Wembley: Is the FA’s valuation right and do they need to sell?
As has been widely reported, the Football Association has received an offer from the American billionaire Shahid Khan to buy Wembley Stadium.
Khan already owns an NFL franchise and Fulham FC, and is no stranger to football or London and the UK.
Permission for the FA executive to develop the proposal has been granted by the board and this means the offer is now being seriously considered by the FA and its wider constituency.
Read more: Fulham owner Khan poised to buy Wembley in £800m deal
This process will include wider consultation with not only the “football family”, but government and fan groups. We must wait to see if this will include commercial partners.
It will also involve a significant due diligence process and, one hopes, a fuller analysis of the proposal, the value of the deal on offer and a clear understanding of the ramifications.
The FA are being advised by Rothschilds bank, among others. If nothing else this process will take some considerable time and we expect that any sale, if it was to happen, will take months rather than weeks.
Wembley and the FA
Prior to its demolition and reconstruction between 2001 and 2007, Wembley was acquired from Wembley plc by the FA in 1999.
Wembley plc agreed to sell for £120m and that money was supplied by the government via lottery funding earmarked for the construction of a new national stadium.
The original cost projections of £350m were massively exceeded and the final costs have been put at between £700 and £800m. This cost and the servicing of the debt, quite apart from the running costs, have fallen on the FA.
Significantly, the banks that lent the money to the FA found that the stadium was only viable with the guarantee of the FAs events. This presumably will continue to be the case, and therefore the staging agreement for the FAs events will be pivotal in any deal.
The original debt repayments were scheduled over 20 years but rising broadcast and commercial revenues have allowed the FA to reschedule the debt to its banks, and the stadium will be debt free by 2021.
A good return?
The foregoing analysis raises the issue: if the FA has ploughed close to £1bn into the project, is the current offer a good return?
Khan is said to have proposed around £600m cash, which seems to undervalue the stadium, and is probably not even reflective of the brand value of the Wembley name.
It may also be asked whether, having spent almost 20 years paying off the mortgage, the FA wouldnt be better advised to enjoy the fruits of its labour for a few debt free years?
Fulham FC owner Shahid Khan hopes to buy Wembley for £600m (Source: Getty)
Moreover, the FA have been talking a great deal about how the money would be used to build grass-roots facilities, but the current situation is that grass-roots football has more funding than it can spend.
Via the Football Foundation, a “gusher” in the shape primarily of Premier League funding of £180m per year makes football in England enviably well-funded. It is a fact that the Foundation cannot find enough worthy projects to spend its money on.
What are we to expect from the Wembley sale: gold taps at the Hackney Marshes changing rooms?
Implications for commercial partners of the FA
The first thing to be assured of is that this process will not be done in a hurry. The second thing is that, whatever Khans vision may entail, the FAs portfolio of events will be pivotal for the continued success of the stadium.
Finally, it is assumed that the FA will ensure that in any future staging agreement with a new owner of the stadium, the staging agreement will fully protect the rights of existing partners during the lifetime of their existing contracts.
If the FA learns the lessons of history, it will also construct staging agreements with the new owners of Wembley which set up highly prescriptive terms in respect of clean stadia and bowl, which allows them greater scope for selling advertising at its events.
European footballs governing body Uefa has such agreements in place for the Champions League and Europa League, so a template and best practice already exists.
In relation to deals which are exclusively predicated on Wembley Stadium, such as pourage and supply, it is expected that the FA will be contacting partners sooner rather than later to engage in discussions concerning any potential change of ownership.
The new owners may expect to renegotiate these arrangements but it is hoped that the FA will insist at the very least that current contracts are honoured.
Other considerations and assessment of probability
There are certainly question marks against the value of the deal and its utility to the FA.
There are also a number of stakeholders who will be sceptical, perhaps including the Premier League, and still others, Chelsea for example, who will be alarmed by developments. Chelsea hope to rent Wembley as a home for three seasons from 2021 while Stamford Bridge is redeveloped.
The FAs current assessment is better than 50/50 that it will happen and the Press campaign already in flow indicates that at executive level they are deeply wedded to it happening. Experience would suggest otherwise and the backlash has not yet begun.
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