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State subsidy of West Ham United reaches £387m

By Tony Attwood

Any notion that Financial Fair Play rules will help balance out football’s money issues a little, have been blown away by the news that Boris Johnson, the Conservative Mayor of London, has granted West Ham United the tenancy of the Olympic Stadium for a down-payment of £15m and further payments of £2m a year for 99 years.

This makes a total of £213m paid over the course of 99 years.  I don’t know if there are any rent reviews built into this, but assuming that there are, and that are set to keep pace with inflation, then that is the total cost to West Ham United.

The only down side is that since the stadium will be very dated within about 60 years (on current trends) then they will end up at the end of the lease with nothing much, and will have to build themselves a new stadium from scratch (if football in general and West Ham in particular are around by 2113.

The price of £213m compares with the cost of the stadium, which in a speech today Richard Caborn, the former sports minister, said was worth £600m.  The Emirates cost around £390m to build, of which Arsenal borrowed £260m, which means the actual cost to Arsenal was £546 when interest on the borrowings was factored in.   On the basis that the Olympic Stadium was built to a higher standard than the Emirates, and will have to have quite a bit of work done on it to make it a football ground, £600m seems about right.

So what we have here is a £600m stadium going for £213m over 99 years.  This means that West Ham don’t have to borrow money as Arsenal did.  They own the lease on their own stadium for 99 years, and will be able to sell Upton Park at a fair old profit, and to pay off their existing loans.

Karren Brady said she was “delighted” with the deal, and you can well understand why.  The only thing left for West Ham to do is to get planning permission, which given the way the state and the Greater London Council have pushed the deal through, should be no problem.
The stadium will seat 54,000 fans, and obviously many West Ham supporters will be very happy with the deal.  Indeed if Arsenal had been able somehow to get a deal like this I would be laughing – although perhaps a trifle embarrassed that my club had got a state handout at this level.
One other fact that has come out today is the the Borough of Newham will invest £40m in the project – although I gather from one report that this is a loan.  Other reports just give the figure with no detail.
As part of the deal athletics is guaranteed 20 days use per year, which should be no hardship for West Ham as these days are certain to be within in the summer break.  The only problem would be if the Premier League ever became a summer league.  Given climate change that suddenly becomes a possibility.
Additionally the stadium will also be used for pop concerts and other sporting events – although today’s details are not clear as to who will benefit financially from this.
There is one other worry.  Given that the Olympic Stadium lease becomes West Ham’s biggest asset, West Ham United becomes a much more interesting club to buy.  Mr Gold and Mr Sullivan who have a majority holding in the club have said they will not sell, but this of course is a matter for them, and they could change their minds at any time.   Certainly they have now got their hands on an incredible asset (the 99 year lease) for a fraction of the normal market price.

The only downside for West Ham is that they won’t have any property that they can use in order to secure other borrowings, since they won’t own the stadium.  If the club fell on lean times and slipped down the leagues it would be hard to borrow money to buy players to try to get promotion, as there would be very little security around.

There is still the shadow of  Barry Hearn who is asking for a judicial review of the whole process, and he has often said that letting West Ham move to Stratford will damage Leyton Orient, and break Football League rules about moving into an area where a club already exists.  (These rules were not in existence in 1913 when Arsenal moved to Highbury, nor in 1910 when Millwall moved across the river in the other direction.)

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29 comments to State subsidy of West Ham United reaches £387m

  • avatar Dan

    I believe that its not just £2m a year, but a share of the naming rights, catering and corporate profits. I don’t know what these are likely to be, but think its not quite as simple as you state.

  • avatar Alex

    is your real worry that Arsenal will become the 3rd London team?

  • avatar Tom Mills

    We are aparently all pikeys so we don’t mind a state handout!

  • avatar PT

    Pathetic. Although I have my doubts about the move your catty article which wonders if West Ham ” in particular” will even exist is laughable. The whole stadium was ill conceived and the whole procedure should have been decided before it was built. However as it wasn’t we are left with the debacle that has followed. As you stated , West Ham will not own their own stadium so it is not without risk. As for value for money for tax payers I have not heard a viable alternative. I don’t remeber a similar outcry when City moved into their subsidised custom built stadium. The whole piece smacks of jealousy. Maybe we won’t be the easy 3 points that you’ve come to expect.

  • avatar akasuna00

    thanks Tony for the post. Feel a bit unfair on the whole deal..

  • avatar SoupPlate

    Er, no. West Ham have effectively bailed out the State.

    The additional cost to the Taxpayer would have multiplied by £££millions/billions if West Ham hadn’t taken it. That’s just a simple FACT.

    West Ham are a TENANT. The State is the LANDLORD. The LANDLORD had a property that NO ONE WANTS TO RENT for anywhere near the asking price. So the LANDLORD is upgrading the property (i.e. a roof, retractable seats) so it can attract TENANT(s). This has attracted West Ham.

