nothing to do with the rent.
"If the Olympics people are so prissy to insist on a running track, well that's where the real problem lies."
How did the manage at the old Wembley? Didn't that have a running track. (The whole stadium is a nonsense anyway. If an ounce of forethought had been applied, the old Olympic stadium (Wembley Mark I) could have been rebuilt as the new Olympic stadium.)
B, for sure, the whole thing was a colossal waste of money, they built the new Wembley between 2003 and 2007, and they must have known at the time that there was a possibility that we'd get the Olympics (which in itself is a waste of money, however well you stick to the budget).
But that's all in the past, the question is what to do now? It strikes me, the lowest risk option is to rent it out.
"we can safely assume that the running costs are paid by the tenant"
Can we?
MW, B, Ken Livingstone publicly acknowledges that the Olympics could have been held in West London for about a tenth of the price of building a new site from scratch but says he did it deliberately to get the "investment" into opening up a whole new part of London.
It wasn't bad foresight it was quite deliberate.
BE, yes, the reasons for most really bad decisions tend to be down to politics of one form or another.
BE, yes of course we can make that assumption.
The VOA are fairly clued up and they work out the rental value of the building/the site to within a tolerable margin of error.
"The valuation assumes that a year to year (that is, ongoing) lease is being agreed, where the tenant pays all repairs and insurance, and that the property is in a state of reasonable repair"
Those are the rules.
I think we can agree that the running costs of West Ham FC are about £100 million, according to this turnover £70m and pre-tax loss £30 million.
I hope you are not proposing that a landlord would charge £2.6 m in rent for their ground and then happily pay £100 million costs on their behalf? So the assumption clearly is that the tenant, i.e. WH, pays them.
Neither can you be proposing that the rental value of WH's stadium is negative £3 million a year? If it were, they'd knock it down and sell off the site, surely?
BE, as to Ken, fair play, he is a local politician and his job is to get the central government to spend as much on his patch as possible.
I'm not faulting him so much as the government i.e. Tony Blair who went along with this for vanity reasons (and to line their own pockets along the way).
In the same way as I have nothing against industry lobbyists, it's their job to go cap in hand to the government, and it's the government's job to tell them to f- off.
MW I am not assuming anything about the kind of weird contract that the "legacy" company might enter into with the company that has just been prevented from buying the site at a massive loss. Have you seen the contract?
Are you saying that there are rules which stop someone from renting out their property at a loss?
BE, as to the details of contracts entered into by the Olympics gang, we can only shudder in horror.
All I am saying is, when BoJo goes into negotiations with WH or Spurs, his starting figure will be in the region of £2 - £3 million a year, with the tenant being liable for repairs and insurance.
It remains to be seen how much he gets.
It may be that the two clubs who are behind in the running always manage to raise objections to the front-runner getting it and that it just stands empty for years.
As to renting out at a loss, perhaps BoJo will get conned into paying WH or Spurs to take it off his hands, what do I know? But at least, when the lease is up for renewal in ten or twenty years, the future mayor can have a crack at upping the rent a bit. That must be better than paying WH or Spurs to take the freehold and regretting it for eternity.
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