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Plan B's

By John Charles :  01/08/2007 :  Comments (24) :
Its with great interest I have read and heard the on going 'Kirkby' debate over recent weeks.

I am sure most have you have read the same stuff as me. "Redevelop Goodison" they say. "Move to the Loop" they say. "Move to Aintree or Speke" they say.

But of course, one crucial factor is overlooked by most if not all who suggest it — who will pay for it. I think it's fair to say even YES voters to Kirkby would sooner see the blues in Liverpool and more so in the Walton Lane/Everton area — so why not then?

Well, we could do it couldn't we? All we wound need is the Council to Cave in and give us Walton Hall Park for free. Bradley said two or three weeks ago categorically that LCC were not going to give Everton £50m of council tax payers' land for free, but one would think even this could be overcome in light of them essentially doing it for Liverpool — we'd just have to argue the toss hard enough.

So why not do that then?

Basic stuff? Please, correct me if I am wrong: A new stadium costs what, £75-100m to construct on top of the land value? So, if we got Wally Hall Park for free and then took out a £100m loan — like a long term mortgage... lets say some wonderful bank gave us a super low commercial interest rate of 7.0% interest on this £100m loan (unlikely). That 7% equals £7m PER YEAR on loan debt interest only repayments to build our own stadium on The Loop or Walton Hall Park.

£7m-£9m pounds per year every year for what? 40 years plus to pay it off and own the ground ourselves.

That is £7m pounds the club has to pay out of operating profits, in essence £7m pounds less to fund the manager in the transfer market every single year.

Let's all think this through — if we move to Kirkby rather than build it off our own backs, we'd save £7m per year in interest payments alone.

That's £7m per year every year. If we build it, it's fair to say that even if it produced £10m more in revenue per year this would in effect be only £3m as it would take out £7m in mortgage/interest repayments. Look at Arsenal — why do you think they have gone from buying a good amount of players to buying no one? Crippling interest payments maybe?

So, two years of Kirkby (£15m it's quoted as costing us) Versus £7m (more likely £8m-£9.5m) per year every year, every single year in debt repayments.

Am I the only one who agrees with Wyness about 'the deal of the century?

We get something that would cost us £7m per year every year for yonks, or £15m one off instead. Are we crazy? We should be biting there hands off 100%.

Of course, keeping Everton in Liverpool is not crazy and I was torn either way. But I do not see any deal in Liverpool giving us this package. Bestbuy/LCC — until there are designs, facts and figures on the table it doesn't exist. Why will Bestbuy give us this land for free? Whats in it for them?

Building Houses and developing the Everton area? They can do that anyway without us now if they wanted too couldn't they? I am skeptical: So Bestway are going to give us £75m to move to a piece of there land which they currently use profitably — that is what is needed for the Loop to work. I do not see them making £75m plus back on a housing development in Everton. I do not see Bestbuy's ROI being anywhere near enough.

What if we vote no to Kirkby on the basis of 'Bestbuy is a plan B that needs invesitgating'. Are Tesco going to let us come back to Kirkby after we find the Loop is a non-starter? Of course not... then we will really be stuck with our best hope of being a free piece of land from the council and a £100m loan to build from fresh by ourselves. We would surely be left in a Kings Dock feeling then "oh, why didnt we take that".

Keep in mind with Liverpool and 'The Toilet Bowl' that Gillet and Hicks to the best of my knowledge are putting the club £250m in debt to pay for the new stadium — that's debt they have to service every single season. We do not have their turnover, nor do we have the intial upfront investment that they almost certainly have to buy down the interest rate.

The real choice is £7-£9m per year, every year in interest payments to stay in Liverpool or £15m one off to Kirkby.

I know which way I will vote. I'd sooner spend keep the £7m in interest payments, keep the extra revenue the stadium produces and give it to every manager every year to spend... for the sake of 6 miles.

It's a no brainer surely?

Reader Comments

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Dave Thompson
1   Posted 01/08/2007 at 09:14:41

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John,

You base your £15M of debt for Kirkby on what?

One of the many Wyness statements?

The problem with all of the different workings he has offered so far is the use of words such as "if", "could" and "may".