    The simple fact is the incredibly stupid and flawed design of the OS has led to this situation. That’s not West Ham’s fault. West Ham offered to purchase the OS back in 2007 if retractable seats were included in the design BEFORE A BRICK WAS LAID. They were told where to go. The real culprits are ‘Lord’ Coe, Tessa Jowell and the other cronies.

  • avatar Gerry Lennon

    The only comment I would make, is rather West Ham than Spurs?

  • avatar Man Overboard

    Hold on a second, although West Ham are benefiting from the Olympic Stadium you seem to be forgetting that the whole purpose of that stadium being built was to host the Olympic games. The government would have spent the £600m to build the stadium regardless of whether West Ham then moved in or not. If anything the government are recouping some of what the tax payer laid out. So why the Daily Mail-esque sensationalist bullcrap? Personally I thought Untold had a bit more intelligence and were above such jealous remarks and gutter journalism. You should be glad that West Ham got a cheap stadium ahead of the Spuds, who have a tiny stadium and a one man team that would fail to compete should they have to outlay anything near the money Arsenal have paid for the Emirates.

  • avatar SoupPlate

    Man Overboard – you’ve got it spot on.

    West Ham have effectively bailed out the State.

    The additional cost to the Taxpayer would have multiplied by £££millions/billions if West Ham hadn’t taken it. That’s just a simple FACT.

    West Ham are a TENANT. The State is the LANDLORD. The LANDLORD had a property that NO ONE WANTS TO RENT for anywhere near the asking price. So the LANDLORD is upgrading the property (i.e. a roof, retractable seats) so it can attract TENANT(s). This has attracted West Ham.

    The simple fact is the incredibly stupid and flawed design of the OS has led to this situation. That’s not West Ham’s fault. West Ham offered to purchase the OS back in 2007 if retractable seats were included in the design BEFORE A BRICK WAS LAID. They were told where to go. The real culprits are ‘Lord’ Coe, Tessa Jowell and the other cronies.

  • avatar Jack

    What do you mean these rules were not in place when Arsenal moved to Highbury. Since when was Highbury In Tottenham?

  • Soup – I didn’t mean to imply that it was West Ham’s fault, and actually I agree with you totally.

  • avatar GoonerPete

    Jack,

    I beleive the rules in place prohibit 1 team from moving within a certain vicinity (milage) of another club – not direct areas. So if the rules were in place now for example Arsenal couldn’t move from Woolwich to Highbury as its geographically too close to Tottenham.

    From what I’ve been reading over the last year Leyton Orient have a point here!

  • avatar GoonerPete

    Sorry – read that middle bit as
    If the rules that are in place now were in place in 1913, for example Arsenal couldn’t etc…

  • avatar Adam

    Good luck to West Ham, hope they become a very competitive club again. Maybe keep hold of their youth products, because they have had some very good players come through their ranks.

    Pisses me off somewhat that other clubs seem to get help, but I might be mistaken.

    Agree with some comments regarding planning ahead. Seems we Brits (or at least our leaders) have lost the ability to plan sensibly. But you know what they say “chaos equals cash”.

  • avatar It's Grim Oop North

    Blimey, can you not just be happy for the Hammers that they have the good fortune to progress their club?

    Show some class please, stop being so bitter when the Arsenal don’t get things all their own way, it’s not very edifying to behold.

  • avatar Super Singh

    Good move for West Ham, better transport links, bigger stadium and the drinking dens are not too shabby either?

  • Its grim – this is getting silly. You infer all sorts of emotions into the posts on this site which are never in the writer’s mind. I guess you believe you can infer emotions from another’s writing, but as I was the writer of this piece I can tell you that you are quite wrong.

  • avatar Shazza

    I am getting so fed up with this sort of article – west ham and olympic stadium no different to man city and the old commonwealth stadium (now the etihad) why was there no talk of taxpayers money then and as for barry hearn dont even get me started – stratford in newham – leyton in waltham forest not same area and in any case west ham are going back to where they originated thames ironworks old ground just down the road from olympic stadium – we are going back to where it all began and i cant wait!!

  • avatar It's Grim Oop North

    Tony, first para –

    “Any notion that Financial Fair Play rules will help balance out football’s money issues a little, have been blown away by the news that Boris Johnson, the Conservative Mayor of London, has granted West Ham United the tenancy of the Olympic Stadium for a down-payment of £15m and further payments of £2m a year for 99 years.”

    We all know you back FFFP, and therefore you don’t back West Ham in this, you didn’t need to even mention FFFP whilst reporting on this story. You could have mentioned all those other clubs throughout Europe who benefit from state sponsored subsidies too, but you make out that football will be the loser in all this – I would argue money coming in to help a football club from outside sources is a good thing in these times of financial austerity.

    ” if Arsenal had been able somehow to get a deal like this I would be laughing – although perhaps a trifle embarrassed that my club had got a state handout at this level.” – is this not ungracious and belittling?

