In this article I am exploring the Olympic Stadium rental deal and the comparison to the one negotiated by Manchester City.
It has been widely speculated in the press that West ham will be paying between £2m and £2.5m per season for 99 years to rent the Olympic Stadium from 2016.
At the upper £2.5m rent estimate it works out as £247.5m over 99 years. It is claimed that the rental annual sum is also linked to the Retail price Index (RPI). Based on the past 50 years of RPI this would mean the £2.5m per season rental would rise to around £10.7m per season in 99 years time so the final rental total bill could be much higher. But what would be £10.7m between friends in 102 years? probably just the average annual wage of a Premier League player.
Barry Hearn in a recent London Standard interview said West Ham have the “the deal of the century”
He was quoted as saying: “West Ham are paying £2 million a year rent but the stadium owners, LLDC, are paying for all the security, police, stewarding and ground maintenance. That comes to more than £2m a year. So effectively they are getting the stadium rent free. West Ham also get all the normal match day revenue and part of the catering income”
In front of the House of Lords select committee Barry Hearn said “In my view, commercially, the occupation of this stadium will increase West Ham’s value by around £100 million. Yet they are paying £2 million a year rent and the stadium is responsible for policing, stewarding, and so on. If you add up those costs, it is rent-free. I think they are paying a £15 million contribution to the reorganisation cost but are being allowed to sell and develop Upton Park. This is state sponsorship beyond my wildest dreams.”
At the time of the October interview West ham responded saying “The figures quoted here are entirely inaccurate and in no way reflect the financial commitment West Ham has made to the Stadium. West Ham United will deliver a profit to the taxpayer. We will bring over 1 million people to the Queen Elizabeth Olympic Park each year and create in excess of 750 jobs for the local workforce”
It has also been claimed West ham current running costs at the Boleyn Ground for match day stewarding and security, police costs, ambulance costs, rates, utilities and ground maintenance for currently around the £2m mark. A mere coincidence?
It remains to be clarified who exactly will be funding match day stewarding, police costs, ambulance costs, rates, utilities and ground maintenance for the Olympic Stadium.
In Karren Brady’s Select Committee interview in front of the House of Lords she said:
“A significant amount of money is being invested by West Ham into the stadium, into the retractable seating and the reconfiguration to make it a sporting arena. That could not be done without West Ham, without our rent, without the money that we generate naming rights, catering and pouring income. All those things that amass to many, many
millions of pounds will be going into the stadium, and not into West Ham’s pocket.”
Baroness King of Bow asked “When do you think that taxpayers might be able to see a return on their investment?”
Karren Brady answered “I do not know what the running costs of the stadium are” “We made the best bid we could, based on many factors: lump sums, generated guaranteed rent that is RPI’d every year, a commitment to the naming rights income, the catering income, and various other source of income, that made us partners in that process” She went on to say “In terms of the finances, by the end of the 100-year lease, the taxpayer will be able to afford to build two new Olympic stadiums, for the commitment that West Ham has made. The money that West Ham will generate from the stadium runs into many, many hundreds and hundreds of millions of pounds over its lifetime”
This last quote from Karren seems to suggest that West Ham will ‘generate’ twice the original construction which was £486m. A eye watering £972m over 99 years!
It also confirms the RPI element of the rental deal and suggests West Ham do not know what the running costs of the stadium are so to me we wouldn’t agree to pay for something we don’t know.
Manchester City Rental deal as a comparison:
Manchester City FC originally agreed to pay rent for their new stadium to Manchester council derived from match day income, specifically ticket sales. Under their agreement no money was due if the attendance did not top the 32,000 capacity of Maine Road, while half the price of tickets sold above that level would be paid over, after associated costs had been factored in.
Now Man City have new found wealth from their billionaire owner they have renegotiated the terms of their 250 year lease.
The new agreement in place now switches from the match day revenue model to a flat £3m yearly charge.
This is still an increase on the £2M per year generated on average from the ticket sales model used previously.
In a master stroke they bought the naming rights in a separate agreement paying £2M per year for them which they then sold on to their main sponsor Etihad for an estimated £10m per year. The rental model certainly appears to work for them by making a £5M per year profit of a stadium they don’t own! Not bad business for the richest club in the world.
Hopefully the terms of our rental deal will be announced before the start of the 2016 season so we can find out whether this is a good deal for West Ham, the Tax Payer or both.
Karren Brady confirmed in front of the house of Lords that “In the event that West Ham could not pay any rent or fulfil any commitments that it had made to the LLDC, the two owners of the football club have guaranteed personally to meet those commitments, so the stadium will never fail to fulfil its business plan. If they sell up, they sell that commitment to the next potential buyer”
As always the devil is in the detail with these rental agreements.