All of the calculations I have seen include "up to £25M" in naming rights. However, that is likely to be paid over a ten year period, so to have the money up front to fund the stadium, which is in the calculations, it would have to be borrowed. So, we’re already borrowing £25M.

In another calculation, he indicated it might be necessary to fund "up to £15M" of debt towards the finishing of the stadium.

Finally, there has been no statement as to who will pay any over-run costs. If the builder is giving such a fiantastic deal as to build a £75M stadium for £50M (and aren’t you just a little bit worried about that?) then you can be sure they won’t be liable for the additional costs which might be incurred, and always are.

So we might be borrowing even more.

The one bit of the estimate that is probably true is the £15M for Goodison, since that is what LFC have offered for the site to use it as a car park.

No brainer? You certainly need to have no brain if you’re voting yes on the basis of what you know so far.
Neil Pearse
2   Posted 01/08/2007 at 10:26:45

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Thanks John for another clearly reasoned article on Toffeeweb.

The reality is this. In emotional terms, for all of us, it is a tremendous wrench to move out of the city. Can we all agree on that?

But in financial terms, the funding we will get from Tesco / Knowsley does indeed make the deal extremely attractive. Unless a sugar daddy suddenly appears wishing to pop £100 million into Everton, it is absolutely certain that we will not find a better financial deal.

And because of that, more money will be freed up to invest in the squad than on any other known alternative.

In financial terms, minus that sugar daddy, it actually is a complete no-brainer.
Ben
3   Posted 01/08/2007 at 11:38:32

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Dave,

I agree with some of your points about figures always changing. But if we were to build are own ground (with our own money) then the figures would be even greater, and with our ability to mismange then probably a lot greater.

I think the move with Tesco would probably cost us less than any other deal, (assuming we could afford anything else). As to whether we should move or not, that is up to all of us to decide on all aspects not just financial.

Dave Thompson
4   Posted 01/08/2007 at 11:53:53

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Ben,

Your final sentence sums up my feelings entirely - "all aspects, not just financial".

Turn away from the "deal of the Century" spin, look at the whole package. Is Kirkby the right location, is the stadium going to be of the highest quality, will the extra 10,000 people really turn up, and will they still be turning up in 5 years time?





That’s why it’s far from being a no brainer.
Colin Potter
5   Posted 01/08/2007 at 13:48:55

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If someone had clients from maybe abroad and they wanted to see a football match,and you wanted to give them a good time because of the prospect of them ploughing a few million into your business,would you yes voters really take them to a retail park situated in Kirkby? Please be honest with yourselves.
Lee Kidd
6   Posted 01/08/2007 at 14:32:42

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If it was a successful club in a comfortable, modern, impressive stadium which was a short drive from Liverpool... then, yes, completely - because it wouldn’t be a retail park, it’d be a football stadium you’d be taking them to with an immediate environment that would be far easier on the eye than the congested Walton region.

That’s completely honest - i’d feel more confident taking potential clients to a brand new stadium in Kirkby than a aging stadium in Walton. Definitely. Or even on "the Loop" - the location doesn’t matter. The surroundings and "feel" does.
Chris Stewart
7   Posted 01/08/2007 at 14:31:49

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Wyness is only interested in Everton FC the business so I would take any of this comments with a huge pinch of salt. I am more concerned with Everton FC the football club. Getting in to bed with Tescos is no better than getting in to bed with two Yanks who want a franchise. We called the Red Sh*te for hooking up with them when it happened and whilst the Tescos deal might not appear as blatant...its still a sell out.

Football is about history, passion, commitment, loyalty...not something that any big business has in abundance if you asked me. If a company will close down its stores or hive of its assets when they perform poorly with scant regard for the social impact, are they likely to act any differently with a football club. Methinks not. The talk is all about the Move benefitting the Club....Wyness and his balance sheet pals should take a look at the sign outside GP and remember whose Club it really is!
John Charles
8   Posted 01/08/2007 at 14:36:05

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Dave: Why would you doubt Wyness when he says it will cost us around 15m ball park? I don’t understand what motive he has to tell lies?

Surely the man is just trying to do his job to the best of his ability. If this deal was on the table in Liverpool you would be championing the man as next prime minister it is that good a deal.