    “So what we have here is a £600m stadium going for £213m over 99 years. This means that West Ham don’t have to borrow money as Arsenal did. They own the lease on their own stadium for 99 years, and will be able to sell Upton Park at a fair old profit, and to pay off their existing loans.”

    - Jealous much?

    Do you now see West Ham as a direct rival?

    I see nothing in your article that shows you are at all pleased for West Ham, but please feel free to highlight anything I’ve missed.

  • avatar Stuart

    Tony,
    I believe when Arsenal moved to Highbury, Tottenham were not in London. Please correct me if I’m wrong.

  • avatar Georgaki-Pyrovolitis

    What an odd comment from Mr. Oops North! Can’t see how Tony’s article can be construed as sour grapes.

  • avatar gouresh

    Sorry if I missed the previous articles, wasn’t David Dean keen on us moving to the new Wembley? What is the difference? Can someone shed some light?

  • avatar ARSENAL 13

    @all,

    Tony is not saying state is wrong or any thing like that. He is just stating the obvious. Even the clubs with rich owners dont have the balls to do a ARSENAL.

  • Shazza the issue of Manchester City and taxpayers money has been highlighted on this site many times.

  • avatar andy bishop

    A deal like this will contain many aspects not all for public consumption (although it should be as it involves public money). The fact is the stadium has been built as the Olympics showpeice that bought in god knows how much income. Without a tenant and proper use it would become a financial burden on the state and local council ala Don Valley. Just maintenance would run into millions. The evocative headline on this piece achieves comment but that is all. For those that feel increased attendance will elevate West Ham to top London club over Arsenal only need to look at our own example. What might be interesting is what happens to Upton Park. Presumably the disposal will be for development. Are West Ham selling privately? in which case the land is worth circa 8-10 million or has Boris as chairman of the Homes and Community agency done the sensible thing and included its sale so it can be developed by that agency as much needed social housing in the area.

  • avatar Helen

    I think you will find that the £2m rent will be index linked and not fixed at £2m per annum.

  • avatar nicky

    If the Olympic Stadium holds 54,000 and West Ham’s average attendance is under 35,000, the atmosphere will hardly be exhilarating.
    Something like the Emirates did someone say!

  • avatar Rufusstan

    I had the expected bout of ‘Daily Mail Outrage’ when this broke, but the more I think about it, the more I wonder what West Ham are getting themselves into.

    The capital costs are an issue, but the stadium had to be built anyway, so putting the recovery of those costs on the West Ham deal is a little unfair (The state still owns the stadium after all). The only alternatives from a football club as tenant would be either:

    the stated plan which was to remove the upper tier and turn the stadium into a 25,000 seater athletics venue, which would still stick the state with conversion and operating costs and not recover the investment. I actually would not have minded if they had gone that way as it could have gone a lot of good, but I bet no one could (would?) pay the operating costs.

    Or sell the stadium to West Ham outright, which I am still not sure why that fell through.

    We are now in the idiotic situation of having to retrofit a stadium for football, when it could have been designed that way in the first place. West Ham were already sniffing around at the design stage. If Richard Caborn is to believed, he thought the only practical legacy for the venue was to have a football club installed, but was voted down by everyone else. Scroll forwards 5 years and guess what….

    The other side, the lease is hard to judge without the small print fully revealed yet, but:

    1). West Ham Pay £2 mil a year rent. This does seem to be RPI limked.
    2). They give up a proportion of the commercial revenues from the stadium, which is theoretically a loss for them (one source I have read suggests Newham council alone gets 35%).
    3). Nothing is mentioned about operating costs. More detail about this would have an impact on how good a deal this is (If West Ham aren’t paying them all I’d be furious).
    4). Its seems that other events have nothing to do with West Ham, and revenue goes to the landlord (us). It needs to be clarified, but the best quote I have found suggests that West Ham gets ‘primacy’ during the football season– which suggests that they get to play their games above any other event during the season; but that is it.

    The other side is that West Ham get the option to raise their attendance by around 20,000. As their season tickets are around £600
    you can throw an increase in revenue of £12 mil a year. Take: the rent off of it (£2), the money they lose in hospitality (they seem to get £4-5 mil at Upton Park), the increased operating costs which (hopefully) they have to pay. With that the income benefits don’t look as rosy, and that is if they fill the place, and not with kids.

    For the state, we get the rent, plus say half of the hospitality, which I think £3 mil is a good estimate. Add to that at least half the naming rights. Stoke get £4 mil a year, and West Ham should be able to do way better than that. So we are not getting £2 mil a year, but nearer £7-10 mil, AND can make more cash from other events.

    In the end I still hate the fact that West Ham just get the stadium, but the fact they don’t own it, and it may well be the best option available lets me live with it. Of course once all the details come out, this could all change….