The Club has stated that Jones Lang La Salle have been employed to seek a partner for the Club in a Joint Venture agreement designed to carry out the ground redevelopment project. Jones Lang La Salle merged with King Sturge in May this year to form the biggest property company in the UK. Prior to that merger the Club had already used King Sturge to assess the viability of certain aspects of the redevelopment scheme. Details of the consultation process on the published redevelopment plans for the Club were made available in June this year, so the formal appointment of Jones Lang La Salle must have been made shortly after that date. (I can now find no reference to this on the official site, which incidentally does not have a specific area devoted to the Ground Redevelopment Project. Most other clubs carrying out redevelopment projects do have a specific area which is constantly updated with news, so this is a serious omission and hardly an endorsement of the Club’s ‘open’ policy).
The search for a Joint Venture Partner by Jones Lang La Salle (and predecessors King Sturge) has however probably been under way on an informal basis for more than a year. So, the basic question is, if the biggest property company in the UK can’t generate any immediate interest in the project, why is it that prospective partners aren’t falling over themselves to jump into bed with us? Is it due to the type of Joint Venture agreement that the Club seeks? Is it due to specific terms that the Club requires in that agreement being unacceptable to any prospective partner? Or is it simply that the basic design concept is flawed? On the other side of the coin, if a Joint Venture Partner does eventually turn up, the Club should not readily accept the first prospective partner without conducting a major financial appraisal on that developer combined with a thorough assessment of the build quality of past developments carried out (and the fact that they are popular and profitable) by that developer. This really has to be an exhaustive appraisal to ensure that the company does not fail part way through the build process.
I have not been party to any discussion on the way that any joint venture agreement will operate. However, as the Chairman continues to insist that the project will only be carried out “at no financial risk to the Club,” to me this implies that the Joint Venture will be carried out using a separate Joint Venture Company, i.e. one with limited liability. So, should by any chance this company fail, then this should not have any direct impact on the football club accounts. Operating in this way, it appears that the only direct financial input that the Club would have into the Joint Venture agreement would be the value of the sublease granted to that redevelopment partner and perhaps safeguarded by various provisions in the agreement such as requiring the partner to take out a performance guarantee bond or make specific insurance provisions. Therefore that partner would be taking virtually all of the financial development risk. Therefore, depending on the terms of the agreement (specifically what is taken out or generated by that agreement) this might be another deterring factor. It also appears to me that, in saying that the scheme will be at no financial risk to the club, that the club could very well have steered away from financing sources such as venture capital or pension funds and be looking to be dealing directly with a specialist student accommodation provider/contractor (and for them to do all the work) rather than being involved in any direct letting of contracts.
With regard to the specific terms that the Club might require in any agreement, of serious concern to me is the Chairman’s assertion that the ownership of the student accommodation should revert to the Club after a period of approximately 40 years. In seeking interest from potential providers of student accommodation, can I respectfully suggest that that interest will be severely limited because the NPV (net present value) of the scheme will simply not add up. On any leasehold property, 40 remaining years is the generally accepted period when the usual sale price (or the return on investment in this case) starts to show a serious decline. To have this as a starting position for any developer will therefore deter, or seriously limit any interest from them. I have certainly warned the Club on numerous occasions that the sublease needs to be of sufficient length to attract developers in the first place. Additionally a longer sublease would allow the Club to benefit from the profit sharing idea that I suggested, and which is made possible by that longer lease. This ensures that the Club would receive major immediate financial benefit rather than waiting for the expiry of that lease.
A third possibility deterring potential partners could simply be a flawed or badly phased design concept. Whilst the new facilities at the club might very well appeal to students, would developers possibly still be put off by having to develop in cramped conditions? There might also be a sequential element to the stadium part of the build not consistent with the way that the stadium might be built in more open, less restricted conditions, and which in turn might increase costs not to the developers’ liking.
Just my musings - but often the right ones!
The search for a Joint Venture Partner by Jones Lang La Salle (and predecessors King Sturge) has however probably been under way on an informal basis for more than a year. So, the basic question is, if the biggest property company in the UK can’t generate any immediate interest in the project, why is it that prospective partners aren’t falling over themselves to jump into bed with us? Is it due to the type of Joint Venture agreement that the Club seeks? Is it due to specific terms that the Club requires in that agreement being unacceptable to any prospective partner? Or is it simply that the basic design concept is flawed? On the other side of the coin, if a Joint Venture Partner does eventually turn up, the Club should not readily accept the first prospective partner without conducting a major financial appraisal on that developer combined with a thorough assessment of the build quality of past developments carried out (and the fact that they are popular and profitable) by that developer. This really has to be an exhaustive appraisal to ensure that the company does not fail part way through the build process.
I have not been party to any discussion on the way that any joint venture agreement will operate. However, as the Chairman continues to insist that the project will only be carried out “at no financial risk to the Club,” to me this implies that the Joint Venture will be carried out using a separate Joint Venture Company, i.e. one with limited liability. So, should by any chance this company fail, then this should not have any direct impact on the football club accounts. Operating in this way, it appears that the only direct financial input that the Club would have into the Joint Venture agreement would be the value of the sublease granted to that redevelopment partner and perhaps safeguarded by various provisions in the agreement such as requiring the partner to take out a performance guarantee bond or make specific insurance provisions. Therefore that partner would be taking virtually all of the financial development risk. Therefore, depending on the terms of the agreement (specifically what is taken out or generated by that agreement) this might be another deterring factor. It also appears to me that, in saying that the scheme will be at no financial risk to the club, that the club could very well have steered away from financing sources such as venture capital or pension funds and be looking to be dealing directly with a specialist student accommodation provider/contractor (and for them to do all the work) rather than being involved in any direct letting of contracts.
With regard to the specific terms that the Club might require in any agreement, of serious concern to me is the Chairman’s assertion that the ownership of the student accommodation should revert to the Club after a period of approximately 40 years. In seeking interest from potential providers of student accommodation, can I respectfully suggest that that interest will be severely limited because the NPV (net present value) of the scheme will simply not add up. On any leasehold property, 40 remaining years is the generally accepted period when the usual sale price (or the return on investment in this case) starts to show a serious decline. To have this as a starting position for any developer will therefore deter, or seriously limit any interest from them. I have certainly warned the Club on numerous occasions that the sublease needs to be of sufficient length to attract developers in the first place. Additionally a longer sublease would allow the Club to benefit from the profit sharing idea that I suggested, and which is made possible by that longer lease. This ensures that the Club would receive major immediate financial benefit rather than waiting for the expiry of that lease.
A third possibility deterring potential partners could simply be a flawed or badly phased design concept. Whilst the new facilities at the club might very well appeal to students, would developers possibly still be put off by having to develop in cramped conditions? There might also be a sequential element to the stadium part of the build not consistent with the way that the stadium might be built in more open, less restricted conditions, and which in turn might increase costs not to the developers’ liking.
Just my musings - but often the right ones!