Surely ’ifs but and may’ is understandable from him and the club - after all, you and I both know, as does he, that he will be drilled in the event he miscalculates something even marginally. The man cannot win.

As for the naming rights 25m being paid over ten years - that doesnt matter, so long as whatever sum it is is on pen and paper written in a contract the banks will see that as guarenteed income and as such we will be able to use it upfront for the fit-out as if we had it in a lump sum.

Its important to note our existing operating debt and the new 15m ish stadium debt would be independent of each other to the best of my knowledge. The stadium debt at 15m would be also at a very very cheap interest rate since its guarenteed by a stadium with a value of roughly 75-100m (inc land) therefore a 15m loan from the bank is very very safe for the bank based on our turn over and the value of the asset (stadium) we would be using it against.

It’s a no brainer. The more I think about it.

Build ourselves = an extra 7-9m per year in debt service costs (interest)

Move 4-6 miles to Kirkby = save 7-9m in debt interest per year AND have any extra revenue the new stadium produces.

I love our history, you will not find a more proud evertonian than me, but having an extra 6-10m for players every single season is worth 6 miles to me. I want us winning cups. One thing is for sure, if we say no to kirkby and LCC dont find us a commercial partner to the same tune as Tesco then our financial outlook is very very bleak.

Heads on chaps.. forget about the RS ffs.
j.harris
9   Posted 01/08/2007 at 14:41:33

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John you are totally misled.Do you not think if some builder can build a stadium in Kirby for 50m then it can be built in Walton,the loop,Timbuctoo for$50m.That halves your argument.
Secondly I think even the most pro Kirby supporter would agree naming rights would be worth significantly more in Liverpool.Apparently the RS are getting 100m.
So lets say we get an extra 25m in Liverpool (especially the loop).
Thirdly we will get far more support and corporate hospitality revenue in Liverpool(IN theory I accept).
That blows a hole right through your numbers.
MOst importantly of all if the same stadium could be built in Liverpool at the same cost to the club I am sure it would get close to 100% support Kirby will not.
Vote No to Kirby - NIL SATIS NISI OPTIMUM.
John Charles
10   Posted 01/08/2007 at 15:25:40

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J. Harris: You are living in cloud kukoo land mate.

So, okay then, lets say we can build for 50m at the Loop like you say (which i doubt but lets say youre right).

Okay, so where is that 50m coming from?? Are you saying Bestway are going to give us 50m in cash to build a stadium on there site which they already sue at a profit? Yes or No? (and they say our stadium is worth 75m in construction because of tesco’s buying power with there regular builder which is surely believable since it is worth while to Barr Construction to give them discount as they get so much business from them)

"Naming rights being worth more in Liverpool" - doesn’t make a blind bit of difference mate. There is no stadium in Liverpool and that difference is marginal even if you were right - which I doubt you are. Stadium naming rights gives the sponsor press coverage and TV coverage everytime they name it in reports.. this doesnt matter where it is built.

Thirdly "more corporate revenue in Liverpool". There is no stadium in Liverpool, you might be right. I’d love to go the match at the Loop, but again, there is no stadium in Liverpool and there is no funding package in Liverpool.

It is not about why Liverpool is better for Everton. It is better if it was built. I know it is, you know it is. Its how we get a stadium in Liverpool - the only option is to

1) convince the council to give us land for free (hard)

2) Take a loan out for 100m ish . This would probably involve us stumping up 20m upfront as a downpayment (like a deposit for a house) and the ’mortgaging’ 80m over say 40 years at the cost to the club of approx 8m per year in interest payments.

1) we dont have 20m for a downpaymenty, just like we didnt have 30m for the kings dock

2) 8m ish per year out of our funds in interest payments means any financial gains from moving would be off-set by having to pay the bank back - in effect there would be no financial gain until the very very long term.

Are we all stupid here?? - sorry to be blunt but are we?? I know we all want the best for our club - so do I.

I look forward to St. Georges Hall... seriously, you show me a concrete deliverable deal in Liverpool I’ll vote no to kirkby. Get into the real world people and stop thinking Wyness is out to get you. He is trying to do what he thinks best. Moaning bastards!

An
Ben@mycummins.name
11   Posted 01/08/2007 at 16:10:50

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i Do worry that all this talk of a ground move is splitting the club in two. It seems now that no matter what happens a large % of our fans will be annoyed with the choice. If we go we will all be sad, but some very annoyed.

If we stay some will be annoyed that we are not moving forward.

All this stuff about attracting new fans i don’t agree with, we should really be about loyal long term fans. Rather than new fans who choose a team because of any other reason than loving Everton.

Having said all that i am in support of the move, in my opinon it should be good for us, for Kirkby, and as Tesco would be dealing with the building, we as a club can’t screw that up too much. I only hope that we don’t lose our loyal support (which i doubt they would stop going, but i dont’ want them going and being p**sed of at going to watch Everton/at least more than usual!!) in the rush to go somewhere new.
Dave Thompson
12   Posted 01/08/2007 at 16:23:50

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John,

Form the questions to Wyness in last nights program...

Q: How much will this move cost Everton FC? I’ve seen the number £10m. Is that accurate?
A: It’s still too early to say. The club’s total contribution will be around £50m.

"it’s still too early to say".

How can you be so certain of your figures why Wyness himself isn’t?

Plus, on the Naming rights matter, if we have a contract over 10 years, and factor the money to pay the up front costs, it will be at a higher borrowing rate, not lower.

This is because the contract would have certain conditions, such as remaining a PL club. Since that can’t be guaranteed, any lender would take that into account in agreeing a rate.

So, to emphasise my point again, even assumming your £15M figure (but Wyness isn’t sure), we would be borrowing £37.5M in the first year, if we got £25M paid over 10 years.



In effect, £25M naming rights over 10 years would probably be worth £20M after interest and charges.
John Charles
13   Posted 01/08/2007 at 16:55:26

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yes but what are the chances we will be relegated? Minimal I would say...thats not gambling like Leeds did or anything, but when was the last time we went down..



Okay - So if gross loan is 37.5m, we get a contract for naming rights for 20m over ten years (2m per year)

That 2m per season in naming rights means effectively our net debt is 17.5m

You are correct to say we would pay interest on the whole 37.5m, but, given the loan to value ratio here is heavily heavily in our favor this interest rate would be presumably very low and over half the repayment per year would be covered by the constantly incoming naming rights.

So we’d have a new debt of say 37.5m over 40 years, at lets say 7% again (probably less). That is 2.6m per year in interest - but the naming rights bring in 2m per year - hence we have a new stadium for 600k a year in Kirkby rather than 7-9m per year with a 20m upfront downpayment in Liverpool.

You see my point? I am not arguing it would be better in Liverpool, but as far as deals go, for the 6 miles and boundary problem I think it is worth it. well worth it.
Dave Thompson
14   Posted 01/08/2007 at 17:10:05

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But that £37.5M debt needs a crowd increase of 4,000 per game to finance it (assuming £650 per season ticket).

Where is the £10M a year for the team coming from?



I didn’t say we would get relagated - I said that because the total was not guaranteed, and it’s not, then a higher rate would be payable. If you think that would be at 7%, you’re being very optimistic.



Let’s not even get on to what kind of quality (or lack of it) the stadium would have at those figures!
John Charles
15   Posted 01/08/2007 at 17:38:31

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No, we wouldn’t need 4,000 extra per game (-and why wouldn’t we get it?) to pay for the stadium. And given the amount of obstructed poor quality views at Goodison and lack of corporate facilities this is surely very easily achieveable. Think of the games we’d sell out at 50,000 - think of increased away fans even if its not increased home fans. You’re telling me, Newcastle, Arsenal, City, Man U aren’t going to take up a 6,000 allocation instead of a 3,000 allocation? (off topic here a bit arent we?)

Tripling main corporate boxes would cover a vast amount -they go for 44k each right now don’t they - per season?

I am not sure if 7% is optimistic or not in terms of the rate, I work in residential property rather than commercial.. but I did use it in both arguments either way to balance the debate.

As I see it with your/my figures - in this case we would have a 37.5m master loan, equating to approx 2.5-3m per season repayment but we would receive 2m per year from a naming rights sponsor for buildind the stadium - to be thats fabulous fabulous business in my opinion.

Of course, its all my opinion thats all - but its got to be a damn sight better financially than build ourselves - which was my original point I have tried to get accross.

Building ourselves is something we would surely need to do inside 10 years if Kirkby is a No. I don’t trust LCC - they’ve had years to work with us to give us a option like this, so whats changed?
John Charles
16   Posted 01/08/2007 at 17:46:17

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As for the 10m per year for the team, this comes from increased ticket gate receipts, increased none match day useability. Lower maintenance costs. Increased match day corporate hospitalilty use.

We would be getting a modern day facility. Last night it took me 25 minutes to get a beer in the Upper Bullens despite being in the ground at 7.15pm... you can’t even get the qunts money at the moment!
Bilbo
17   Posted 01/08/2007 at 18:55:30

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JR we all know that GP is dated, but are you aware as part of the deal to move out of our city knowsley will get a cut of the new revenue generate from the stadium, like gate receipts and your £4 beer. So if the move did happen your pie and pint deal will be out in the region of £7.
John Charles
18   Posted 01/08/2007 at 19:28:13

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Thats BS... were have you read or been told that.

Thats what happens in Italy when councils build grounds for them - this is totally different and as far as I am concerned thats just incorrect information.

Please provide a source if this is true?
Desmond Prosper
19   Posted 01/08/2007 at 21:02:59

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John,

Good, well-reasoned posting. It’s all well and good to go on and on about tradition and history but to compete at the highest level in the EPL in the 21st century, Everton needs to upgrade it’s facilities--and quickly. Until there is a better deal on the table...Kirkby it is.
j.harris
20   Posted 01/08/2007 at 22:14:04

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Guys sorry to repeat myself but you are totally misled.
Tesco would not be allowed to pay 50m to the council then to hand that land to Everton.There is something not right at all about the numbers.Why cant Wyness come up with a consistent answer.He’s had the exclusivity period to have the design built and costed.
If Tesco are to get Goodison(as is widely believed)why dont we approach other retailers(Sainsbury etc.)or other commercial entities to see if they are interested.

Do you not think if some builder can build a stadium in Kirby for 50m then it can be built in Walton,the loop,Timbuctoo for$50m.
That halves the 100m argument.
Secondly I think even the most pro Kirby supporter would agree naming rights would be worth significantly more in Liverpool.Apparently the RS are getting 100m for their stadium.
So lets say we get an extra 25m in Liverpool (especially the loop).
Thirdly we will get far more support and corporate hospitality revenue in Liverpool(IN theory I accept).
That blows a hole right through the pro kirby numbers.
Most importantly of all if the same stadium could be built in Liverpool at the same cost to the club I am sure it would get close to 100% support Kirby will not.
Vote No to Kirby - NIL SATIS NISI OPTIMUM.
John Charles
21   Posted 01/08/2007 at 22:34:48

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j. Harris:

We dont have 50m. Kirkby is not just a new supermarket it’s a whole new town centre, hence the ROI in Liverpool is not enough in the commerical form unless they build 500,000 sqft of retail space -and fill it. There is not demand for it in Liverpool hence Sainsburys et al have no profit to make in the long run.
Bilbo
22   Posted 02/08/2007 at 11:53:09

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DP, there is a deal on the table but EFC are hell bent on moving to Kirkby for some reason ?
The best way site would be a catalist for other commercial developers and take the whole project jennifer development virtualy into town. Keep your eyes and ears peeled for a major anouncment on Mon or Tuesday.
concerned
23   Posted 02/08/2007 at 13:09:28

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Could someone clarify something for me? Is Bestway Cash and Carry part of the Bestway Cement Company?
Tom Hughes
24   Posted 04/08/2007 at 13:29:13

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Bestway is also the cement people yes. It is a massive concern. According to their spokesperson, they are prepared to invest far more in their stadium project than Tescos can ever. Tescos are a plc and cannot just give their cash away, they are accountable to shareholders. Bestway are a private company, and also have ideas to enable the club to make much more out of their existing site also. The city planners and Bestways development people and architects are putting the package together as we speak.

As far as finacial figures for redevelopment are concerned we had hoped to put a full details together. However, the bestway project has taken people away from that. However, there are various developers chasing the Park end site depending on whether or not a stadium is to remain there. The bottom line, the whole process is uncovering lots of possibilities, which isn’t bad for something that was supposed to be a non-option.

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